Am in a Conundrum, please advise -

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rkser

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My intended Asset Allocation was & is 50/45/5 before the recent Covid Madness in the Markets .

Now it is 61/33/6, thanks to -

1)A little over zealous re balancing from Bond Funds & Cash into stock Funds near the end of the Market down days.

2)Pushing forward the planned Roth conversion originally planned for later in the year.

3)The Stock Mutual Funds on their way back, at least for now, which may well be temporary. No complaints on this front though.

My inclination is to let the market run its course & let the chips fall where they may & re balance near the end of the year otherwise I may be chasing my tail.

What do you think ? what would you do ?

Thanks in advance.
 
I am sticking to the plan I had before all of this started. That is to re-balance on 5% bands, so when my 50/50 allocation gets to 55/45, I sell equities and buy more total bond. BTW, I looked today and I am at 55.3/46.7 so it is time again. This will be my 3rd rebalance, but the first one selling stocks to buy bonds. The first two times, I was buying equities with bond assets.

Best to make a plan, and stick with it. And if your situation changes drastically, change the plan.
 
I also follow 5% bands to rebalance to my intended rebalance,

I see my present stock funds ratio Is around 10% beyond my intended 50% , due to the Market gyrations.
As I have all stock funds in taxable accounts, it will mean capital gain tax transactions, & tomorrow the Market may go down again as we are still not out of the Covid mess.

I know a tough call, - no question I have to reverse re balance the stock funds into bonds, but the question ( or the conundrum) is when. Now or after the market stabilizes at least some, although no one knows when.
 
rkser said:
My intended Asset Allocation was & is 50/45/5 before the recent Covid Madness in the Markets .

Now it is 61/33/6, thanks to -

1)A little over zealous re balancing from Bond Funds & Cash into stock Funds near the end of the Market down days.

2)Pushing forward the planned Roth conversion originally planned for later in the year.

3)The Stock Mutual Funds on their way back, at least for now, which may well be temporary. No complaints on this front though.

My inclination is to let the market run its course & let the chips fall where they may & re balance near the end of the year otherwise I may be chasing my tail.

What do you think ? what would you do ?

Thanks in advance.
Click to expand...
I would rebalance back to target and just be very thankful I got some gains.

Hopefully you have high cost basis shares to sell that will minimize your taxable gains.
 
My AA target is 60/40. I rebalance on 5% bands. All is in tax deferred accounts. As stocks lost, I rebalanced twice. Right now, with stocks recovering, I am at 64/36. Almost, but not quite!
 
rkser said:
My intended Asset Allocation was & is 50/45/5 before the recent Covid Madness in the Markets .

Now it is 61/33/6, thanks to -

1)A little over zealous re balancing from Bond Funds & Cash into stock Funds near the end of the Market down days.

2)Pushing forward the planned Roth conversion originally planned for later in the year.

3)The Stock Mutual Funds on their way back, at least for now, which may well be temporary. No complaints on this front though.

My inclination is to let the market run its course & let the chips fall where they may & re balance near the end of the year otherwise I may be chasing my tail.

What do you think ? what would you do ?

Thanks in advance.
Click to expand...

Rebalance again. Be mindful of tax efficiency. Well done!
 
rkser said:
I also follow 5% bands to rebalance to my intended rebalance,

I see my present stock funds ratio Is around 10% beyond my intended 50% , due to the Market gyrations.
As I have all stock funds in taxable accounts, it will mean capital gain tax transactions, & tomorrow the Market may go down again as we are still not out of the Covid mess.

I know a tough call, - no question I have to reverse re balance the stock funds into bonds, but the question ( or the conundrum) is when. Now or after the market stabilizes at least some, although no one knows when.
Click to expand...

I have no specific recommendation for you. But, a comment: I'm a retiree who wants to be at 50/50 but is currently at 45/55. (I didn't act aggressively enough quickly enough when things really tanked recently or I might well be closer to 50/50 now.) My IRA is 100% fixed income; like you, all my equities are in taxable (along with a lesser amount of fixed income). But when I do add more to equities, I'm going to do it in the IRA so I have a tax-free way of rebalancing in the future if equities continue to grow. Following the "equities in taxable; fixed in tax-advantage" rule may be right in many situations but it can create situations such as the one you find yourself in. I suppose it's not the end of the world to pay a CG tax on a gain but if I change my thinking about asset placement a bit maybe I can avoid some taxes in the future.
 
friar1610 said:
I have no specific recommendation for you. But, a comment: I'm a retiree who wants to be at 50/50 but is currently at 45/55. (I didn't act aggressively enough quickly enough when things really tanked recently or I might well be closer to 50/50 now.) My IRA is 100% fixed income; like you, all my equities are in taxable (along with a lesser amount of fixed income). But when I do add more to equities, I'm going to do it in the IRA so I have a tax-free way of rebalancing in the future if equities continue to grow. Following the "equities in taxable; fixed in tax-advantage" rule may be right in many situations but it can create situations such as the one you find yourself in. I suppose it's not the end of the world to pay a CG tax on a gain but if I change my thinking about asset placement a bit maybe I can avoid some taxes in the future.
Click to expand...

- Point well taken indeed - I wish I could do that too -

But as it is at present, there was/is no room for my growing Bonds (in the Asset Allocation) in the Tax Advantaged as I put on years, leading me to keep increasing Bonds.
I needed to have the Intermediate Tax Exempt Bonds in the Taxable to reach the 50% Fixed, (where the Interm Tax Exempt got clobbered but that is a story for another day).

I do not have any earned income as all is passive, so no IRA contributions either.

One way I see to get my AA back to around the sweet spot for me of 50/50 is as Audrey suggested above is on a good market return day, sell some of the long term cap gain Stock Fund shares & put them in a short term Bond Fund. I do have some losses to tax harvest to mitigate the blow.

Hey but I am not complaining as I will happily give 15 cents every time on each dollar I gain, it is just the logistics of how to go about it.

Please have suggestions coming, appreciate your ideas & help.
 
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Just be careful about wash sale rules if you are selling anything at a loss!
 
Looking at today's S&P Index, I may not need to worry about getting my AA back to 50/50, Market is doing it for me.......

Maybe another day..........


Thanks for your inputs everybody.
 
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