Anyone else considering allocations...

[Brat]

My funds with US large-cap value holdings have had a great run (DODBX) this year. The managers are fantastic but I wonder if I shouldn't take a little off the table.

Am twixt CDs and international. I know they are different beasts but I need to resolve my desires for caution and greed - usually I end up splitting the difference.

[yakers]

I increaded my international AA earlier this year and have been accumulating a bit more cash (converted stock dividends to pay cash Vs reinvestment). Both make some sense to me but this was a small change in AA and I rarely change my AA as my major retirement holding is a Target Retirement type fund.

[Olav23]

The general consesus is usually, "is it your target allocation?" If you're a market timer, feel free. Most of us just set-and-rebalance.

[Mwsinron]

Whatever you feel comfortable with I guess. I balance and dont mess with it.

[Brat]

I miss-spoke. My large cap position exceeds my target allocation.. it has ballooned.

I have US large-cap bloat.

[Mwsinron]

Quote:

Originally Posted by Brat I miss-spoke. My large cap position exceeds my target allocation.. it has ballooned. I have US large-cap bloat.

How far out of wack from your target?

[LOL!]

I have been working on reaching my asset allocation nirvana this week. I am not market timing, because I have neglected moving things around until I had some accounts transferred to a zero-commission broker. Now that movement is complete, I am ready to get back to 25% fixed income and to put funds in the most tax-efficient accounts. My equities were up over 80% (of assets, not total return) and I had accumulated too much cash in a taxable account, so I am overdue for a rebalance.

Also, it looks like I will reduce income taxes by a few thousand dollars by moving things around a little bit, so I hope to get all this done by the end of next week. For a specific, in my 401(k) I sold international value and bought bonds, then in my taxable, I bought tax-managed international. The end result is a similar asset allocation, but moved fixed income into a tax-deferred account. It may look like I am buying international at the high point, but I am effectively trading international for international. If it tanks, then I will do tax loss harvesting. So if the market goes up I win and if the market goes down am I still better off than I was before these transfers.

[unclemick]

The nice thing about Target Retirement - I don't have to even look anymore - just assume the computers at Vanguard are still running.

I think I am gonna like this better than the 'good old days' of rebalancing.

2006 was my first year. We'll see.

heh heh heh : : 8)

[Nords]

Quote:

Originally Posted by Brat My funds with US large-cap value holdings have had a great run (DODBX) this year. The managers are fantastic but I wonder if I shouldn't take a little off the table.

It's just a rebalancing question, isn't it?

You do have a rebalancing plan for these situations, right?

[dex]

I'm using any dips to buy into my allocation.

[Brat]

I put our IRA portfolio through Fidelity's grinder, here is how it looks today:

Domestic Stocks 34.20%
18.54% Large value
12.55% Large blend
2.77% Small Growth
Foreign Stocks 28.70%
Bonds 20.80%
5.75% Individual I-bonds
Short Term 15.30%
10.83% MM/ST CDs

Because most of the Domestic Stock portion is in DODBX (about 35% of our grand total) and Oakmark Balanced (13%) re-balancing domestic stocks means that I need to sell some of them. Because DODBX holds most of the large value any tweaking impacts that holding.

I am not inclined to sell my foreign stock holdings, nor Diana, or my itty-bitty Fidelity Low Price.

My bond allocation has decreased because stocks have been on a tear. Although it will decrease the total return in our portfolio I think I should increase my short term holdings.. and forget about being greedy. [We are in our mid-late 60s]

I am not anal about our allocations but our bond/cash should be closer to 45%. I won't do that overnight but it is something to work on, IMHO.

Feedback please, gang.

[LOL!]

Quote:

Originally Posted by Brat Feedback please, gang.

For exquisite asset allocation and rebalancing advice, you can't beat the folks over at http://diehards.org/forum/viewforum.php?f=1 They seem to live for this kind of question. It would be helpful if you had at least one Vanguard fund among your holdings though.

[ats5g]

Brat,

Do you have any set guidelines for AA that you follow, or perhaps have written down? If find that if I have my rebalancing guidelines written down, it's a whole lot easier to follow - the emotions [fear + greed] are greatly diminished.

If you AA has gotten out of wack, what are you waiting for? Seems like you've got it all figured that you need to sell large cap US stocks and rebalance into bonds. The only thing that would possibly stop you is if you hold DODBX + OAKBX in a taxable account, but it seems like they're both in an IRA.

I like to do rebalancing every year or so, but if you want to do it whenever your AA gets out of whack you can use Larry Swedroe's 5/25 rule:

"Author Larry Swedroe suggests using a 5/25 rule to rebalance, instead of relying on specific time intervals. What this rule says is that the portfolio should be rebalance if at least one of the asset class is 5% out of balance with respect to the entire portfolio or 25% or more out of balance relative to its original allocation. An example will illustrate this.

Consider an asset class with a 10% allocation in an investor’s portfolio. Then the 5% “sub-rule” says that if this asset class becomes less than 10%-5%=5% or more than 15%, then it should be rebalanced. On the other hand, the 25% “sub-rule” says that if this asset class grows to be more than 1.25*10% = 12.5% or less than 0.75*10% = 7.5%, rebalancing should be performed. Combining the two “sub-rules”, the rebalancing points are triggered at below 7.5% or more than 12.5%.

In the author’s opinion, the exact rebalancing method probably does not a lot of difference since there is little evidence to suggest that one technique is better than the other. What is more important though is that rebalancing is performed diligently with a predetermined method."

btw - isn't this sort of thing that balanced funds are for? don't they automatically rebalance for you?

- Alec

[audreyh1]

Quote:

Originally Posted by Brat I am not anal about our allocations but our bond/cash should be closer to 45%. I won't do that overnight but it is something to work on, IMHO.

Trim your stock funds to bring your bond/cash allocation back to around 45%. Go ahead and do it overnight! Rebalancing is supposed to happen all at once.

Has it been years since you rebalanced? If so, it's well due.

Audrey

[Rich_in_Tampa]

Quote:

Originally Posted by audreyh1 Trim your stock funds to bring your bond/cash allocation back to around 45%. Go ahead and do it overnight! Rebalancing is supposed to happen all at once. Audrey

Brat, I agree with Audrey. There is no premium for rebalancing over time. Dive in, do it, and sleep well. I've researched this, thinking that it was like dollar-cost averaging in the accumulation phase. But everything I read says getting into the desired allocation as soon as practical (i.e. rebalancing) is just fine. There will be exceptions to be sure, but the sooner you're in the sooner your risk tolerance is reflected the way you want it.

[brewer12345]

Seems reasonable to rebalance to me.

[ats5g]

Brat, and others:

For myself, it is relatively easy to rebalance b/c I've got a small amount of $$. For those of you with rather large amounts of dough, do you find it harder to rebalance b/c it's a whole lot of money that you'll be moving around?

My dad had never rebalanced since 1975 until last year and had this problem. I tried to get him to write down a plan like dividing the money to be rebalanced into 2,3, or 4 smaller amounts, and then moving those smaller amounts every month or two. I thought this would help with paralysis, but I guess it's hard to listen to your kids , b/c in the end he just rebalanced all at once.

- Alec

[JustCurious]

Quote:

Originally Posted by ats5g I thought this would help with paralysis, but I guess it's hard to listen to your kids...

People find it difficult to take advice from someone whose diaper they once changed.

[Nords]

Quote:

Originally Posted by ats5g For those of you with rather large amounts of dough, do you find it harder to rebalance b/c it's a whole lot of money that you'll be moving around?

Heck, yeah, especially in a taxable account. Taxes should logically have nothing to do with AA but sometimes the tax bite is bigger than the prospective loss faced by not rebalancing.

Quote:

Originally Posted by JustCurious People find it difficult to take advice from someone whose diaper they once changed.

You would think that parents would value the advice of those who they've raised & trained more than the alleged "objective advice" of strangers with a bunch of letters after their names.

I don't know about the rest of you parents, but the wisdom & perceptiveness of our 14-year-old's insights bring me up short at least once a week. Especially when it comes to picking stocks!

[unclemick]

This here thread be one more proof why I may (in my old age - mabbe in 7 yrs at 70) organize my notes and publish my grand theory of:

Chickenheartedness!

heh heh heh heh heh heh heh heh heh - Target Retirement 2015 anyone? .

And then I'll have to give up on: Pssst Wellesley - except perhaps on special occasions. Go you Vanguard computers - rebalance your little 'heartless' hearts out - rationally of course.