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Rebalancing
Old 02-18-2011, 09:29 AM   #1
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Rebalancing

I need to rebalance as my stock portion has moved 5% past my threshold. It is now 55/45. My fixed income portion consists of DODIX, VBMFX, and a stable value fund which is yielding 3.8%. I want to get back to 50/50 but I am not sure where to put the 5% because it looks like interest rates are going up and bond funds may start heading down. I am leaning toward putting the money in the stable value fund. Any ideas?
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Old 02-18-2011, 09:39 AM   #2
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There have been a number of threads in recent months devoted to the question of where to put one's fixed income allocation, especially if one does not want to buy bonds or bond funds. Money market funds are paying very little, and many people prefer CD's if they can find a good rate.

In my case, I already have a sufficient cash allocation so despite the predictions for bonds (over the last 2-3 years), I have bought VBTLX. I guess I will just have to take the long term outlook if/when the predicted drop occurs.
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Old 02-18-2011, 09:54 AM   #3
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MY 2 cents and my choice is to go with a stable value type fund. I just cannot buy into bonds right now. Of course my crystal ball that indicated inflation is coming and bonds will take a beating has not worked so well for a couple years now.
YMMV
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Old 02-18-2011, 12:05 PM   #4
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I had a similar dilemma this year on picking between DODIX and VBMFX to add a considerable amount. I decided to go with DODIX because its bond holdings have a shorter duration (3.8 vs 4.79 according to Yahoo as of late last year). I'm guessing it's opting for shorter-term bonds in anticipation of the interest rate rise.
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Old 02-18-2011, 03:43 PM   #5
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At this point I have close to a 50/40/10 equity/bond/stab value allocation with all new money going into the stable value fund. With a decent amount invested and less than 5 years to retirement, this allocation fits my comfort level. Or at least as much of a comfort level as one can currently have.
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What is Stable Value Fund---Example?
Old 02-18-2011, 04:50 PM   #6
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What is Stable Value Fund---Example?

What r Stable Value Funds---Examples?
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Old 02-20-2011, 03:12 PM   #7
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Quote:
Originally Posted by ripper1 View Post
I need to rebalance as my stock portion has moved 5% past my threshold. It is now 55/45. My fixed income portion consists of DODIX, VBMFX, and a stable value fund which is yielding 3.8%. I want to get back to 50/50 but I am not sure where to put the 5% because it looks like interest rates are going up and bond funds may start heading down. I am leaning toward putting the money in the stable value fund. Any ideas?
I are starting to look at bonds and CD┤s but i think I stick with individual stock for a little longer(95 %). But soon I will chicken out .

Read this article just now about yield and stocks...

Will Rising Yields End the Party? | zero hedge
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Old 02-20-2011, 11:33 PM   #8
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Quote:
Originally Posted by rsingh6675 View Post
What r Stable Value Funds---Examples?
typically these exist in 401k or 403b plans. they have a nav that goes up unlike mm funds that maintain a $1 nav. sv funds now typically pay 3-3.5%. they are composed of very short term paper and include an insurance wrapper. i have never seen the nav of mine go down it's just how fast it goes up that determines your yield/return.


The fund invests in stable value investment contracts issued by a diversified group of high-quality insurance companies, banks, and other financial institutions, and a variety of fixed income instruments including U.S. Government and agency securities, mortgage-backed securities, asset-backed securities, corporate bonds, and interest rate futures and options. The fund also maintains an allocation to a money market fund to help meet daily liquidity requirements. Unit price, yield, and return will vary.

Who may want to invest:

Someone looking for a conservative investment.
Someone who is looking for relatively stable income and seeks to preserve principal value. Someone who anticipates using a portion of their retirement savings in the next five years.
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