Retirement Fund(s) Allocations

[Pilot2013]

Anyone thinking of re-allocations until things settle down from Fed rate change? Do you think market is already planning on it and factored in?

 

[pb4uski]

No, my AA is set and doesn't really change with market conditions. The last change I made was from 60/40/0 while I was working to 60/34/6 after I retired but that isn't a big change. To change allocations as a result of market conditions is market timing and my investment policy doesn't allow market timing.

I have done a tactical thing within the 34 of bonds above and have gravitated towards CDs (think you PenFed!) and lower duration target maturity bond funds rather than conventional bond funds until interest rates normalize. That tactic cost me some in 2014 as conventional bond funds did quite well but I still think it is the right thing for me so I'm staying the course.

 

[martyb]

pb4uski, could I ask how your 60% is allocated? My funds are in the fed TSP & for stock index choices I have C fund (S&P 500), S fund (DOW US Completion Total Stock Market DWCPF) and I fund (International). I'm retired now & trying to settle on my long term allocation. I feel like around 60% stocks is about right, but unsure how much to put in each fund, or even whether to use all of these 3 funds.

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[Corporateburnout]

No planned changes to my AA. Established one year before I retired at 50/40/10 and will remain the same throughout with an annual re balancing.

I only check my investments once a month when I download the dividend distributions from my financial institutions to Quicken.

 

[audreyh1]

Anyone thinking of re-allocations until things settle down from Fed rate change? Do you think market is already planning on it and factored in?

I know from long ago now, that it doesn't usually pay to make anticipatory changes in asset allocation. The market has a way of confounding more people after the fact. My asset allocation remains fixed.

If the Fed actions has a very strong impact on various markets, in either direction, mind you, I will simply rebalance after the fact.

That's how asset allocation and rebalancing work for me. If the impact is so large as to throw my allocation out of balance - I rebalance!

 

[MichaelB]

Anyone thinking of re-allocations until things settle down from Fed rate change? Do you think market is already planning on it and factored in?

I thought about it, made a few changes last year, nothing to write home about. Problem is, things never seem to settle down. No portfolio changes expected this year.

 

[REWahoo]

Anyone thinking of re-allocations until things settle down from Fed rate change?

No.

 

[pb4uski]

pb4uski, could I ask how your 60% is allocated? ....

I use the 70% domestic equities/30% international equities proportions that have historically been used by Vanguard in their target retirement funds. Vanguard recently announced that they plan to change from 70/30 to 60/40 in 2015 but I have yet to decide whether I will make a similar change.

I add a refinement of putting 10% of the 30% international in emerging markets. The emerging markets piece is a relatively recent and experimental piece for me based on posts I have read here and I may increase that a little in the future.

So it ends up being 70% domestic, 27% developed international and 3% emerging markets. My core funds for each asset class would be Vanguard Total Stock Market Index, Total International Stock Index and Emerging Markets Stock Index funds.

I know that a 64/36 blend of Vanguard S&P 500 Index and Vanguard Extended Market Index approximates Vanguard Total Stock Market Index. While you'll have to research if I suspect a similar blend the S&P 500 and Completion funds available to you would nicely cover domestic equities.

 

[Pilot2013]

I agree that chasing the market doesn't pay 99.9% of the time. However, since I had basically started over (see my "hi, I am" post), back sometime around 2008 or so I got nervous and put everything in my retirement fund in a cash position. To be honest, I did it, and kind if then forgot about it as the market made big downward changes. One of my buddy's from work was complaining about his account drop, and I told him I had not even checked mine because I was afraid of what it would be. I finally logged on and all was about the same. I then re-allocated to largely equities, and got the benefit of the rebound.....

I'm not saying I was "smart", just lucky. But I'm kind of getting that same nervous feeling. I have to keep telling myself not to play that (market timing) game, because lightening rarely strikes twice....


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[martyb]

Thanks very much for sharing that. I figured I'd use both the S&P and the DOW completion indexes, but not sure at what percentages. Don't know whether just to split 50/50 between the two, or if I should weight more to or the other. Also, with regard to my international stock option, it's either a take or leave deal...no additional choices within the fund. I think it has s one emerging markets in there already, though.

Are you saying you're 35/35/30 on your stock allocation, or something else? I know I'm being nosey! I really want to get to a set & almost forget allocation, and I've kind of bounced this off a few folks on here before. If I keep my money in the TSP, I do have some limitations. My biggest gripe is withdrawal options, and my allocations figure into that equation as well. When I do take withdrawals, I'm not able to specify which fund (s) the money comes from. It comes from all my funds equally. Other annoying withdrawal limitations as well, but still...I like the extremely low fees and relative simplicity of TSP. I'm optimistic for some changes in the future with the plan features.

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[jebmke]

Anyone thinking of re-allocations until things settle down from Fed rate change? Do you think market is already planning on it and factored in?

Where would you hide? Cash is useless so you either bet on bonds or equity or stick with a blend.

 

[EastWest Gal]

Making changes or not making adjustments regarding asset allocation due to an expected interest rate rise (for which we have been waiting years, it seems) would be market timing. Which is why I am firing my FA. They have been dragging their feet on my asset allocation for a very long time, mainly due to not wanting to dish out some taxes on capital gains. I have only been studying the financial stuff diligently for the past 6 months and boy, what an education. I will be moving into bonds regardless, but especially in my tax deferred accounts.

 

[pb4uski]

...Are you saying you're 35/35/30 on your stock allocation, or something else? ...

45/25/30 of S&P 500/extended market/international would reflect my allocation. The 45 is 64% of 70%. The 25 is 36% of 70%.

The 64/36 between the S&P 500 and extend markets (which is mid and small cap stocks outside the S&P 500) is the overall market weighting, so if you want your domestic equities to replicate the overall US stock market then you would go 64/36 rather than 50/50.

50/50 (which translates to 35/35/30) would put on a modest tilt towards mid/small cap stocks and is fine if you decide that is what you want to do.

 

[UnrealizedPotential]

No changes for me. I am holding tight to my AA as far as I can see down road. 7% cash, 93 % stocks. If and when I am in the position to buy a small bond percentage then that would be the only change. That seems far off at this point.

 

[audreyh1]

Where would you hide? Cash is useless so you either bet on bonds or equity or stick with a blend.

Cash isn't useless.

It's very handy when other things drop. You can use it to buy more of the other asset classes.

 

[nun]

I'm 75% equities, 15% bonds (Wellesley), 6% TIAA-Traditional and 4% cash. I've increased my effective equities allocation recently, not because of the markets or speculation of what the Fed will do, but because I bought into a state pension that provides income. I'm thinking of that as a sort of fixed income allocation.

 

[mrfeh]

Anyone thinking of re-allocations until things settle down from Fed rate change?

Nope.

A better question is: why would you?

 

[purplesky]

Anyone thinking of re-allocations until things settle down from Fed rate change? Do you think market is already planning on it and factored in?

I would keep your AA on autopilot.