Where to park wifes 401 in Vanguard

[SVHoper]

Hi Rocks911,

I am not sure whether you missed that the main concept of asset allocation and in particular the fixed income/bonds/cash to equity ratio is to pick a % with which you can sleep and not sell during a 2008 or worse.

This is a fundamental tenet of asset allocation as it ensures that you do not sell low (and should be buying to maintain equity allocation too). If you take any major index --> and just look at it in morningstar history or google finance they have "fully recovered" from 2008/9 lows... so you don't have to rely on anyone rewriting history.

This asset allocation "system" has inbuilt market response (not timing as not predictive)... if equities drop and you follow the system you exchange bonds for equities so you are buying at lower equity prices. Similarly, if your mid and small have runup 30-40% as they did in 2013 you would be buying some bonds now... again selling high and buying relatively low.

However, if you try and mix your own predictive market timing into the system - it breaks as you have to time twice... getting out and getting back in.

I hope this makes sense.

Edited to add: I took a very big spanking - near 50% but was buying early in 2009 so all is great.

 

[34rlsa]

If you are sitting on excess cash what's the hurry to get back into stocks or bonds right now?

While I agree with most of the responses to the OP... given the current valuation of stocks and interest rates that can only go up from here... a little patience right now may not be a bad strategy. Market timing? maybe... but buying stock or bond funds today is buying high.

Today... what's the risk of lost opportunity vs. the risk of market declines in the next 1 or 2 years?

If you are extremely risk averse and believe interest rates will rise in the near future wait for CD rates to improve and park the money there. Ten years is not a very long period of time. If you were much younger a more aggressive AA in index funds makes good sense.

But not knowing more details about the OP's complete financial situation it's difficult to offer AA guidance.

 

[nun]

If you are extremely risk averse and believe interest rates will rise in the near future wait for CD rates to improve and park the money there. Ten years is not a very long period of time. If you were much younger a more aggressive AA in index funds makes good sense.

a 60/40 AA would be good for a 10 year horizon.....but if the OP is risk averse a CD ladder would be the way to go. I would not hold off on either approach. The OP could set up a 1,2,3,4,5 year CD ladder and as the CDs mature and interest rates rise reinvest at the higher rate. I wouldn't sit around waiting for some supposed interest/market opportunity.

 

[JOHNNIE36]

After fighting the low CD interest rates for the last few years, I have finally "bitten the bullet". My Ira CD just matured a couple weeks ago and the best I could do was 2.25 % for five years. My wife never gets involved in such things as this, but the low interest rates irritated her like I've never seen. She said "no way can we keep this up. We've got to do better than that." After some discussion we decided to put that money in the Vanguard Wellesley Admiral Fund. Vanguard was great in setting up my account and performing the custodial transfer of funds.