kyounge1956
Thinks s/he gets paid by the post
- Joined
- Sep 11, 2008
- Messages
- 2,171
My target asset allocation for all retirement accounts considered together is 30% equities, 70% fixed income. Right now I am at around 36% equities, made up partly of the stock allocation in Vanguard Target Retirement Income (VTINX) in my 457 plan at work, and partly of Vanguard's REIT index fund (VGSIX), which is in my Roth IRA. My periodic contributions go 100% to VTINX in the 457 account, and 100% to VIPSX in my Roth IRA. That's about 76% going to fixed income, so all other things remaining equal, I'll get closer to my target allocation over time.
My question is this: if stocks spike upward, how do I rebalance? There is only one bond fund in the 457 plan, which is actively managed. I recently sold the small amount I had in that fund under the "don't invest in things you don't understand" principle—short selling in this particular case. I can't figure out how to rebalance out of stocks (if I need to) when all the stock I own is in a blended fund which I can't sell out of without selling bonds at the same time, and no way of adding bonds separately in the 457 except the above-mentioned active fund, which I want to avoid. I could add a small amount of a stock fund separately in either account, so there would be something to sell out of if needed, but this would be going in the wrong direction, increasing the percentage of stocks when I am already on the high side of the target. Or I could replace some of the REIT in the Roth IRA with bonds...but what if REITs as an asset class had gone down while stocks went up? I'd be selling low to buy higher, and that's going in the wrong direction, too. I have some cash in the Roth from a recent cash-out and transfer of my Ameriprise VA, and was going to buy more VIPSX with it (which would put me closer to 32% stocks). Now I'm not sure that's the right thing to do. I've posted this question at Bogleheads too, for those of you who were about to suggest I ask there.
My question is this: if stocks spike upward, how do I rebalance? There is only one bond fund in the 457 plan, which is actively managed. I recently sold the small amount I had in that fund under the "don't invest in things you don't understand" principle—short selling in this particular case. I can't figure out how to rebalance out of stocks (if I need to) when all the stock I own is in a blended fund which I can't sell out of without selling bonds at the same time, and no way of adding bonds separately in the 457 except the above-mentioned active fund, which I want to avoid. I could add a small amount of a stock fund separately in either account, so there would be something to sell out of if needed, but this would be going in the wrong direction, increasing the percentage of stocks when I am already on the high side of the target. Or I could replace some of the REIT in the Roth IRA with bonds...but what if REITs as an asset class had gone down while stocks went up? I'd be selling low to buy higher, and that's going in the wrong direction, too. I have some cash in the Roth from a recent cash-out and transfer of my Ameriprise VA, and was going to buy more VIPSX with it (which would put me closer to 32% stocks). Now I'm not sure that's the right thing to do. I've posted this question at Bogleheads too, for those of you who were about to suggest I ask there.