After almost four years of false alarms, the bond bears are finally able to act smug. Broad-based Canadian bond index funds have fallen in price about 4% or so in since the beginning of May. Meanwhile, real-return bonds have taken it on the chin: they’ve plummeted about 13% and are headed for their worst calendar year since first being issued by the federal government in 1992.
In times like these investors question the whole idea of including these asset classes in a balanced portfolio. So it’s time for a reminder about how diversification is supposed to work.
It’s helpful to think about a portfolio like a cake recipe. You probably wouldn’t eat flour, baking powder or raw eggs on their own, but when you mix them with sugar, butter, vanilla and other ingredients the results are delicious. A baker doesn’t view ingredients in isolation: she considers how each interacts with the others to produce the final result.
In the same way, it’s important not to view individual asset classes in isolation. Real-return bonds are a perfect example. It would be hard to make a compelling argument for holding nothing but RRBs: their yields are low, and with such long maturities they’re quite volatile. But in the context of a diversified portfolio they play a couple of important roles. They provide a hedge against unexpectedly high inflation, and they have low correlation—even some negative correlation—with other asset classes.
Swing your partner round and round
Although real-return bonds are vulnerable to big price swings on their own, they can reduce the overall volatility of a portfolio, because they often zig when other asset classes zag. RRBs and Canadian equities, for example, have frequently moved in opposite directions since the beginning of 2010:
When equities had a rotten year in 2011, real-return bonds returned close to 18% and (along with real estate) helped the Complete Couch Potato earn positive returns that year. They also produced double-digit returns in 2009 and 2010. On the other hand, RRBs performed poorly in 2006 and 2007, while Canadian equities were in double digits.
It’s not a perfect balancing act: you can’t expect one asset to consistently go up when the other goes down. But the relationship is strong enough to justify keeping bonds—both traditional and RRBs—in a balanced portfolio even when they don’t look enticing on their own.
Make volatility work for you
Remember the importance of rebalancing your portfolio when the asset classes diverge dramatically. After their outstanding performance from 2009 to 2011, real-return bonds probably climbed well above their target allocation in your portfolio. If so, the appropriate thing to do was trim them back to size and use the proceeds to prop up whatever was below its target. This year, US equities have soared in price as much as RRBs have declined. So if your portfolio is out of whack again, it may be time for another round of rebalancing.
When you “harvest volatility” in this manner it quickly becomes clear why you’re holding multiple asset classes in your portfolio, and how they work in partnership with each other.
We’d all like to know which asset classes will be this year’s winners and which will give us ulcers. Unfortunately, the market gurus who make these calls are often spectacularly wrong. As the holder of a diversified portfolio that’s periodically rebalanced, you don’t need to guess. You simply hold all the asset classes all the time, and you systematically sell high and buy low. It’s like having your cake and eating it too.
The only catch I see is for investors who rebalance on a schedule (say annually). These folks could miss some of the upside of their winners and value in other asset classes if they rebalance at the wrong time. Is the solution to set thresholds for asset classes and ‘watch them like a hawk’, rebalancing as soon as they exceed or fall below the thresholds?
Dan, am I crazy to think that I don’t need any bonds — that a 100% equity portfolio is fine for me?
I’m thinking that I might not need bonds because:
1. My risk tolerance is high. If my equity portfolio fell 75% or more, I’d consider it to be a great time to buy stocks at a discount. (And if the market never recovered in the ensuring decades, then I figure it’s because the world has bigger problems than low-equity returns, anyway.)
2. My time horizon is infinite. Sure, I might want to sell some of my investments some day but my living costs are low and I have no dependents.
I don’t foresee a need to withdraw at a paritcular time — at least not until many decades from now — and even then I wouldn’t withdraw at more than 4% a year.
It seems to me that I risk getting lower returns if I include bonds in my portfolio. Since my risk tolerance is high and my time horizon is so long, the lower return doesn’t seem to be justified by the added safety?
I’m the same was as Kevin (maybe worse – I’m on leverage). With a 50+ year time horizon I see bonds only as a way to lower my returns when the historical average for stock market returns is 11%.
The difference may come in how we view our portfolios. I don’t view my portfolio as a piggy bank nor do I view it as an emergency fund. I view it as a tool to get the best return possible over a 50+ year time horizon.
I use to think just like you but I have been convice by the time by some argument to hold at least 20%.
-The difference of past performance between 80% and 100% is not great less than 1 % if I remember well.
-If stock go down if you got 20% in fix income will be really able to buy I great portion of cheap stock and enhance your return with rebalancing.
-it will keep your moral up in market crash is always difficult, if it was easy everybody would adding new money in crash to invest. Do not overestimate you market timing ability because you never know when you hit to bottom of the barrel in a crash.
Honnestly right now your best option that nobody talk about for fix income is the 3% at people trust TFSA saving accout if you got a portfolio under 100 000$, this years the average coupon on stock was less that 3% so is yelding more risk free. I plan to go in bond when monatery easing will be officialy over.
But if nothing of that convince you there still option to do better with 100% portfolio. You should try to get small large and value stock of diferent market because they can correslate differently and rebanling between your target allocation is the way to go with 100% stock.
There are two free lunches for investors. Diversification and rebalancing, but you can’t enjoy the latter without the former!
Rebalancing does not necessarily boost returns and so we do it not to capitalize on upside (such that market timing is irrelevant) but it is done as a risk control measure to get back to one’s asset allocation which was done in the first place for risk mitigation. See Vanguard’s paper at: https://personal.vanguard.com/pdf/icrpr.pdf
@CCP: Interestingly, it looks like real-return bonds are even more volatile than stocks. When the markets started dropping a couple of weeks ago I noticed everything was going down but stocks went down more than regular bonds (at least initially). From your chart here it seems that real-return bonds experienced even bigger losses than stocks. I wonder if the RRBs are better for diversification than ordinary bonds since they look more uncorrelated. The big drop they’ve had recently might make them more promising too.
@Kevin/Francis: I am currently 100% in stocks. While a normal portfolio should have bonds, I am comfortable with the risks and returns I get from this. Since I have a long time horizon and the dividend yield on several stock indexes is higher than the bond yield right now, I don’t see any value in holding bonds myself. Yes I may be able to rebalance later, but how many years of low returns will I have to endure while waiting for that? The long-term value offered by stocks just looks better and I can wait.
Even without any bonds I can benefit from international diversification among stocks. Just compare the TSX and S&P 500 over the last 5 years and you’ll see it. When bond yields have improved noticeably I’ll start to buy them again, unless stock markets have crashed again and offer the kind of value we saw in 2009. Then again bond yields usually wouldn’t be high in that situation.
If the market crashes and never recovers that’s good over the long term. Assuming that profits and dividends more or less hold up, you would be able to re-invest and invest more at such good yields that after enough time you would actually come out ahead. It might take a couple of decades but I am fully prepared to wait that long. Price gains are a one-time benefit that you only get when you sell, while high yields are forever and pay you while you stay invested.
@Richard and Francis: Thanks for your input. I’m still inclined to stay with 100% stocks at this point.
1. My risk tolerance is high. If my equity portfolio fell 75% or more…
Let’s let Mebane answer this one:
“The unfortunate mathematics of a 75% decline require the investor to realize a 300% gain just to get back to even- the equivalent to compounding at 10% for 15 years.”
A Quantitative Approach to Tactical Asset Allocation, p.4
In theory, it’s no big deal. But in practical application, that amounts to 15 years of rebuilding your account. Imagine a crash around the corner (and it might not take much imagining) and you are now 42 years of age before you’re are back to square one. And that’s assuming 15 years of 10% growth.
Not how I’d want to spend my 20s and 30s.
Not the final word, by any stretch of the imagination, but something to consider.
All the best,
Excellent article! Been waiting for somebody to say this, Yes, the smug ones are doing the “I told you so” dance about bonds. Traditionally it’s the same folks did the “told you so” dance about equities whenever they drop. A broken clock is still correct twice a day, huh? I see this as a massive buying opportunity.
Sadly, most people are rushing for the bond exit door, even though they only bought last year (it was cool then) and it’s the same thing they did in 2008 with stocks. (And with gold.) Yeah, buy high/sell low–the common man’s investing mantra.
Kevin –> Why on earth wouldn’t you own any bonds? Just because the US index has been all shiny the past 12 months? As the article states, bond funds have had years reaping 15-18% while equities were low. In a balanced portfolio you would have scraped that sweet foam off the top, dropped it into lower performing equity indexes at the same time, and now you’d be richer than a sheik.
Bob_C –> You’re right about potential lost gains by rebalancing early and it’s called “not letting the dogs run”. That’s why rebalancing should only be done at a fixed point in time or once you’re off by a good few points of your target allocations. But to do otherwise is trying to time the market, isn’t it? But you have to approach your portfolio logically–like Mister Spock not like Doc Holliday. Thresholds are a very good idea, indeed.
Kevin: I too haven’t gone into bonds. I am retired and have a good government pension with a cost of living index. Therefore I invest 60% in ETFs equities globally, domestic and US. I have 40% in my portfolio in Reits -VRE and preferred shares ZPR. My portfolio has the diversification and balance I need in equity stocks and income. For tax purposes Reits are in my TFSA
Claire: What is a pension? ;-) Your approach seems sound to me. Your pension might effectively act as the “bond portion” of your portfolio anyway.
@Edward: predicting returns for stocks is difficult, but for bonds we can get a more accurate idea. For example if you have a bond with a term of around 9 years and a duration of around 7 years, with a yield to maturity of 2.6%, you are likely to earn around 2.6% annually from that bond for the next 7-9 years. That’s approximately where the DEX Universe Bond Index is right now. In comparison XIC has a dividend yield (12 month trailing dividends) of 2.82% right now. That’s just the cash paid to investors today. The earnings are much higher (a 6.9% yield) and over the long term there are many reasons for stocks to grow more than bonds. For me that’s a compelling reason not to jump into bonds yet. Give me a 5% yield and I’ll be right there alongside you :)
It’s true that in the short term, holding bonds might allow me to rebalance and earn a profit if the stock market crashes. However there are two problems with that for young investors like me. First, I care about the long term a lot more than the short term. If I try to reach for the best short-term results I risk losing what’s really important to me. Second, to have a meaningful impact I would have to have a large portion of my portfolio in bonds. If I shift 10% of my assets into bonds and they outperform stocks by 10% over the next year, I’ve only gained 1%. Given the number above I’m not about to put 70% of my assets into bonds to get a bigger gain. Since we don’t know how long we will have to wait for a decline in the stock markets, how deep it will be, or what short-term performance bonds will have in the meantime, the result of trying to anticipate a stock market decline this way may be that you pay $1 to avoid losing $0.50. Like a lottery ticket there is a small chance that it will make you a lot of money but a much larger chance that it won’t.
Not everyone has the same requirements as Kevin and I, so some other investors should be a lot more interested in bonds. This is just why I personally don’t want to own them now.
@Chris: 15 years to get back to even is a long time indeed. However if stock prices crash and dividend yields don’t, after a while (possibly 10-20 years) you would actually be better off than if prices stayed level or just kept rising. It’s hard to look that far ahead – but isn’t the whole purpose of investing to make long-term gains like that? A 75% decline would be a dream come true for me.
Hi all: I’m on the road until later this week. I’ll address your comments when I’m back.
I’ve always wondered if rebalancing is “systematically selling high and buying low”, then does rebalancing increase returns? Does doing it more often increase returns?
@CCP: I would be very interested in your thoughts on the paper linked to above by Chris. (this one: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=962461)
Fundamentally this is clearly an attempt at market timing, which is the anti-thesis of the Couch Potato. On the other hand, it seems to share many of the advantages and avoid many of the pitfalls of typical market timing strategies. It follows a simple, rule-based decision making criteria, that is mechanical and removes emotion from the decision, just like Potatoing. Based on the numbers in the paper, it appears to offer the potential to increase returns and drastically decrease volatility. At least it does so over the past 100-years, and granted that past performance is no predictor of future, but the back-testing here seems far more exhaustive and robust than most schemes that aim to beat the Street. The only down sides I can see, most of which are cited in the paper, are (a) taxes [but in a tax-deferred or tax-free account this doesn’t matter], and (b) potentially increased trading costs [but with a moderate sized portfolio in an online discount broker, some napkin math suggests even the worst case is not that bad].
The only other down side I can see is that this strategy requires monthly action/intervention/decisions. Aside from the dollar costs [which probably aren’t that bad], I think this could make it more difficult to “stick to plan”, since the investor would have 12 decisions/opportunities to let his emotion complicate things, or deviate from plan, versus perhaps only one for a Couch Potato portfolio.
Am I missing anything else? This strategy really does seem to have some merit.
@Danno : Here the CCP answer for this strategy
@Francis: Thanks for the link. I probably read that post already but forgot. :-) So here’s what I have trouble reconciling; the only problems with the approach cited are costs/taxes (which with today’s discount brokers and in tax-free accounts, one might argue, is a fairly minor issue, and more importantly, the behavior/ability to execute over time issue.
But here’s what I can’t reconcile – does a couch potato portfolio not have the same issue? It requires that, once a year (or whatever), I rebalance my portfilio based on some established rules. It likely involves difficult “emotional” decisions, such as selling some of an asset that is outperforming and buying one that is underperforming. Basically – it’s the same thing in principle, is it not? It’s slightly different in both extremity/amplitude (a Couch Potato approach never has you going 100% to cash), and in frequency (the Faber method requires a look/transaction once a month versus perhaps only 1-2 times per year for a Couch Potato. So I will give that there are more and potentially more severe “executions”. And so more opportunities for very human failings, perhaps? But I can’t really accept that a Couch Potato is totally devoid of these either – it asks you to do precisely the same thing once a year. (that being to put your emotions and the news aside, and execute a move just based on a simple and purely mechanical rule set)
(Just to be clear, I follow a Couch Potato strategy now and have little intent of deviating. I’m just playing Devil’s Advocate here. If I can stick to a simple rule, even in “bad times”, and execute a Couch Potato rebalancing strategy, I fail to see why I couldn’t do this too? Both are just a matter of discipline and following your own rules.)
@Danno: the difference for me is that the assumptions behind couch potato investing are pretty much built into the market. They only fail in major bubbles and similar rare events, and even with those included the basic market mechanics lead to good long-term returns. Not only do we know that couch potato investing has worked well in the past, but we have good reasons to believe that it will continue to work well in the future.
Any market timing approach may look good in the past but unless you have similar compelling reasons to believe it will look good in the future then it’s not as valuable. For example I could tell you to stay out of stocks every 20 years when the year ends with a 7 or 8. If I wrote a paper on this it would show how you would have avoided the weak years in 1987-1988 and 2007-2008, probably outperformed the market by investing in bonds instead, and ended up with a higher return. So is that a proven strategy now?
It’s hard to come up with fundamental reasons that market timing strategies should continue to work, because the way the market responds to events is continuously changing and all the formulas that people come up with are very specific to past market activity. Take any strategy that has worked in the past and I’m sure it will work again at some time in the future. I just don’t know when and for how long.
There was an argument by Warren Buffet (I think…although I can’t find the video now) – that demonstrated that someone who doesn’t sell their assets and take a capital gains on a regular basis ends up with significantly more in the long run (i.e. getting an extra 2-3% in investment return (11% vs 8-9%) compounds massively over 100+ year period) which approximately represents the tax you pay.
Now on the other hand you need to find securities that you are willing to hold for 100+ years (that’s the hard part).
Heres an article that says 60/40 can give a better return, less risk than 100% equity.
@Richard: Thanks for the reply. Again I will play Devil’s Advocate here, and saying that I think you may be exaggerating a bit. Certainly a strategy that says to “stay out of stocks every 20 years when the year ends with a 7 or 8” does not seem to be based on any real mathematical model, even if back-tested data showed it happened to work. Mebane Faber’s strategy is not that. It is actually based on mathematics (using a moving average), and I would say is substantially more mathematically and statistically robust than a “sell on Mondays” approach.
Granted, his own data shows periods in which a Couch Potato portfolio would have outperformed (and those where it underperformed). So my argument is that they are not so different after all. Let’s pose this question in reverse. Suppose that you are an avid proponent of the Mabane Faber method, and I am trying to sell you on Couch Potato. They are both based on fairly simple principles, rule-based decision making. The future is unknown for both, with only past data as a guide. Sometimes each one wins, sometimes each loses – and you have no idea which way things will go in the future. But back-tested results actually show the Faber method, at least over the last 100yrs, results in slightly better returns and lower volatility. So why would you switch to Couch Potato?
Someone who firmly believes in a certain approach is unlikely to be convinced by any argument :) I may be suffering from that condition too.
That said, one of the limitations of the paper is that it compares a single asset to an entire portfolio. Few investors have a portfolio that is allocated 100% to the S&P 500. In the paper this imaginary allocation is compared to an allocation that flips between 100% in the S&P 500 and 100% in cash based on market signals.
A better comparison would be with a balanced portfolio using a diversified asset allocation and rebalancing. Some studies find that introducing a small to moderate bond allocation actually increases returns by about as much as this timing strategy (though that may be due to the specific time period studied). But even without that, all cases that I have seen show that a bond allocation with regular rebalancing significantly lowers volatility. If you compare to the market timing method to a full portfolio you might find much less benefits to doing it.
Like you said they have some similarities. The market timing method may be more suitable for someone who is willing to give up future returns at the slightest sign of trouble. The couch potato method may be more appropriate for someone who want to maximize their long-term returns.
Overall I believe couch potato investing has lower risks and equivalent returns for those who can stick to the plan. The market timing method attempts to avoid mistakes, so any mistakes made in the method or in implementing it could be very dangerous. Even a technical error like being off by a few days on one signal could cost you 5% or more of your portfolio value. The couch potato method embraces mistakes and despite those mistakes manages to earn a return that is very difficult to beat as long as you have the confidence to stick to a somewhat appropriate asset allocation.
How do you feel a real-return bond ETF such as XRB compares with a floating-rate bond ETF like HFR, an ETF which is tied to the interest rate rather than the inflation rate, in the kind of economy we may have for the next five years or so?
@Danno: The link that Francis provided includes pretty much all I have to say about market timing strategies like the one proposed by Faber. In my experience there will always be folks who are not content with market returns and will be attracted to strategies like this. However I have never met anyone who has actually followed such a strategy for several years.
@Gerry: Floating rate bonds and RRBs are completely different asset classes with different risk profiles. Choosing one over the other based on what you think will happen over the next five years is just making a guess on where you think inflation and interest rates are headed. I don’t believe anyone can do that, so my advice is always to hold I uncorrelated asset classes all the time and avoid forecasts.
@CCP: Thanks for the reply. I can certainly accept the execution argument. The best strategy is fairly useless if it’s impossible to execute.
Again only playing Devil’s Advocate here. You say you have never met anyone that has followed through on a strategy like this over many years. Yet (I assume) you have met at least a few that follow through on a Couch Potato strategy. From a behavioral standpoint, that makes me curious as to why it is more likely that people will follow one than the other. From what I can see, they are not all that dissimilar. Both are simple strategies, rooted in the law of averages, that can be summed in 1-2 lines of mechanical rules, and require only that you obey those simple rules. So why are folks “able” to actually follow through on only one? Is it the frequency (that Faber forces you to do this 12x/year where Couch Potato really requires once)? Is it that Faber’s strategy forces you to look at a price, where CP doesn’t, directly, and that makes it more “tempting” to fail? Is it the nature of the binary, all in/all out strategy that attracts a type of personality more prone to “mind changing” and less able to stick to a plan?
@Danno : I think the quick answer is always easier to follow the herd. With indexing you follow well establish barometer but with other strategy you are on your own. If the strategy lag for to long you will be tempted try something else to join or beat the heard.
I am a 28 year old teacher just starting out on the investment trail. My question is when is a good time to buy in? With bonds being in such bad shape right now is it time to buy bonds now (buy low) and wait on filling in the equities portion of my portfolio until equities stop to take a breath? I like the passive investment strategy and am hoping to set up a Couch Potato portfolio through my TD brokerage account. Any advice would be appreciated.
@Heddy: If you’re just starting out and you have a sensible long-term allocation (like the example portfolios on this site) then it’s easiest to stick to that regardless of current market conditions. You won’t be missing out on much and you will avoid many common mistakes.
Bonds are “in a bad shape” not because the prices are low, but because the expected future returns may be low. That implies that bond prices may be too high right now. We just don’t know for sure.
There are also no guarantees on how soon or how far equities may fall, or how much more they will go up before they go down again. It looked like they were falling recently but after dropping 5.8% over a few weeks the S&P 500 climbed back up in 2 weeks to close at a record high today. Anyone waiting for a 7% or 10% drop in the US market to buy missed out on that opportunity. So holding your breath until they stop to take a breath could be dangerous.
@Heddy: Your question is extremely common, but as Richard points out, it’s dangerous. You will never be able identify a good time to buy, because you will likely fall into the trap I describe here:
Investors who sit on the sidelines waiting for “the right time” to buy in often end up sitting in cash for months or even years as the markets run away from them. They simply can’t bring themselves to pull the trigger, and the longer they wait, the harder it becomes.
You’re 28 years old and I assume you won’t need this money for a couple of decades at least. My suggestion for all young investors is to start now, stay invested, and think long-term. “A good time to buy in” is when you have the money, period.
(repost of my question in this thread)
Does “making volatility work for you” imply greater returns than without or less frequent rebalancing? If rebalancing is “systematically selling high and buying low”, then does rebalancing increase returns? Does doing it more often increase returns?
@George: Sorry I missed your comment. Rebalancing might boost returns, but that is not its primary goal. It is more about risk management. I also see a behavioural benefit: if you have new money to add to the portfolio you might ask, “What asset class do I expect to outperform in the near future?” and put the money there. But this is useless forecasting, and it’s better to take the emotion out of it and simply ask a mathematical question: “Which asset class is furthest from its target allocation?”
Because markets exhibit some momentum, it is counterproductive to do it too often. There’s no magic interval, but in general I’d say once or twice a year is plenty, and one should make an extra effort when a market move is very dramatic. For example, if you rebalance in January and the equity markets drop 20% in the next three months, it’s probably worth doing it again.
These articles explain more:
Thanks CCP! I’m glad you’ve already covered the topic extensively. These blog entries will become a timeless resource!
A few of the readers posted replies asking about portfolios holding 100% equities. What is your opinion of younger/ newer investors all in with equities?
My portfolio consists of a few different index mutual funds that are pretty much 100% equities. You could probably name most of the funds I own because you recommend most of them. I have justified my large exposure to stocks based on the following;
-I am young and have time to recover from a drop in the market. As others have stated. A drop in the market now may help my cause.
-I have a secure job with a defined pension. So even if I mess up I can fall back on my pension.
-Eventually I plan to have less exposure and risk.
What is your opinion on this mentality? I feel that a few of your readers are practicing similar strategies based on justifications similar to mine.
Thanks in advance!
@Barry: There’s nothing wrong with a portfolio of 100% equities if you have the willingness and ability to accept that kind of risk. From what you’ve described, you seem like a good candidate. The real test will come when your portfolio suffers a big drop. Since early 2009 markets have performed extremely well, so being 100% in stocks has been pretty easy. It would not have been so easy from September 2008 through February 2009, when you would have lost half of your savings. If you could get through a period like that without losing your composure, then you may indeed be suited to an all-equity portfolio. Very few people have the stomach for that, however.
i am 33 and starting to invest myself (earlier in pensions and mutual funds)and have high risk tolerance for my tfsa and medium RRSP currently i have invested in 100% equities(diversified, us,emerging, and canadian ) in tfsa. since i am all in equities i was thinking should i add REITS and bonds or just 10% REITS in tfsa
i hear lots of people say that bond is a bad idea now even Warren Buffet.
@taran: As I said in my reply to Richard, if you believe you can handle a portfolio with no bonds, that’s fine. Bonds are obviously vulnerable to short-term losses as interest rates rise, but your RRSP and TFSA are long-term investments, so you should not be trying to time your purchases.
I do not have a direct benefit pension, but my employer offers a direct contribution pension through Sunlife. I have to keep my funds with Sunlife until I leave my current employer so I am stuck with the funds that they offer me through my employer. I am not complaining, but the funds, overall, do not offer the individual asset diversification I would like and worst of all, the fees are much higher than available ETFs (My pension uses mutual funds averaging around .50% MER. My question is, what can I do with my pension in conjunction with my TFSA and RRSP? In other words, as my pension is a registered account should I just keep Canadian equity and bonds in it and use my RRSP to purchase US Equity in $US? Any comments would be greatly appreciated or words of support from others who feel trapped with a pension of crappy mutual funds.
@Mike: It’s impossible to offer specific advice here, but in general, you should probably think of your pension, TFSA and RRSP as a single large portfolio and give some thought to the best asset location. For example, you might keep Canadian equities in the pension plan, bonds in the TFSA and international equities (US-listed ETFs) in your RRSP. The problem, however, is that each account may be very different in terms of size and future contribution room, and rebalancing across accounts is impossible.