Putting the past behind us can lead to a bright future. More importantly though is learning a lesson from the past to add to the proverbial toolbox to bring into the future. These live-and-learn lessons apply to finance as much as any other regard of life.
We are midway through the first quarter of 2023, where all experts expect a bounce back from the ~20% of 2022. By all accounts, that is how things have gone for the first six weeks of the new year. Ideally, this will continue (probably not in a straight line, although even the recent past year has been anything BUT a straight line).
As usual, some sectors will recover more quickly than others. Hence the benefit of rebalancing. I submitted my quarterly rebalance for Friday, I moved just less than 1% of the overall account balance, and it all came from a single fund: Total International Stock Index Fund. Based on this information alone, we know that the international equity sector has outperformed domestic equities, domestic bonds and international bonds significantly over the past three months.
Unfortunately, this information means very little for the future. Next quarter, I might find myself moving money back into the international equity fund, or more could come out of it. The important thing is that it is relatively overvalued compared to my other sectors, so "buy low; sell high" logic supports the idea of selling some from the top to bring into the lagging sectors. This strategy works best when broadly invested across a few sectors and/or index funds because any of these four sectors are equally likely to out- or underperform in a given quarter.
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