Rebalancing portfolio / normal portfolio balance

[Rob Base 2.0]

With the gains of last year, have you rebalanced your portfolio recently?

What percentages breakouts do you normally try to keep in your portfolio? And why?

[dee27]

I am retired: 50 to 60% stock funds and the rest is in bonds, mixed funds and CDs paying 3%. I did rebalance two months ago. My small Roth IRA gained a lot this year and has doubled in 5 years. Prior to retirement I had 80/20 split of stocks to bonds.


Edited to correct %

[Rob Base 2.0]

In your stock funds do you separate out large cap, small cap and International (or something like that)?

[Deleted]

I try to stay around  80/20 stocks.  The 401K auto rebalances occasionally but if I look at my overall AA with Vanguards portfolio watch I'm at about 85/15 right now.  I suppose I should go in and push some over to bonds...but yuck...I'm not a huge fan. 

[dee27]

Jan 8, 2018 16:07:38 GMT -5 Rob Base 2.0 said:

In your stock funds do you separate out large cap, small cap and International (or something lik

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Yes, I did before I rebalanced but dropped the small cap fund.

[dee27]

Rob,

How is your mom doing?

[Rob Base 2.0]

Mom is OK. Still looking for work.

[resolution]

I am fully vested in a pension that will replace the majority of my earnings, so I have an aggressive allocation: 95% stock funds and 5% bonds.

The stock funds are split 80% US index funds and 20% international index. I don't officially re-balance, but when I make my monthly deposits I take a look at the percentages and add the new money into the one that is low. That usually keeps them on track.

[Lizard Queen]

I have not, but theoretically it forces you to sell high and buy low, so it's a really good idea.

[tallguy]

Jan 8, 2018 16:08:38 GMT -5 minnesotapaintlady said:

I try to stay around  80/20 stocks.  The 401K auto rebalances occasionally but if I look at my overall AA with Vanguards portfolio watch I'm at about 85/15 right now.  I suppose I should go in and push some over to bonds...but yuck...I'm not a huge fan. 

I'm not either, so I don't bother with them.  My AA is effectively 100/0.  I tried to talk myself into even a little bit of bonds and couldn't do it.

[alabamagal]

I am numbers geek and use spreadsheet to monitor my 401k transactions. When I started with current company they had auto rebalance quarterly. After first two times I turned it off because it was generating large numbers of transactions to deal with very small discrepancies vs targets. Plus i just realized it was selling my winning funds and buying my losers.

My target is 10% bonds (may change to 0% like tall guy due to other safe investments). Since contributions are based on target allocations, the overall allocation remains pretty close to target.

[tskeeter]

Jan 8, 2018 19:05:10 GMT -5 tallguy said:

Jan 8, 2018 16:08:38 GMT -5 minnesotapaintlady said:

I try to stay around  80/20 stocks.  The 401K auto rebalances occasionally but if I look at my overall AA with Vanguards portfolio watch I'm at about 85/15 right now.  I suppose I should go in and push some over to bonds...but yuck...I'm not a huge fan. 

I'm not either, so I don't bother with them.  My AA is effectively 100/0.  I tried to talk myself into even a little bit of bonds and couldn't do it.

This sounds like my pre-retirement asset allocation.  Have a fairly high risk tolerance and don’t get upset when things take a dive.  It always comes back.  Even after near 50% declines in 08/09.

Now that I’m retired, I’ve shifted to 30% bonds and the like.  But, I’m planning to increase my risk level about five years in to retirement.  Maybe not 100% equities, but increasing equity allocation over time as a shortening life expectancy reduces the consequences of a 10% or 15% market correction.

[tallguy]

Even in retirement now I still think of myself as a long-term investor.  For the long term, stocks beat bonds handily.  I'll go with the math.  Expenses are low so my needs are minimal, and I've got a big enough cushion to withstand a large downturn.  And while there may be something to be said for the idea of, "When you've won the game, stop playing" I also don't much believe in the idea of taking a knee, particularly in the third quarter.  It's late in the third quarter, certainly, but still in the third quarter.  Lot of time left to play.

[Deleted]

Jan 8, 2018 19:05:10 GMT -5 tallguy said:

Jan 8, 2018 16:08:38 GMT -5 minnesotapaintlady said:

I try to stay around  80/20 stocks.  The 401K auto rebalances occasionally but if I look at my overall AA with Vanguards portfolio watch I'm at about 85/15 right now.  I suppose I should go in and push some over to bonds...but yuck...I'm not a huge fan. 

I'm not either, so I don't bother with them.  My AA is effectively 100/0.  I tried to talk myself into even a little bit of bonds and couldn't do it.

After losing my GM stock to bankruptcy and learning the bond holders also lost their investment, I just don't get bonds, they seem to have a similar risk to stocks with limited upside.  So I'm 100/0, but actually closer to 90/10 as the 10 is cash that floats from 5-10 based on when I get around to moving earns over to the after tax brokerage account.  

If you run the FIRE calcs, 100% stocks always wins.  If you can build a portfolio where you are ok with a 40-50% drop in the market because you have built enough net worth, then keeping it all stocks will provide the best 30+ year result.  If I work until age 50, with only 5% returns plus my added contributions, I could live for the rest of my life if the day after I retire the stock market dropped 40-50%.  Bonds are only less volatile for those down years, but the cost is the huge loss of growth.

[souldoubt]

I've got 20-30 years until retirement.  Currently still 100% in stocks and I really don't think I'll make the move to bonds until some time after 40 and even then I can't say when or how much.  I used to re-balance twice a year but every time I went to re-balance it seemed like my current allocation was pretty close to my original allocation.  Currently re-balancing once a year and just did 3 months ago so likely won't even start thinking about it until after the first half of the year.   

[djAdvocate]

i don't pay any attention to any rules of investing, save two:

1) stay as close to 100% invested as i have time for
2) don't have more than 5% in any one sector OR individual issue

how did everyone do last year?  i got a measly 29.6% return.

[gs11rmb]

I don't re-balance because I don't actually know how .

Roth - Vanguard Target Retirement Date Fund
Taxable - Vanguard SP500 Index Fund
401K - SP500 Index Fund

I used to have my 401K in a Target Date Fund but the fees were ridiculous.  The only low-cost un-managed index fund available is the SP500 so I moved it over but I'm concerned that I'm not diversified because I have essentially the same fund at Vanguard. 

Am I diversified enough because there's an 'age appropriate' mix in my 401K?

[jitterbug]

My husband took all the earnings from our 401k investments and put them into our bond funds within our 401k so we don't lose all the gains once the market turns (as we know it WILL turn eventually!) It seemed like a good opportunity to shift some things since we hope to retire in the next 5 years or less.

[Lizard Queen]

Jan 9, 2018 15:22:20 GMT -5 gs11rmb said:

I don't re-balance because I don't actually know how .

Roth - Vanguard Target Retirement Date Fund
Taxable - Vanguard SP500 Index Fund
401K - SP500 Index Fund

I used to have my 401K in a Target Date Fund but the fees were ridiculous.  The only low-cost un-managed index fund available is the SP500 so I moved it over but I'm concerned that I'm not diversified because I have essentially the same fund at Vanguard. 

Am I diversified enough because there's an 'age appropriate' mix in my 401K?

You don't really have anything to rebalance here.  The Target Retirement Date fund should rebalance on its own, by definition of the fund.  The others are all stock, whereas, you would rebalance to maintain a certain % between equity and debt (aka bonds)  You could also rebalance against another type of investment--the gist of this is you want something that moves in the opposite direction of equity, so if your stocks are down, then this other investment is up.  The problem with bonds right now, besides the whole moving in the opposite direction of a hot equity market, is the interest rates are being kept artificially low. The Fed is itching to raise them, and when they do, bond values that you are holding will go down.  The tax cut also makes bonds (debt financing) a less attractive option for companies now.  My take, you're probably perfectly fine with what you are doing.  Just saw a headline that said bonds are crashing now.  If true, that could make it a good time to buy them if you are so inclined.  There's still the issue with the Fed, though.  El Presidente wants the market to take off, even if it would be prudent for the Fed to put the brakes on it a bit.  How much are the politicos going to influence the Fed decisions in regard to this?  WTF knows.