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Old 12-22-2008, 05:08 PM   #161
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Originally Posted by LOL! View Post
You should probably go visit the bogleheads forum and get free personalized asset allocation advice: Bogleheads :: View Forum - Investing - Help with Personal Investments

Basically, don't treat your accounts as separate portfolios. Treat all your accounts as one big portfolio. In my IRA nowadays, I have one fund: Vanguard TIPS and that's it. In my 401(k) I have almost all fixed income. In my 403(b) I have fixed income and a real estate investment. Think about it: I have not listed any of the equity investments. I have almost no equity investments in my retirement accounts. The reason is that there is no room in my tax-advantaged accounts. So I have my equities in tax-efficient ETFs and index funds located in my taxable accounts.

Get thee over to Bogleheads. I will look for you over there.
I probably won't join the boglehead forum--I spend altogether too much time online as it is and I kind of feel like I shouldn't join any more forums without quitting one of the ones I belong to already. I will go look around in the archives there and see what I see on the subject.

If it isn't some sort of Asset Allocation faux pas to put different asset mixes in the two kinds of accounts, then I'm probably good to go. I can get a fund with some bonds in it from my 457 and put the rest of the bonds in my Roth. It's at Scottrade and I haven't checked out what funds they have available but hopefully one of them is "all bonds, all the time" or maybe I can buy individual TIPs in that account. I had heard it makes a difference which assets go in a taxable account and which go in a tax deferred plan, but didn't know if important what goes into a tax deferred plan vs an after-tax account. (I don't have a taxable account except bank savings acc't and the occasional CD.)

Thanks.
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Old 12-22-2008, 05:26 PM   #162
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Originally Posted by kyounge1956 View Post
I probably won't join the boglehead forum--I spend altogether too much time online as it is and I kind of feel like I shouldn't join any more forums without quitting one of the ones I belong to already. I will go look around in the archives there and see what I see on the subject.

If it isn't some sort of Asset Allocation faux pas to put different asset mixes in the two kinds of accounts, then I'm probably good to go. I can get a fund with some bonds in it from my 457 and put the rest of the bonds in my Roth. It's at Scottrade and I haven't checked out what funds they have available but hopefully one of them is "all bonds, all the time" or maybe I can buy individual TIPs in that account. I had heard it makes a difference which assets go in a taxable account and which go in a tax deferred plan, but didn't know if important what goes into a tax deferred plan vs an after-tax account. (I don't have a taxable account except bank savings acc't and the occasional CD.)

Thanks.
There are more schools than just "all accounts are one asset allocation". I have found doing this to be a bigger headache than the benefit.

I might have posted that much earlier in this thread... but this thread is real old, so I forget what I have posted where...

In my case I have a 401k, rollover and Roth which are allocated the same (in general) and my wife has a 401k with identical allocation and a Roth which is similar:

95% stock, 5% bonds/cash
70% domestic equity, 25% foreign equity, 5% bonds*
40% large cap, 15% mid cap, 15% small cap, 15% foreign large, 10% foreign small.

Logic for each account: The 401ks at one point had close to 80% of the balance. With job changes and rollovers, in the last 11 years we have had:
4 401ks for me
3 401ks for wife
1 rollover for me (2 contributions)
1 rollover for wife (1 contribution)
Roth for each of us

I have had same job for nearly 12 years. Yet we keep getting bought off, sold, re-acquired then sold off and similar. Each of these transactions gives us the option:
a) cash out 401k
b) roll the 401k into the new 401k
c) roll the 401k into a rollover IRA

I have chosen c) twice
wife has done a) once, b) once and c) once.

With each new job or rollover, treating all accounts as one allocation would have required doing the detailed analysis you did each time (do xray before, do xray after, find a fund which fits the missing portion etc...).

A more efficient use of time:

Allocate each account in full- I can guarantee all our accounts are close to 70% domestic and 25% foreign and 5% bonds/cash. In addition I can come close to 40% large cap and 30% mid/small.
We do not put bonds in a Roth, so that is only exception to above allocation. Only bonds in 401ks and rollovers.

When the recent rollovers we completed I might habe spent 5 minutes on the allocation (I just put the % of the funds it needed to purchase and was done). This would not effect the other 5 accounts.

If you are missing a piece in one account (like 457 is missing fund X) find an equivalent. In wife's 401k there is not a good small cap fund, so she holds 30% mid cap. In my 401k there is no mid cap and I hold 30% small cap. The high level percentages fit into allocation. The percentages into small or percentages into mid will have low impact on return (will 15% mid and 15% small return better or worse than 30% mid or 30% small?). As long as the 30% is not allocated to large cap, foreign or bonds, not a problem.

In addition the Roths are the only place we found a foreign small cap fund- so the 401ks have 25% to foreign large cap. Again will 15% foreign large and 10% foreign small return better or worse than 25% foreign large? Because of currency risk, I doubt the differences will be significant.

Tough to see if your questions on AA were answered... I remember a similar discussion on a thread you started somewhere else here... so hopefully this post helped some- there is more than one way to do something right.
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Old 12-22-2008, 05:38 PM   #163
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What jIMOh is doing is OK for him partly because all the accounts he is using are tax-advantaged IRAs or 401ks. If I did what he did, I would get killed on taxes.

And sometimes one of your plans has a fund to avoid. For example, in my spouse's 401(k) plan all the bond funds have an expense ratio of about 2.25% while in my 401(k) the expense ratio is "only" 1.1%. Do you think I want to use a bond fund in my spouse's plan or the one in my own plan?

And I know what you mean about too many forums. I do the same deal with pieces of technology: If I get a new piece of hardware, I must give up an old one. That's one reasons I don't own any watches. But I would ditch this forum before I ditched the bogleheads forum.
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Old 12-22-2008, 10:50 PM   #164
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What jIMOh is doing is OK for him partly because all the accounts he is using are tax-advantaged IRAs or 401ks. If I did what he did, I would get killed on taxes.
If I did it I'd be flailing around even more than I am already. All I have is one tax deferred plan at work, a Roth and a traditional IRA at Scottrade (the trad-IRA is going to get rolled into the Roth as soon as I get my act together) and a Roth IRA at Ameriprise (which is just going to sit until either the surrender charge comes down some more, or I understand the post on here that explained how and when it might be better to bite the bullet and pay the charge rather than leaving the VA in place). So I have four accounts which will soon be three, then later only two, and after I "downshift", three again because I will have some house proceeds (I hope!!!) and I won't be able to put them in either tax advantaged account.

Quote:
(snip) And I know what you mean about too many forums. I do the same deal with pieces of technology: If I get a new piece of hardware, I must give up an old one. That's one reasons I don't own any watches. But I would ditch this forum before I ditched the bogleheads forum.
So many forums (fora??), so little time. If the time ever comes when I feel like I really, really, REALLY need to join the Bogleheads, I'd probably shed one of my yahoogroups rather than this one. I am in four that are rather similar and lots of the same people are in more than one of the four.
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Old 12-22-2008, 11:22 PM   #165
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We do not put bonds in a Roth, so that is only exception to above allocation. Only bonds in 401ks and rollovers.(snip)
If you are missing a piece in one account (like 457 is missing fund X) find an equivalent. In wife's 401k there is not a good small cap fund, so she holds 30% mid cap. In my 401k there is no mid cap and I hold 30% small cap. The high level percentages fit into allocation. The percentages into small or percentages into mid will have low impact on return (will 15% mid and 15% small return better or worse than 30% mid or 30% small?). As long as the 30% is not allocated to large cap, foreign or bonds, not a problem.
Why no bonds in a Roth? Because this is what I was about to do. The problem is that my tax deferred account at work has only one quote unquote bond fund, and when I look at the fact sheet it says this fund is 84% allocated to cash! Because of the limited choice of funds there is no way to add bonds without also adding either a lot of cash along with them or using a blended fund which adds stocks along with the bonds, but not in the proportion I was shooting for.

Quote:
(snip)Tough to see if your questions on AA were answered... I remember a similar discussion on a thread you started somewhere else here... so hopefully this post helped some- there is more than one way to do something right.
Yes, they are being answered. I was asking (here and on that other thread) how to calculate an estimated return and standard deviation for a given asset allocation once I knew the historic rates of return, the standard deviation, and the correlations of the assets with one another. I found the formula in a book at the library (Quantitative Methods for Financial Analysis, 2nd Edition, edited by Stephen J. Brown, PhD and Mark P. Kritzman, CFA, in case anyone else is looking for it—see chapter 6, "Quantitative Methods in Asset Allocation". I got the returns, standard deviation, and correlations from the SBBI yearbook, also in the library.) It has taken me two weekends to cook up a spreadsheet that does all the math so I can play with different allocations, and it seems pretty obvious from the spreadsheet results that using only the pre-selected funds in my 457 plan, I'm not going to get the return and risk that I used when I did all my Monte Carlo models. After this year I certainly don't want to go with a higher standard deviation and I also don't want to have to work several years longer than what I had figured on based on the Monte Carlos due to lower returns.

What with reading and asking questions here (and sneaking a peek at the Bogleheads) I think I am gradually getting closer to being able to say, "this is the asset allocation I have chosen; I chose it because I estimated it would generate x% return with no more than y% volatility, which is the return and risk I need in order to be able to downshift at my target date by setting aside $z from each paycheck", and being able to back up that statement with some historic data that gives me grounds for expecting to get the return/risk I expect and eventually also some data on my own portfolio that shows that I really did get it.
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Old 01-07-2009, 01:42 AM   #166
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I devoted considerable time during my recent ER test drive vacation to deciding what asset allocation I want to aim at. My target was to replicate the 7.5% return/7.1% standard deviation I used for all my Monte Carlo models. This was described on the Monte Carlo site as a "below average risk" portfolio, which is appropriate for me by age (about to turn 53), temperament (nervous Nellie) and timeframe until I want to semi-retire (shooting at 4 years from now).

Based on the data for several historic periods, the asset allocation I have chosen is 70% Intermediate-term Government bonds, and split the remainder between Large-Cap stocks and REITs. For simplicity, I would split the non-bond portion evenly between Large-Cap and REIT, but the historic data suggest that these two asset classes could drift far from an even split without much affecting the overall return or standard deviation.

Over most of the periods for which I had data, this three-way combination would meet both the risk and return targets. Between 1980 and 1999 this mix would have met the return target but somewhat exceeded the volatility target, but I re-ran my Monte Carlos and even if the standard deviation stayed as high as 10% (much higher than during the actual historic period) for two decades, it did not cause the portfolio to fail.

I also used projected returns for the next 30 years from All About Asset Allocation by Richard Ferri. These are considerably lower than market performance over the last several decades (and I have read elsewhere that market returns are likely to be lower in the future than over the last several decades) but the proposed allocation still met the target using these lower returns. So, if everything goes according to plan, if I continue to maximize my contributions to 457 and Roth for the next four years I'll be able to semi-retire at that time and fully retire at age 70.

Now I need to find some funds that will enable me to carry out this asset allocation. I don't anticipate any difficulty in my Roth IRA but the 457 plan could present some problems. I recently discovered that there is a "self-directed brokerage" option with my 457 plans that will give me access to a great many more funds than the twenty or so pre-selected options. But there is an annual fee and transaction fees for every transfer and at most I could put half of my 457 into that option; the rest has to stay in my "core" account with the limited choices available there. I am going to investigate what I have to do to get some more choices added. There is no bond index fund—the only so-called bond fund is >80% in cash. As far as I am able to there are no stock index funds, so there's no way to choose an AA and carry it out, and be reasonably certain the manager won't change the AA and throw my target allocations all out of whack.

I don't think I should have to pay extra fees to have access to asset class index funds.

So that's where it sits at the moment.
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Old 01-08-2009, 08:16 AM   #167
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Well, I went thru several and most have all failed over the yrs... I just stuck with Boggles % in bonds equals to your Yrs and for retirement? You shuold have whatver your Need to supplement your Income comming all from bonds... not Equities..

EG; For every $1,000 yr you need by 6% apy = you need at least $16,667 saved in Bonds..

has worked out very well for me since Retiring..In the Last Bear of 00-02' and surely this last 08' yr as well, to say the least...

And since I converted to being a Very Passive and Real Lazy Investor now?
I just put the rest in A couple of Balanced Funds and let them take care of it..

Which I had done those Balanced funds A long time ago... I'd been able to retire alot sooner than at age 55..

J. Burton came out with an article saying something like a 50/50 Port has done as well as any other In Higher % in Equities for the past 20 yrs.. and I've seen a 40/60 do only 1% less APY than a 80/20 for the past 10 yrs...

maybe Those outfits that advocate A higher % in equities also stand to gain from you doing so.. M* and others surely do.. They'd go Out of business if they told everyone to Own mostly Bonds, wouldn't they? and surely alot of those FP's and Invesstment houses managing peoples $... most use a 60/40 mix.. at the most.. Gee, wonder why? The one's i've asked for their opinions on what kind of Port I should have, really got Defensive when I reversed their % allocations into Bonds...

They aren't responding to me these Past 9 yrs now and especially after last yr...
LOL
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Old 02-10-2009, 08:19 PM   #168
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With more than 20,000 views, this thread has moved into the top 5 most-viewed of the FIRE and Money forum. Thanks everybody.

I noticed that another sample portfolio with a very low cost asset allocation has been posted here: Is it Christian if you give more of your money to a financial advisor than to the Church? I actually own 7 of the 8 funds in the mix (I use GWX (small cap int'l) instead of Bridgeway Ultra Small cap).

The asset allocation and Morningstar style box for the portfolio in the link is:
40% US stocks
20% foreign stocks
40% fixed_income
9-box style grid:
21 22 18
7 7 5
7 7 5
average market cap $11.1 billion.

Anyways, just another model portfolio to take a look at if you are looking for an asset allocation to copy.
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Old 02-10-2009, 10:03 PM   #169
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That link doesn't work...so what are the funds in this simple portfolio?
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Old 02-10-2009, 10:14 PM   #170
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$1 Million Retiree Portfolio Using Low-cost Index FundsAllocation
($)
Ticker
Symbol
Fund NameExpense
Ratio
(%)
Annual
Fee
($)
$200,000VFSUXVanguard Short-Term Bond Admiral Shares0.10%$200$200,000VAIPXVanguard Inflation-Protected Securities Fund-Admiral Shares0.11%$220$250,000VTIVanguard Total Stock Market ETF0.07%$175$50,000BRSIXBridgeway Ultra-Small Company Market Fund0.66%$333$50,000VBRVanguard Small-Cap Value ETF0.11%$55$150,000VEUVanguard FTSE All-World ex-US ETF 0.25%$375$50,000VWOVanguard Emerging Markets ETF 0.25%$125$50,000VNQVanguard REIT ETF 0.10%$50-------. --------------$1,000,000= Total PortfolioTotal Portfolio Expense = 0.15%$1,533
OOPS, found it.
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Old 02-10-2009, 11:19 PM   #171
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$1 Million Retiree Portfolio Using Low-cost Index FundsAllocation
($)
Ticker
Symbol
Fund NameExpense
Ratio
(%)
Annual
Fee
($)
$200,000VFSUXVanguard Short-Term Bond Admiral Shares0.10%$200$200,000VAIPXVanguard Inflation-Protected Securities Fund-Admiral Shares0.11%$220$250,000VTIVanguard Total Stock Market ETF0.07%$175$50,000BRSIXBridgeway Ultra-Small Company Market Fund0.66%$333$50,000VBRVanguard Small-Cap Value ETF0.11%$55$150,000VEUVanguard FTSE All-World ex-US ETF 0.25%$375$50,000VWOVanguard Emerging Markets ETF 0.25%$125$50,000VNQVanguard REIT ETF 0.10%$50-------. --------------$1,000,000= Total PortfolioTotal Portfolio Expense = 0.15%$1,533
OOPS, found it.
VEU contains emerging markets. If you don't want overlap with VWO swap VEU with VEA. I'd also use VFISX over VFSUX.

DD
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Old 02-11-2009, 07:42 AM   #172
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VEU contains emerging markets. If you don't want overlap with VWO swap VEU with VEA. I'd also use VFISX over VFSUX.
That's the beauty of your asset allocation. You can tune it to your desires and wishes.

You can overweight emerging markets by using both VEU and VWO or you can avoid corporate bonds by using a Treasury fund (VFISX) instead of VFSUX. There is no one-size fits all in this regard, but its useful to know what's inside each of your funds so that you can make a knowledgeable decision.
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Old 05-21-2009, 07:34 AM   #173
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For those of you interested in current and timely asset allocation articles, the NYTimes seems to have a URL that just lists all the articles on AA that the newspaper publishes starting with the most recent. So you can bookmark this URL and check for new articles from time to time:

Asset Allocation - Your Money Guides - NYTimes.com

There are 4 new articles so far this May.
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Old 05-21-2009, 01:48 PM   #174
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sorry, but I found just because they maybe Lower cost, they also ended being lower performers as well. An the way the Indexes are not true indexes anymore and how Devious Traders, Hedge Funds and many others have figured out ways to Circumvent and Manipulate them? Add to the fact that ( according to Jack Boggle ) Institutions control 80% of the money being invested now and less than 20% from private investors, when it used to be the otherway around...

"Investing in the future is going to be far more challenging than in the past..that most average and even above ave. investors will have problems & be taken advantage of..and disappointed, unless regulations are both enforced and changed.."

Show me the Money... Looking @ A per $10k invested Cost basis..
FYI- A Typical self managed 60/40 port of index's lost over -20% in 08 and now has only about $300 in tot. value per every $10,000 Invested after the past 10 yrs..most other mixes have a ave of less than 4% apy for the past 10 yrs or just barely enough to stay ahead of Inflation.. From 5/99- 5/09' = 10 yrs...Of Active Bal. Index Ports, VWINX ( 40/60 ) shows having the best Tot. Rtn and Tot value for the Same period with about $16,216 = + $6,216 for every $10k invested..not much better than Owning All Bonds.. And it only took 1 yr of loosing -10% for it to end up like this..and 9 yrs of gains.. While It's 60/40 Active Mge fund of VWELX shows about $15,141

Not bashing Indexes, just bashing Equities.. making 50-60% after 10 yrs isn't my idea of making my $ make the most and working for me in a Risk Enviorment as in equties..

Will we have another -20% melt down in the next 10 yrs? You can bet on it and maybe even more than just 1 with all the devious methods being created in just the past 5 yrs..from being able to Short it by a margin of 3-1 to Leverage it to Hedge it, a Hedge fund with just a $100 Mil. can destroy a Decent Co. in a Day..Now.. as they did in 08'...and nothing is on the books to stop this from happening again.. Yet.. Yet alone to force regulators to Enforce those Regulations..

All Methods of investing in the past did not have these kinds of Devious methods back then and thus do not work as well now , nor going into the future..

Wherever there is $, there will be Theives to try to steal it and After they do and even if they get caught, the damage has been done and Investors will end up not getting that $ back and Be the looser, Only the Lawyers and the Gov't will get it back into their hands.. Either Ban Hedge Funds or require them to be Mutual Funds and have them meet those Regulations and Regulate Short Selling..on margins of 2 & 3-1 leveraging..with Derivitives.. Until then? We Average investors haven't got a chance anymore..investing in equities...
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Old 05-21-2009, 03:32 PM   #175
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I'm interested. Count me in.
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Old 05-21-2009, 11:28 PM   #176
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sorry, but I found just because they maybe Lower cost, they also ended being lower performers as well. An the way the Indexes are not true indexes anymore and how Devious Traders, Hedge Funds and many others have figured out ways to Circumvent and Manipulate them? Add to the fact that ( according to Jack Boggle ) Institutions control 80% of the money being invested now and less than 20% from private investors, when it used to be the otherway around...

"Investing in the future is going to be far more challenging than in the past..that most average and even above ave. investors will have problems & be taken advantage of..and disappointed, unless regulations are both enforced and changed.."

Show me the Money... Looking @ A per $10k invested Cost basis..
FYI- A Typical self managed 60/40 port of index's lost over -20% in 08 and now has only about $300 in tot. value per every $10,000 Invested after the past 10 yrs..most other mixes have a ave of less than 4% apy for the past 10 yrs or just barely enough to stay ahead of Inflation.. From 5/99- 5/09' = 10 yrs...Of Active Bal. Index Ports, VWINX ( 40/60 ) shows having the best Tot. Rtn and Tot value for the Same period with about $16,216 = + $6,216 for every $10k invested..not much better than Owning All Bonds.. And it only took 1 yr of loosing -10% for it to end up like this..and 9 yrs of gains.. While It's 60/40 Active Mge fund of VWELX shows about $15,141

Not bashing Indexes, just bashing Equities.. making 50-60% after 10 yrs isn't my idea of making my $ make the most and working for me in a Risk Enviorment as in equties..

Will we have another -20% melt down in the next 10 yrs? You can bet on it and maybe even more than just 1 with all the devious methods being created in just the past 5 yrs..from being able to Short it by a margin of 3-1 to Leverage it to Hedge it, a Hedge fund with just a $100 Mil. can destroy a Decent Co. in a Day..Now.. as they did in 08'...and nothing is on the books to stop this from happening again.. Yet.. Yet alone to force regulators to Enforce those Regulations..

All Methods of investing in the past did not have these kinds of Devious methods back then and thus do not work as well now , nor going into the future..

Wherever there is $, there will be Theives to try to steal it and After they do and even if they get caught, the damage has been done and Investors will end up not getting that $ back and Be the looser, Only the Lawyers and the Gov't will get it back into their hands.. Either Ban Hedge Funds or require them to be Mutual Funds and have them meet those Regulations and Regulate Short Selling..on margins of 2 & 3-1 leveraging..with Derivitives.. Until then? We Average investors haven't got a chance anymore..investing in equities...
What the heck are you talking about? Is this a response to a previous post? I think if you get one of those little air spray cans you might be able to fix that sticky caps key.
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Old 05-23-2009, 10:46 AM   #177
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This is a great thread.
So much info I'll have to read as I get time.
So I'm tagging/bumping it to make it easy for me to find.
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Old 05-24-2009, 09:24 AM   #178
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Thanks for the thread

I admit I'm a big believer in alternative assets as I have been fortunate to get good access to that through my employer.

As a result I've grown partial to thinking of the major decisions in assets categories in 4 buckets

Equities
Inflation sensitive (e.g., real estate, commodities, TIPs)
Deflation sensitive (e.g., bonds)
Relative value investments (e.g, long-short, arbitrage, etc. )

David Swensen who has taken the position that the typical individual investor should run away from alternative investments given that they don't have good access and can't do the right due diligence still recommends a different blend for investors.

http://www.bloomberg.com/apps/....refer=home


"Swenson told Mack that equity-oriented investors should allocate 30 percent of their money to U.S. stocks, 15 percent to Treasury bonds and 15 percent to TIPS. He recommended putting 15 percent into real-estate investment trusts, 15 percent into equities in non-U.S. developed markets and 10 percent into emerging markets"

So 55% to equities with 25% international bias
15% deflation sensitive - T bills
30% inflation sensitive - TIPs, REITs
0% to alternative investments

Major message for me is that people should just limit the world to stocks and bonds in a world that is likely prone to serious inflationary stimulus; stimulus that I could do without
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Old 05-30-2009, 11:47 PM   #179
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Originally Posted by LOL! View Post
(snip)

One might say there are 3 general ways of rebalancing which are really based on the "when" of rebalancing:
1. Rebalance with every new addition to the portfolio.
2. Rebalance at a set time every year: your birthday, January, etc.
3. Rebalance when certain percentage trigger points are reached, such as Larry Swedroe's 5/25 rule. (snip)

Back to 'when' to rebalance:

If one contributes to their portfolio every paycheck or monthly or quarterly, then one can check their asset allocation and put the new money to work in the asset class that is underweighted from their written asset allocation plan. This is relatively simple to do now that you all have your portfolios set up in the M* portfolio tool and can easily "X-ray" it. This is also reasonably tax-efficient and you are not selling any investments to create a tax liability. This would be a classic buy undervalued securities or buy low strategy. It can be very difficult to be buying REITs now or small cap value. These asset classes have gone down the most in the past year.

Another method is to check whether rebalancing is needed based on some calendar date. I personally do not like this method because lots of opportunities can be missed in between. If something drops alot but goes back up before your 'rebalance date', then you may have missed a chance to buy low. However, I think this is certainly the simplist way.

Another method is to use trigger points. Swedroe advocates a 5/25 rule where one rebalances when as asset class percentage is changed by more than 5% of the total portfolio value or by more than 25% of its target value. Here's an example: You want 30% fixed income. So your target range is really 25% to 35% of fixed income for your total portfolio value. You do not need to rebalance if your fixed income percentage falls within this range. However, if your asset allocation calls for 12% fixed income, then a 7% to 19% range would be too large, since 25% of 12% is 3%, then the range would be 12% plus or minus 3% or 9% to 15% of fixed income.

With all the rebalancing that you might do, you should take taxes into account. You do not want to be creating a tax liability if you can avoid it. If you can't avoid it, you want to try to avoid short-term capital gains and get long-term capital gains. Rebalancing in a 401(k) or IRA has no tax consequences, so look at those accounts first. (snip)

Homework: Present here on this thread, the last act of rebalancing that you did.
After a lot of delay I am finally trying to get my portfolio to actually reflect my target asset allocation of 70% fixed income with the other 30% split more or less evenly between stocks and REITs. I have submitted several trades online in both my Roth IRA and my 457 plan that should get me a lot closer when they take effect on Monday.

The first thing I did, several months ago now, was find out which REIT index funds are available through my Roth IRA custodian. (No REIT funds are available in my 457 plan.) I requested a copy of the prospectus and after reading it decided to buy the fund, so yesterday I sent in an online order to buy 1000 shares of VGSIX in my Roth. That is most of the money that was in the account, and by a fortunate coincidence is also about 13% of my total portfolio, which is right around the correct amount for my target AA.

Then, last night and today, I checked the balances in my 457 plan. I had a large amount of Fidelity Contrafund (FCNTX), an approximately equal amount of "Stable Value Fund" (which I've never been able to find a ticker symbol for or much information about ), plus smaller amounts of PTTRX (called a bond fund but actually mostly cash), a small-cap index, a mid-cap index, and a Euro-pacific index fund. Some months ago after much number crunching, I came to the reluctant conclusion that there isn't any way I can hit the target allocation in my 457 using only the pre-selected funds . There is a self-directed brokerage option but it has extra fees and restrictions and I'm not sure it would be worth the hassle . About the closest I can get is Vanguard Target Retirement Income (VTINX), which is where I have been sending all my new contributions since March.

I have also been procrastinating on making these changes because the values of the funds had gone down so much and I didn't want to "lock in" my losses. But recently I thought of a way to trick myself into doing what I should have done anyway, which is to reduce my stock allocation and increase bonds by the only readily available means, namely buying more VTINX. So, I looked up the price on FCNTX, and by checking my back statements was able to determine that I had bought about 1/4 of the shares I have when the price was lower than it was when the market closed yesterday ($47.80). "Well", says I to myself, "I won't be losing any money if I sell those" . Then I looked again and found I had bought about half of my shares when the price was over $60, in fact for most of that time the price was over $65, and thought "it's no use holding my breath waiting for it to go back that high again" . The small and mid-cap funds were also down to about half what I had paid for them as one-time purchases . So, I sent in a trade order to sell all of the small-cap and mid-cap index fund shares plus about 3/4 of the FCNTX and about 3/4 of the Stable Value, and buy more VTINX. I decided to keep some of the Stable Value to balance the volatility of the remaining Fidelity Contrafund. If FCNTX goes up over $55, I'll swap half the remaining amount (and half of the remaining Stable Value) into VTINX, and if it gets back up to $60 (or I get sick of waiting for it to), I'll get rid of the last of both.

The Europacific index fund, also a one-time purchase, is worth about 3/4 what I paid for it, so I decided to hang onto it for a while to see if it gets back up to where I started. But if it doesn't within a reasonable time (whatever that is) it's outta there.

Then I ran a portfolio Xray. Before today's trades, I had about 60% of my portfolio in stocks: 55.8% in the stock funds, plus some of the VTINX is in stocks also. The Xray says that after the trades on Monday I should be down to about 44% stock, including the REIT fund which isn't broken out separately (about 32% U.S and 12% Europacific). The bonds will be just under 40% and cash about 15%.

That's not quite what I was aiming at, but it's a lot closer than I am now.

Next, I think I need to see if there is a TIPS index fund, or if I can buy individual TIPS in my Roth IRA. If so, I will split the money going into the Roth between bonds and REITs to increase the bond allocation and hold the REIT allocation about level. According to all the number crunching I did earlier this year, based on historical data a REIT allocation anywhere between 5% and 25% of the total portfolio (with stocks for the rest of the 30% non-fixed) will give me the return and standard deviation I'm aiming for, and it should be easy to stay within that range by directing the incoming money to bonds or REITs as required.

New money to the 457 plan will continue to go 100% to VTINX. The limit on the 457 is about five times the limit on the Roth, so eventually I may not be able to keep my allocation where I want it by just by by buying REITs and bonds in the Roth. If that happens, I suppose I could reduce my 457 contributions and buy more I-bonds on payroll deduction to be earmarked for retirement spending, but I'll worry about that if & when I get there.
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Old 05-31-2009, 06:17 AM   #180
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Several comments:

1. You have fallen into the behavioral finance trap of loss aversion. You need to get out of it. Please read "Why Smart People Make Big Money Mistakes".

Consider this:: If you sell your lower-priced Small Cap Index fund and buy a different lower-priced Small Cap Index fund have you really "lost" or "gained" any value? Same thing with Fidelity Contra: If you sell it and buy something that has also dropped in value (a REIT) have you really lost or gained any value. Read the book.

2. You have the M* tools to help you. You should create portfolios for BOTH the BEFORE and AFTER pictures of what you are trying to do. That way you can see the effect of what you are trying to do before you do it.

3. Stable value fund can be considered a cash account. CASH$ in Morningstar.

4. I myself would not enter trade orders or mutual fund exchanges on a weekend while the market was closed. It is probably OK, but it would be a terrible thing to do with stocks and ETFs because of the way the stock market works (or doesn't really work) at the opening of the stock market every morning.

5. NAV of fund shares don't matter so much because of various distributions and dividends that funds pay out. For example, suppose you bought contra at a NAV of $60 a share and the next year it was still $60, but the it paid a $15 distribution that you automatically reinvested. The NAV would go to $45 and you would have more shares, but the total value of your shares would be the same. Mutual funds are not like stocks and the NAV share price cannot be used to judge loss or gain or position much of the time.

Another instance of this is a bond fund. Many bond funds have monthly or quarterly dividends. The NAV of bond funds often does not fluctuate much away from $10 or thereabouts, so you cannot tell how much you have gained or lost by looking at the NAV: you must look at the total value of your shares (NAV X number_of_shares).
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