DOW heading 20K !

[NW-Bound]

That's why I am keeping my fingers crossed!!!

Instead of keeping your index finger poised over the "sell" button?

 

[frayne]

I pulled the trigger and rebalanced this morning.

 

[explanade]

Do you rebalance into bonds?

Interest rates are expected to go up further after going up already.

 

[W2R]

I pulled the trigger and rebalanced this morning.

Not me. I am not far enough from my target equity allocation of 45%. Today it is at 45.75%, but my written financial plan says it would have to be 47.5% for me to rebalance.

BUT, I always rebalance during the first week in January, after I withdraw my year's spending money. So, it won't be long.

 

[audreyh1]

Instead of keeping your index finger poised over the "sell" button?

Selling has tax consequences. I'd rather defer those taxes until next year.

 

[ziggy29]

Selling has tax consequences. I'd rather defer those taxes until next year.

That said, depending on circumstances those same tax consequences can convince you to sell now! Last week I did a preliminary estimate of our taxes for this year. It turned out that we would have been comfortably in the 15% tax bracket, with over $30,000 to spare. I thought it would be a good idea to see if I could use up most of that tax bracket this year.

I considered Roth conversions to use it. Now we don't have to worry about ACA subsidies so that didn't discourage us. And living in a state with no income tax and being in a low tax bracket, Roth conversions could be a great idea... except that I don't expect to be in a massively higher tax bracket in the future.

So I looked at our taxable brokerage accounts. We had about $19K in LTCG which would have *zero* taxes on them; even when that income is added to our taxable income we are still in the 15% marginal bracket which means no taxes on dividends or LTCG. So I sold all of those holdings and immediately repurchased the same number of shares. It didn't put more money in our pocket but it essentially gave us a "free" stepped up cost basis, reducing the potential future taxable gain in the future.

For us, selling was the right thing to do **because** of tax consequences.

 

[foxfirev5]

This is a great time to have sufficient funds in after tax, deferred and Roths. It gives the flexibility to plan and execute given current market conditions. Personally I've sold what I needed and am set for the foreseeable future. No need to be greedy, since I'm under the impression I've won the game.
We'll see what happens next year.

 

[foxfirev5]

One has to wonder, IMO, how much longer large cap US stocks can keep leading the entire market. Almost time to do some redistribution, and yet again it's time to trim large cap domestic while purchasing other equity classes.

Frankly this reminds me of the run-up before the bear market of 2000-01. Large cap domestic was destroying all other equity asset classes for a long time during that raging bull.... and after the end of said Ursa Major and the recovery began in 2002, small caps, emerging markets and (for a while) REITs caught fire.

FWIW the Russell 2000 has been on quite a run lately. Mid and small caps. but I'm surely not qualified to imply any meaning. Just because I sold some may be a contrarian indicator. Whatever that means.

 

[explanade]

So are you guys reducing equity percentages by selling equity investments and buying fixed-income or bond investments to rebalance?

 

[ejman]

Getting closer but still a ways to go. At 53.1% (the equities band limits I set is 10% - 45% to 55%) But it sure is tempting to re balance early but I must resist....

 

[FIREd]

I received enough distributions (paid in cash) in 2016 to cover next year's expenses, so I won't have to sell anything at the end of this year. And while I am near the upper limit of my rebalancing band, I am not there yet.

 

[jazz4cash]

One has to wonder, IMO, how much longer large cap US stocks can keep leading the entire market. Almost time to do some redistribution, and yet again it's time to trim large cap domestic while purchasing other equity classes.

Frankly this reminds me of the run-up before the bear market of 2000-01. Large cap domestic was destroying all other equity asset classes for a long time during that raging bull.... and after the end of said Ursa Major and the recovery began in 2002, small caps, emerging markets and (for a while) REITs caught fire.

Small cap is way ahead of large cap right now.

Edit: Oops someone already beat me to this point and I missed it but make sure you rebalance accordingly. I try to hold > 50 % of domestic equity position in small and mid cap.

 

[audreyh1]

Yeah, my small cap stocks took off like a rocket in the second half.

But large caps took off huge in November.

 

[RobbieB]

I made back half the dough I lost in October last month, probably make it all back this month.

 

[NW-Reader]

Mortgage rates are up sharply in the last 60 days. Big banks are all over 4 percent on 30 year fixed mortgages, with most circling near 4.25 percent. The chilling effect is already being felt in the housing market.

The Seattle Times reports the opposite effect locally: ‘Panicking’ Seattle home buyers, spooked by rising interest rates, rush to buy | The Seattle Times

 

[audreyh1]

The Seattle Times reports the opposite effect locally: ‘Panicking’ Seattle home buyers, spooked by rising interest rates, rush to buy | The Seattle Times

Yeah - that's usually the first reaction - a rush to buy when it looks clear that interest rates are going up. Anyone on the fence acts. Rates are locked in, etc. But that is not sustainable, obviously.

 

[Another Reader]

The Seattle Times reports the opposite effect locally: ‘Panicking’ Seattle home buyers, spooked by rising interest rates, rush to buy | The Seattle Times

Newspapers are generally not good sources of information about what is really happening in the local real estate market. Numbers of active listings, pendings, and recently closed sales are more informative. Active listings are up here in Silly Valley. Multiple offers are down dramatically.

 

[frayne]

So are you guys reducing equity percentages by selling equity investments and buying fixed-income or bond investments to rebalance?

Yes, that is exactly what I did and no tax consequences as it is all under the umbrella of an IRA.

 

[REWahoo]

So are you guys reducing equity percentages by selling equity investments and buying fixed-income or bond investments to rebalance?

That's not what I'm doing but I'm pretty sure the folks who manage my Wellesley and Wellington funds are.

 

[garyt]

The Seattle Times reports the opposite effect locally: ‘Panicking’ Seattle home buyers, spooked by rising interest rates, rush to buy | The Seattle Times

That's what I was thinking. If you had any inclination to buy soon it seems you'd be in a hurry to get it done to beat rising rates.

 

[explanade]

That's not what I'm doing but I'm pretty sure the folks who manage my Wellesley and Wellington funds are.

My concern though is that interest rates are expected to rise, meaning bond prices should continue to decline.

 

[Big_Hitter]

My concern though is that interest rates are expected to rise, meaning bond prices should continue to decline.

yes but bond yields also increase. rising interest rates aren't all that bad, unless you are borrowing money

 

[NW-Reader]

Newspapers are generally not good sources of information about what is really happening in the local real estate market. Numbers of active listings, pendings, and recently closed sales are more informative. Active listings are up here in Silly Valley. Multiple offers are down dramatically.

NWMLS reports sales up 30% year over year for November, and inventory at an all time low, down 13%. The Seattle RE market has been crazy for some time now... of course it's not sustainable indefinitely, but small interest rate increases should not have too much of an effect. There are lots of buyers from California and China who consider even our inflated prices a bargain.

NWMLS Market Update

 

[audreyh1]

My concern though is that interest rates are expected to rise, meaning bond prices should continue to decline.

You'll drive yourself nuts if you worry about the short-term relative performance of the different segments in your portfolio. Either you time the individual components, or you rebalance when assets diverge. If you are holding bond funds for a long time, they will eventually catch up and be there for you when stocks sell off.

 

[Johanson]

You'll drive yourself nuts if you worry about the short-term relative performance of the different segments in your portfolio. Either you time the individual components, or you rebalance when assets diverge. If you are holding bond funds for a long time, they will eventually catch up and be there for you when stocks sell off.

I haven't been in bonds since 1990 and wondering if maybe I should move some of my 401K money into a bond fund with the drop in bond prices. I've got about 5 years before I retire. Anyone with an opinion?