Portfolio Balancing: Sell or Hold and Buy New?

[lennyandgragg1]

Hey there. I was reviewing my portfolio recently which consists of a variety of Vanguard mutual funds. First, let me say that I am not retired, but plan to retire within the next ten years. Most of the funds I have I have held onto for at least ten years and they have yielded around 7-10%. Two though, an Emerging Markets Fund and an International Stock Index Fund have only averaged around 4-5%. In cases like these, do you keep the funds for diversity even though they aren't beating the SNP 500? Do you sell them and buy something you think will perform better? If you do sell, what are the consequences, fees, etc? This is one of those areas where I don't know what I don't know. I have always purchased investments and rolled them over, but never sold them. If you need more info to answer my question, just let me know.

On a side note, for those who have bond funds in their portfolio, what type of return should I expect on average from those. I have always thought around 4%, but I figured I would ask. Thanks!

 

[DrRoy]

This is a bit of an unanswerable question because we can't predict the future. I got out of nearly all my international ~20 years ago and stayed out. You can always split the difference and do part of the holding. Main downside will be taxes.

 

[target2019]

On a side note, for those who have bond funds in their portfolio, what type of return should I expect on average from those. I have always thought around 4%, but I figured I would ask. Thanks!

You can find yearly returns as well as averages for mututal funds on the institution's website, or other places, like Morningstar.

 

[lennyandgragg1]

This is a bit of an unanswerable question because we can't predict the future. I got out of nearly all my international ~20 years ago and stayed out. You can always split the difference and do part of the holding. Main downside will be taxes.

I figured some might say that. I’m feeling like everything I my portfolio should be a staging more than 7% except any bond funds. Was thinking I should sell those two funds and buy SNP index funds, but was concerned with diversity and taxes.

 

[ERD50]

You are looking in the rear view mirror. Diversification is used because we can't predict the future.

More importantly, what is your current/desired/future asset allocation, and why?

-ERD50

 

[Chuckanut]

You are looking in the rear view mirror. Diversification is used because we can't predict the future.

More importantly, what is your current/desired/future asset allocation, and why?

-ERD50

+1. Bingo!

 

[pb4uski]

I ditched international equities and bonds after many years of lackluster returns but I do keep an eye on them. If they ever arise from the dead then I'll reconsider.

IIRC, Vanguard has often said that the 10 year treasury is a good predictor of bond fund returns... but if that is so, why not just invest in a 10 year rolling bond ladder?

 

[Dash man]

Emerging market funds are often heavily weighted towards China. You might want to rethink those.

 

[SnowballCamper]

You are looking in the rear view mirror. Diversification is used because we can't predict the future.

More importantly, what is your current/desired/future asset allocation, and why?

-ERD50

Yes, taking the time to write yourself an investment policy effectively answers this question, the OPs question, and for any and all asset classes you might consider. The periodic table of investments is a good place to broaden one's perspective on what asset classes are available, if you haven't already. https://www.callan.com/research/2022-classic-periodic-table/#

 

[OldShooter]

Re "Do you sell them and buy something you think will perform better?" I suggest that you download a quilt chart (https://www.callan.com/research/2022-classic-periodic-table/#) and do this exercise: Cover all the columns except the left-hand one, now write down the sector ranking that you expect for the next year. Uncover the next year column of the chart and compare to your expectations. Repeat the exercise for each column moving to the right.

From my quotations file:

Warren Buffett: "I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two."

Warren Buffett: “The only value of stock forecasters is to make fortune-tellers look good."

Warren Buffett: "Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell." ... "Lethargy, bordering on sloth should remain the cornerstone of an investment style."

 

[Dtail]

Got rid of bond funds in 2018 and International in 2021. Don't regret it.
Especially in the area of Fixed Income, there are a lot of alternatives.