Reallocation - if not now when

[donheff]

For many years I have been highly allocated to equities (over 80%). Just before the crash I liquidated a fair amount of those equities so I would have cash to pay off a mortgage (done yesterday) and would have a multi-year bucket for expenses. I have always been comfortable with substantial volatility because I have a Federal pension but I would like to move to reduce that volatility a bit now that DW is ER'd. I am currently at ~77% equities (in a mix of indexes), 12% bonds, and 11% cash equivalents. I would like to drop to about 60% equities but I am not sure when and how. I didn't want to do it after the crash because I knew the equities would rebound. But now things are quite a bit better although not back to DOW 14K.

Should I get more into bonds now or wait? If now, move in one big jump at the close of an up day, slowly move in? And, since I haven't paid much attention to bonds what sort of mix do people recommend? I want to stick with easy to use mutual funds - I have Vanguard, Fidelity and TSP (govmnt fund) to choose among. My current 12% is split about half and half in the TSP government fund and Vanguard intermediate term index with a small amount in VG short term investment grade.

 

[W2R]

I am no investment guru, but if it was me I would go ahead and put more of my TSP in the G Fund now. It seems like as good a time as any. If you are worried about timing, you could move equal amounts during each of the next 6-8 months.

 

[LOL!]

Since we cannot predict the future and since equities have just had a nice run up from the February lows, you might as well re-balance to your new asset allocation today. Ooops! Too late!

 

[Dawg52]

I cut my equities when the DOW got back to 9,600. Obviously to early, but I have slept much better at night. W2R suggestion seems sensible to me. Cut a little bit every month for the next 6 months. But what do I know, I always screw up.

 

[Telly]

Would now really be a good time to buy up a wad of bonds? With interest rates having no where to go but up?

Dirty market timing I know... but with interest rates down against the bottom stop...

 

[donheff]

Would now really be a good time to buy up a wad of bonds? With interest rates having no where to go but up?

Dirty market timing I know... but with interest rates down against the bottom stop...

Thats what is holding me off. But it seems like no matter how many times Brewer explains it I can't wrap my head around the index funds and whether it matters much when you get into them. I would like some opinions about the "likely" progress of total bond funds versus the super safe TSP G fund. I was assuming I should keep a mix of both.

 

[brewer12345]

As I understand it, the G fund is essentially a stable value fund. In a period of potentially rising rates, that sounds like a good way to bump up your fixed income allocation gradually.

Were I in your shoes, I would probably gradually switch my allocation by about 1% a month til I got where I wanted to go.

 

[yakers]

Last year I switched from a Lifecycle (target retirement) fund into G, C, S & I funds, dropping out the F (total bond) fund. The G fund IMHO is a better risk balancer thus allowing a higher % in stocks. I thought less of the G fund when I was working but now it is a key part of my portfolio and it may be the only bond fund one needs to hold. The L Income fund may be a good choice as well. With a COLAd pension and some funds that will not die from inflation or recession, it makes for easier sleeping even if it doesn't amount to great wealth.

 

[donheff]

Last year I switched from a Lifecycle (target retirement) fund into G, C, S & I funds, dropping out the F (total bond) fund. The G fund IMHO is a better risk balancer thus allowing a higher % in stocks. I thought less of the G fund when I was working but now it is a key part of my portfolio and it may be the only bond fund one needs to hold. The L Income fund may be a good choice as well. With a COLAd pension and some funds that will not die from inflation or recession, it makes for easier sleeping even if it doesn't amount to great wealth.

You are right Yakers. In fact, looking at the makeup of the G fund it is not only a great bond fund but a great cash bucket. It can't lose absolute value under any circumstances and it returns the average of all US treasuries with 4 or more years duration. Pretty darn useful. I have consistently had my TSP "balanced" between stocks and bonds like we have done in my wife's 401k and other retirement accounts. (We keep our taxable 100% in equities.) Lately we have used DW's retirement accounts to hold our cash bucket (largely money funds currently). But it seems to me a better approach is to convert the TSP entirely to the G fund and use that for a super safe cash/bond bucket with a pretty good return.

It is frustrating how these things can stare you right in the face and you don't even notice them till somebody mentions something that makes the concept pop. Thanks.

 

[Lakedog]

But it seems to me a better approach is to convert the TSP entirely to the G fund and use that for a super safe cash/bond bucket with a pretty good return.

This is my approach -- before retirement I was in S and I funds but now 100% G fund. Like you, I generally keep my taxable 100% equities (and Roth also).

 

[W2R]

This is my approach -- before retirement I was in S and I funds but now 100% G fund.

Me too. I really liked the G Fund during the 2008-2009 crash.

 

[Lakedog]

Me too. I really liked the G Fund during the 2008-2009 crash.

Of course, I will sometimes become a market timer and move funds to C, S and/or I when the market has had a big drop -- did this early in 2009 but am now back to 100% G. The G fund is definitely one of the best features of the TSP.