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    Had to adjust investments

    My asset allocation (AA) went outside my target 60/40 to 63/37 (stocks/bonds) due to the stock runup lately. That triggered my re-allocation band of 3% so I made the most complex investment decision I have had to make this year. I changed my 401k contributions from all stock to all bond. If it hits 5% out of whack, I'll have to make some exchanges and sell some stocks while they are at all time highs and buy some bonds at normal levels. Quite different from my previous buy high/sell low approach. I like being a boglehead.

    #2
    Not totally disagreeing with your strategy, because it's completely valid, but a question... Since the money is held in your 401k (and thus not subject to taxes on asset sales), why not just sell high & buy low? You can sell some of your stock holdings (which have earned outsized gains), exchange them for more bonds (which are relatively lower), and have your AA fixed in one shot with no tax hit. It just seems that using only new money would take a long time to fix an out-of-whack AA if your account had a high balance (say, >$500k)
    "Praestantia per minutus" ... "Acta non verba"

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      #3
      Originally posted by kork13 View Post
      Not totally disagreeing with your strategy, because it's completely valid, but a question... Since the money is held in your 401k (and thus not subject to taxes on asset sales), why not just sell high & buy low? You can sell some of your stock holdings (which have earned outsized gains), exchange them for more bonds (which are relatively lower), and have your AA fixed in one shot with no tax hit. It just seems that using only new money would take a long time to fix an out-of-whack AA if your account had a high balance (say, >$500k)
      Fair point. My investment strategy I have outlined says I change new money when my AA hits 2% out of whack. I don't do exchanges until 5%. Not sure there is a good reason for this vs. that, but it's what I wrote down, so it's what I follow. You're way is equally valid.

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        #4
        I have never really understood the rebalancing every year, especially in relation to your retirement at around 65. We are being bombarded so much that many of us will live to 85-90+ these days. Why pull out of stocks that have the potential of bringing more money into your nest egg and to dump it into bonds, that from what I have read never seem to get more than 5%, unless they were corporate bonds or whatnot.

        Me I am so far behind the 8ball in saving for retirement, that I am completely focused on stocks (perhaps my IRA has bonds mixed into the fund). I only buy dividend paying stocks. I also try to only buy stocks in companies that I can observe closely, like my bank, my phone company, my chocolate maker (go Hershey - it has almost doubled from what I bought it at), A big company that has a location in town, etc. Once I have a certain number of shares in each of 5 companies, then I intend to start in on some more. So far things are working out for me very well, and if Hershey’s wants to fly me to the moon then I am happy to go along. not every day someone can see that their shares of a company have gone up by over 80%. I know most advisors would tell me to sell it and buy something else. Like what? M&M is still privately held I believe.

        But it comes down to why sell just to change a 3% drift apart. To me it is only a theory, that makes no sense, so I don't do it and have no plans to do so. I've read plenty about the whys but never have I been convinced to readjust. Just my opinion, but no one has to try to sell me on it. Just stating my own philosophy here nor I'm not trying to win anyone to my 'side'.
        Gailete
        http://www.MoonwishesSewingandCrafts.com

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          #5
          Originally posted by Gailete View Post
          I have never really understood the rebalancing every year, especially in relation to your retirement at around 65. We are being bombarded so much that many of us will live to 85-90+ these days. Why pull out of stocks that have the potential of bringing more money into your nest egg and to dump it into bonds, that from what I have read never seem to get more than 5%, unless they were corporate bonds or whatnot.

          Me I am so far behind the 8ball in saving for retirement, that I am completely focused on stocks (perhaps my IRA has bonds mixed into the fund). I only buy dividend paying stocks. I also try to only buy stocks in companies that I can observe closely, like my bank, my phone company, my chocolate maker (go Hershey - it has almost doubled from what I bought it at), A big company that has a location in town, etc. Once I have a certain number of shares in each of 5 companies, then I intend to start in on some more. So far things are working out for me very well, and if Hershey’s wants to fly me to the moon then I am happy to go along. not every day someone can see that their shares of a company have gone up by over 80%. I know most advisors would tell me to sell it and buy something else. Like what? M&M is still privately held I believe.

          But it comes down to why sell just to change a 3% drift apart. To me it is only a theory, that makes no sense, so I don't do it and have no plans to do so. I've read plenty about the whys but never have I been convinced to readjust. Just my opinion, but no one has to try to sell me on it. Just stating my own philosophy here nor I'm not trying to win anyone to my 'side'.
          Because I am a boglehead and I made an ISP based on my tolerance for risk. I decided 60/40 was risky enough to produce returns I can live with but not so risky as to drop 50% like the S&P did in 2008-2009. Theoretically, this would remove the emotion from my ISP when the market corrects (and it will). Only time will tell. And I only invest in index funds. Don't care for the risk of individual stocks. And it was actually fun selling stocks high and buying bonds low. My exchanges happened the day the market went up a lot (I moved a total of $25k from stocks to bonds to rebalance).

          For you, while you need the upside of 100% stocks, can you live with losing half of that in a downturn? Would you panic sell? If not, then 100% equities is fine.
          Last edited by corn18; 12-03-2017, 05:55 PM.

          Comment


            #6
            Originally posted by corn18 View Post
            Because I am a boglehead and I made an ISP based on my tolerance for risk. I decided 60/40 was risky enough to produce returns I can live with but not so risky as to drop 50% like the S&P did in 2008-2009. Theoretically, this would remove the emotion from my ISP when the market corrects (and it will). Only time will tell. And I only invest in index funds. Don't care for the risk of individual stocks. And it was actually fun selling stocks high and buying bonds low. My exchanges happened the day the market went up a lot (I moved a total of $25k from stocks to bonds to rebalance).

            For you, while you need the upside of 100% stocks, can you live with losing half of that in a downturn? Would you panic sell? If not, then 100% equities is fine.
            I don't even know what a Bogle head is or what for sure it refers to.

            Nope, I wouldn't panic sell. I'm frugal. To me if the stock market went down a lot, I would see it as a buying opportunity if I had any cash to invest at that point. Currently GE is doing lousy, but we have one of their big plants close by. As a matter of fact our rental property was originally built as GE workers homes back at the change of the last century. But it is part of our local news scene to keep up with what is happening there. But when I saw how far down it went, I bought more shares since I happened to have the money - a total of 8 shares. Not much but every little bit counts in the long term. But now instead of putting into my regular stock fund, the shares are going into my Roth IRA o I don't have to pay taxes on the dividends. I'm 62 so could actually tap it if needed, but those funds aren't going to be tapped unless absolutely necessary. So far we have avoided it.

            My Roth IRA is being built little by little and over the years is now worth almost $6000. All investment and retirement accounts are now worth around 30K+ 15 years ago when we got married, we had practically zilch, so I feel very good about what we have done and my goals for the next year is to be able to deposit even more, decrease expenses and increase income and savings. I am tracking down Ideas.
            Gailete
            http://www.MoonwishesSewingandCrafts.com

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              #7
              Originally posted by Gailete View Post
              I don't even know what a Bogle head is or what for sure it refers to.
              We Bogleheads are fans of Vanguard founder Jack Bogle. Low-cost index funds are emphasized.

              https://www.bogleheads.org/wiki/Bogl...ent_philosophy

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                #8
                Originally posted by Gailete View Post
                I don't even know what a Bogle head is or what for sure it refers to.
                https://www.bogleheads.org/forum/index.php

                Now you know.

                Comment


                  #9
                  I like Bogel and I like William Bernstein the intelligent asset allocater. He has a book about it.
                  LivingAlmostLarge Blog

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