Besides enjoying bones, Dutch also likes shoes. High heels are his favorite; he ventures into sandals occasionally- mine of course. He likes to hide under our bed and find a shoe to chew on. Lucky for him, he seems to like the shoes that I don’t, so I wasn’t really all that crushed when he ate some uncomfortable, old shoes that I should have thrown out ten years ago or so. I’m not a big fan of shoes; much to the chagrin of my mother and daughter. The shoe loving gene skipped a generation.
Dutch and I had an unspoken agreement: he would stick to the ugly shoes and I would look the other way. He was happy with that, right up until my husband brought home a nice new pair of boat shoes. He resisted the temptation for a few weeks but it got the better of him, and his first foray into men’s shoes were Bill’s brand new ones. He had it pretty good with Bill; Dutch could count on him to take him for a walk or bring home a treat each time he went shopping. As you might imagine though, Dutch’s treat days are over, at least for a while. He spends his time now not begging for treats but begging forgiveness. He went one shoe too far.
In a similar way, we must be careful not to get too greedy with our money or investing. When markets are going well, it’s natural to want to pour more money into investments and ride the wave higher to make gobs of money. Unfortunately, many times that’s exactly the wrong time to buy. This applies to other markets as well; how many of us know someone who bought a house on the tail end of the real estate boom intending to flip it for a quick profit and got burned? Or moved his 401k investments all into stock right before the crash? Having a plan and sticking to it keeps us from getting swept up in the euphoria of hot markets and bubbles, and helps us stick it out when those markets drop and bubbles burst. Instead, including regular rebalancing in your plan can help to take some gains off the table when things are going well, and purchase other assets at a discount. Over time when a particular asset category- like large company or international stocks for instance- is rising, the percentage of your investments held in that category becomes larger, and the percentages assigned to categories that are decreasing in value decrease. Rebalancing brings the percentages back in line with your original investment plan, and is a disciplined way of selling high and buying low. Sure, you may miss out on some gains at the top of the market, but you are also more likely to miss out on some of the losses. Take it from Dutch, you don’t want to be a hog.