Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Jackson12
Posts: 1022
Joined: Tue Oct 06, 2015 9:44 pm

Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Jackson12 »

We reallocated our formerly complicated portfolio to a simplified index fund portfolio at Vanguard this year. .

Since then ,our equity funds have increased to the point where we have a significantly larger percentage of our portfolio value in stocks than our targeted allocation.

This concerns us.

Since we've had our Vanguard funds for less than a year, should we wait to rebalance and ride it out till the " longer than a year" period kicks in ?

We're concerned about taxes .This may be a very newbie question but we're still confused. Anticipated tax bracket is 15% but could end up higher.

Edited to add, per request:

What was the desired asset allocation?

60/40

What is the actual asset allocation now?

66/34 we have been working with a 5 percent range up or down. .

There are also some 5 year CDs outside Vanguard ( but the highest interest we could find) and our Retirement fund and some cash ( cash in emergency fund at a online bank ) , and older Treasuries ( with 7%'or more interest at maturity ) outside Vanguard.

If interest rates warrant we thought we would break the CDs and possibly take advantage of higher interest rates in our conservative allocation.
Last edited by Jackson12 on Wed Oct 25, 2017 5:27 pm, edited 1 time in total.
User avatar
ruralavalon
Posts: 26351
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by ruralavalon »

That's certainly good news about growth in your stock investments. A bull market is a nice "problem" to experience.
Jackson12 wrote: Wed Oct 25, 2017 9:44 am We reallocated our formerly complicated portfolio to a simplified index fund portfolio at Vanguard this year. .

Since then ,our equity funds have increased to the point where we have a significantly larger percentage of our portfolio value in stocks than our targeted allocation.

This concerns us.

Since we've had our Vanguard funds for less than a year, should we wait to rebalance and ride it out till the " longer than a year" period kicks in ?

We're concerned about taxes .This may be a very newbie question but we're still confused. Anticipated tax bracket is 15% but could end up higher.
Don't worry about small shifts in asset allocation, only larger shifts.

What was the desired asset allocation?

What is the actual asset allocation now?

Please simply add this to your original post using the edit button.

To avoid triggering unnecessary income tax liability, do your rebalancing by exchanging between funds inside a tax-advantaged account, not in a taxable account.
Last edited by ruralavalon on Wed Oct 25, 2017 10:25 am, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Jack FFR1846
Posts: 18499
Joined: Tue Dec 31, 2013 6:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Jack FFR1846 »

Not knowing this information:

Taxable account? Do you have tax advantaged accounts where you can rebalance with no tax penalty? What's your IPS say?
Bogle: Smart Beta is stupid
aristotelian
Posts: 12277
Joined: Wed Jan 11, 2017 7:05 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by aristotelian »

Did you check the market today? :)

Taxes will not be affected by bull market. You only get hit with the capital gains when you sell and realize the profit. Dividends are taxable but stay within a relatively narrow range regardless of how the market is doing.
pkcrafter
Posts: 15461
Joined: Sun Mar 04, 2007 11:19 am
Location: CA
Contact:

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by pkcrafter »

As others have noted, think of all accounts as one portfolio. That means you can adjust overall AA in tax-advantaged accounts. If you only have a taxable account and are still contributing, then you might just add tax-efficient bonds to the mix.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
User avatar
Sandtrap
Posts: 19590
Joined: Sat Nov 26, 2016 5:32 pm
Location: Hawaii No Ka Oi - white sandy beaches, N. Arizona 1 mile high.

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Sandtrap »

This format might give others a greater context and more information to view your portfolio
Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212
Wiki Bogleheads Wiki: Everything You Need to Know
User avatar
CAsage
Posts: 3539
Joined: Sun Mar 27, 2016 6:25 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by CAsage »

Also note that you can direct new funds to under-weighted assets. And there is no reason you have to wait a year to rebalance, I take great joy in rebalancing a few bucks here and there just for fun. As others have noted, rebalance in your pre-tax accounts, or pay taxes on the after-tax gains (though at 15% I would not worry....).
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
Fclevz
Posts: 651
Joined: Fri Mar 30, 2007 11:28 am

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Fclevz »

CAsage wrote: Wed Oct 25, 2017 11:21 am Also note that you can direct new funds to under-weighted assets. And there is no reason you have to wait a year to rebalance, I take great joy in rebalancing a few bucks here and there just for fun. As others have noted, rebalance in your pre-tax accounts, or pay taxes on the after-tax gains (though at 15% I would not worry....).
I'd worry a bit. If he waits, his capital gains rate could be zero.
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by retiredjg »

Jackson12 wrote: Wed Oct 25, 2017 9:44 am Since then ,our equity funds have increased to the point where we have a significantly larger percentage of our portfolio value in stocks than our targeted allocation.
What do you consider "significant"?

It is common here to have a "plus or minus 5%" band in which the asset allocation (stock to bond ratio) can wander around. So If your target is 75% stocks, no rebalancing would be needed unless the portfolio goes above 80% stocks or below 70% stocks. In either case, you would sell what you have too much of and buy some of what you have too little of. You can sell/buy enough to get back within the band or you can sell/buy enough to get all the way back to your target.

Since we've had our Vanguard funds for less than a year, should we wait to rebalance and ride it out till the " longer than a year" period kicks in ?
Some people do it once a year or two years. But since this is a "concern", you should probably do something now unless you are within something like 5% either way.

We're concerned about taxes .
Rebalancing can trigger taxes, but this can often be avoided.
  • -You could do the selling and buying in a tax advantaged account like an IRA or a 401k. That does not trigger tax.

    -You could stop sending money to what you have to much of and just send money to what you have too little of. This will fix the problem over time.
Topic Author
Jackson12
Posts: 1022
Joined: Tue Oct 06, 2015 9:44 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Jackson12 »

Jack FFR1846 wrote: Wed Oct 25, 2017 10:24 am Not knowing this information:

Taxable account? Do you have tax advantaged accounts where you can rebalance with no tax penalty? What's your IPS say?
Unfortunately, we dont don't,have the option f rebalancing in tax advantaged accounts. I'm editing my original post to note the range we had for our targeted asset allocation as well as where it is now.

Our vast majority of assets is currently at Vanguard and the asset allocation includes the entire asset allocation for our portfolio, not just Vanguard. However the assets outside Vanguard are not equities.
Topic Author
Jackson12
Posts: 1022
Joined: Tue Oct 06, 2015 9:44 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Jackson12 »

CAsage wrote: Wed Oct 25, 2017 11:21 am Also note that you can direct new funds to under-weighted assets. And there is no reason you have to wait a year to rebalance, I take great joy in rebalancing a few bucks here and there just for fun. As others have noted, rebalance in your pre-tax accounts, or pay taxes on the after-tax gains (though at 15% I would not worry....).
Our portfolio at Vanguard does not receive "new funds" except for what we contribute to Roth accounts there- which is the maximum allowed annually for each of us . We are in our 60s.

Any "new funds" go to a separate TIA Cref Traditional account , a 403b, offered by my spouse's employer ( now known as Retirement Choice since Traditional automatically changed to Retirement Choice )

We can't move funds from there to Vanguard , only change our future contributions to other options offered through the employer retirement plan. None of these are Vanguard choices.

We don't like the fee structures, risks and returns for the other options,

We are reluctant to change from Traditional since it is part of our" conservative retirement fund, with pre-tax contributions, and not only has a good employer match but has a guaranteed return which has been between 3.25 and 4.25 a year ( there is a 3% guaranteed return plus an extra optional crediting rate determined by the Board of Trustees)

Ever since we've had Traditional, the Trustees have always added to the guarantee with extra crediting rates, ranging from .25 to 1.25. This raises our guaranteed rate from between 3.25% to 4.25% , depending on the year.

Contributions have also not raised our current taxes.

Retirement Choice has a guarantee of as low as 1% but in reality , with the crediting rate factored in, has had at least a 4% annual return thus far. .

Unfortunately, when we learned the guaranteed rate for Retirement Choice could go as low as 1% , we reduced our contributions to that fund.

Any other savings go to an ABLE account and similar accounts for a disabled son. Contributions and withdrawals are tax free .
Topic Author
Jackson12
Posts: 1022
Joined: Tue Oct 06, 2015 9:44 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Jackson12 »

ruralavalon wrote: Wed Oct 25, 2017 10:21 am That's certainly good news about growth in your stock investments. A bull market is a nice "problem" to experience.
Jackson12 wrote: Wed Oct 25, 2017 9:44 am We reallocated our formerly complicated portfolio to a simplified index fund portfolio at Vanguard this year. .

Since then ,our equity funds have increased to the point where we have a significantly larger percentage of our portfolio value in stocks than our targeted allocation.

This concerns us.

Since we've had our Vanguard funds for less than a year, should we wait to rebalance and ride it out till the " longer than a year" period kicks in ?

We're concerned about taxes .This may be a very newbie question but we're still confused. Anticipated tax bracket is 15% but could end up higher.
Don't worry about small shifts in asset allocation, only larger shifts.

What was the desired asset allocation?

What is the actual asset allocation now?

Please simply add this to your original post using the edit button.

To avoid triggering unnecessary income tax liability, do your rebalancing by exchanging between funds inside a tax-advantaged account, not in a taxable account.
I am editing to my original post to answer your questions.
MotoTrojan
Posts: 11259
Joined: Wed Feb 01, 2017 7:39 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by MotoTrojan »

I'd work to setup your tax-deferred account so that it has a mixture of assets allowing most rebalancing to be accomplished, plus if still accumulating add that to bonds of course.
Topic Author
Jackson12
Posts: 1022
Joined: Tue Oct 06, 2015 9:44 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Jackson12 »

I'm also confused about what to do if stocks drop as low as in 2008. Back then I did nothing.

The next time around, my inclination would be to rebalance ( more stocks ) but I don't know if that is the right move. Also, I don't know where to get tbe money. Ready cash would not be an option.
Topic Author
Jackson12
Posts: 1022
Joined: Tue Oct 06, 2015 9:44 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Jackson12 »

aristotelian wrote: Wed Oct 25, 2017 10:25 am Did you check the market today? :)

Taxes will not be affected by bull market. You only get hit with the capital gains when you sell and realize the profit. Dividends are taxable but stay within a relatively narrow range regardless of how the market is doing.
So moving between funds is fine?
tesuzuki2002
Posts: 1431
Joined: Fri Dec 11, 2015 11:40 am

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by tesuzuki2002 »

[/quote]

I am editing to my original post to answer your questions.
[/quote]

I do not see these edits.
aristotelian
Posts: 12277
Joined: Wed Jan 11, 2017 7:05 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by aristotelian »

Jackson12 wrote: Wed Oct 25, 2017 1:57 pm
aristotelian wrote: Wed Oct 25, 2017 10:25 am Did you check the market today? :)

Taxes will not be affected by bull market. You only get hit with the capital gains when you sell and realize the profit. Dividends are taxable but stay within a relatively narrow range regardless of how the market is doing.
So moving between funds is fine?
Sorry, I thought you were worried that the stock market going up would increase your taxes. I meant that stock gains would not be taxed until you make a transaction. If this is a taxable brokerage account (not your Roth), moving between funds would mean selling the current fund and buying the new one. Selling the current fund would be a taxable event.
Topic Author
Jackson12
Posts: 1022
Joined: Tue Oct 06, 2015 9:44 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Jackson12 »

Jackson12 wrote: Wed Oct 25, 2017 9:44 am We reallocated our formerly complicated portfolio to a simplified index fund portfolio at Vanguard this year. .

Since then ,our equity funds have increased to the point where we have a significantly larger percentage of our portfolio value in stocks than our targeted allocation.

This concerns us.

Since we've had our Vanguard funds for less than a year, should we wait to rebalance and ride it out till the " longer than a year" period kicks in ?

We're concerned about taxes .This may be a very newbie question but we're still confused. Anticipated tax bracket is 15% but could end up higher.
Ruralavitron wrote: Don't worry about small shifts in asset allocation, only larger shifts.

What was the desired asset allocation?

60/40

What is the actual asset allocation now?
66/34 we have been working with a 5 percent range up or down. .

Th,above percentage includes the entire portfolio , not just assets held at Vanguard, although the majority of equities and bonds is at Vanguard .

There are also some 5 year CDs outside Vanguard ( but the highest interest we could find) and our Retirement fund and some cash ( cash in emergency fund at a online bank ) , and older Treasuries ( with 7%'or more interest at maturity ) outside Vanguard.

If interest rates warrant we thought we would break the CDs and possibly take advantage of higher interest rates in our conservative allocation.


Please simply add this to your original post using the edit button.

I thought I did but instead added the info in a later response

To avoid triggering unnecessary income tax liability, do your rebalancing by exchanging between funds inside a tax-advantaged account, not in a taxable account.
Last edited by Jackson12 on Wed Oct 25, 2017 2:32 pm, edited 3 times in total.
Topic Author
Jackson12
Posts: 1022
Joined: Tue Oct 06, 2015 9:44 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Jackson12 »

tesuzuki2002 wrote: Wed Oct 25, 2017 2:01 pm
I am editing to my original post to answer your questions.
[/quote]

I do not see these edits.
[/quote]
Sorry, it is showing lower down in this thread. I thought I edited my original post but somehow I did not.
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by retiredjg »

So it appears your portfolio has just moved outside your band. Are you adding money to the portfolio? If yes, buy only bonds or other fixed income assets for awhile. That should fix it.

If that does not fix it, you will need to sell some stocks and buy bonds - apparently this would have to happen in your taxable account. In this case, sell only enough to move back into your band. Selling 2% of the portfolio should do it.
User avatar
John151
Posts: 416
Joined: Fri Mar 02, 2007 5:03 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by John151 »

I’m in a similar situation. My stock funds are about five percentage points above my target, I don’t have stocks to sell in my tax-advantaged accounts, and rebalancing by selling stocks in my taxable accounts would trigger a substantial amount of capital gains taxes. That’s one reason why I’m disinclined to sell my stocks. Here’s a second reason: my stock funds are yielding about as much as my bond funds, and my income from stocks is taxed at a lower rate (in my case, at 15% rather than 28%).

So I’ve decided not to sell stocks. Instead, I’ve decided to think of my stocks more as a source of income than as a source of capital. If I have a sudden need for capital, I can raise it by selling bonds.
Last edited by John151 on Wed Oct 25, 2017 5:16 pm, edited 1 time in total.
Silk McCue
Posts: 8951
Joined: Thu Feb 25, 2016 6:11 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Silk McCue »

Jackson12 wrote: Wed Oct 25, 2017 2:27 pm
tesuzuki2002 wrote: Wed Oct 25, 2017 2:01 pm
I am editing to my original post to answer your questions.
I do not see these edits.
[/quote]
Sorry, it is showing lower down in this thread. I thought I edited my original post but somehow I did not.
[/quote]

Pleas edit the original post even if you did it elsewhere. You are making it difficult for others to help.
Topic Author
Jackson12
Posts: 1022
Joined: Tue Oct 06, 2015 9:44 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Jackson12 »

Silk McCue wrote: Wed Oct 25, 2017 4:36 pm
Jackson12 wrote: Wed Oct 25, 2017 2:27 pm
tesuzuki2002 wrote: Wed Oct 25, 2017 2:01 pm
I am editing to my original post to answer your questions.
I do not see these edits.
Sorry, it is showing lower down in this thread. I thought I edited my original post but somehow I did not.
[/quote]

Pleas edit the original post even if you did it elsewhere. You are making it difficult for others to help.
[/quote]

Done. And with my apologies.
Last edited by Jackson12 on Wed Oct 25, 2017 5:39 pm, edited 1 time in total.
Topic Author
Jackson12
Posts: 1022
Joined: Tue Oct 06, 2015 9:44 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Jackson12 »

retiredjg wrote: Wed Oct 25, 2017 3:27 pm So it appears your portfolio has just moved outside your band. Are you adding money to the portfolio? If yes, buy only bonds or other fixed income assets for awhile. That should fix it.

If that does not fix it, you will need to sell some stocks and buy bonds - apparently this would have to happen in your taxable account. In this case, sell only enough to move back into your band. Selling 2% of the portfolio should do it.
We are not adding new money, except for annual Roth funds, usually after looking at our tax bracket at tax time. However, if any Treasuries matured soon we could shift those funds from a settlement fund to bonds. Two will mature within a year but who knows where the market will be then?
User avatar
grabiner
Advisory Board
Posts: 35307
Joined: Tue Feb 20, 2007 10:58 pm
Location: Columbia, MD

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by grabiner »

Jackson12 wrote: Wed Oct 25, 2017 9:44 am What was the desired asset allocation?

60/40

What is the actual asset allocation now?

66/34 we have been working with a 5 percent range up or down.
Is this your portfolio as a whole, or just your Vanguard account? The reason for the 5% tolerance is that raising or lowering the stock allocation by 5% doesn't make much difference to your risk level, and the risk is a property of your whole portfolio, not just the Vanguard portion. Thus, if your whole portfolio hasn't moved by 5%, there is no reason to rebalance.

And have you been reinvesting dividends in the same fund? If you have, this gives you some money available for rebalancing for a small capital gain, as the September dividends don't have much growth.
Jackson12 wrote: Wed Oct 25, 2017 5:37 pm However, if any Treasuries matured soon we could shift those funds from a settlement fund to bonds
This would not help; Treasuries are bonds, so cashing in the Treasuries to buy bonds doesn't change your allocation.
Wiki David Grabiner
Topic Author
Jackson12
Posts: 1022
Joined: Tue Oct 06, 2015 9:44 pm

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Jackson12 »

grabiner wrote: Wed Oct 25, 2017 5:55 pm
Jackson12 wrote: Wed Oct 25, 2017 9:44 am What was the desired asset allocation?

60/40

What is the actual asset allocation now?

66/34 we have been working with a 5 percent range up or down.
Is this your portfolio as a whole, or just your Vanguard account? The reason for the 5% tolerance is that raising or lowering the stock allocation by 5% doesn't make much difference to your risk level, and the risk is a property of your whole portfolio, not just the Vanguard portion. Thus, if your whole portfolio hasn't moved by 5%, there is no reason to rebalance.

This is the portfolio as a whole.
And have you been reinvesting dividends in the same fund? If you have, this gives you some money available for rebalancing for a small capital gain, as the September dividends don't have much growth.

We have been reinvesting dividends in the same funds
Jackson12 wrote: Wed Oct 25, 2017 5:37 pm However, if any Treasuries matured soon we could shift those funds from a settlement fund to bonds
This would not help; Treasuries are bonds, so cashing in the Treasuries to buy bonds doesn't change your allocation.
DoWahDaddy
Posts: 319
Joined: Sat Jul 02, 2011 9:32 am

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by DoWahDaddy »

Many are in a similar situation as the general boglehead way is to keep stocks in taxable and bonds in tax-deferred. When the stock market is as strong as it's been, you are bound to run short of stocks to sell in tax-deferred space. So the question becomes, do you suck it up and pay the Long Term capital gains taxes that you will eventually pay anyway and forego any future gains on those tax dollars, or accept a riskier asset allocation. I'm leading the witness a bit for sure, but please be aware that the latter decision is an inconsistent one, and the result could be that you lose the additional stock allocation in a downswing, or will potentially face a more dislocated asset allocation next year and have to stress over the same decision.
"I've worked in the private sector. They expect results." - Dr. Raymond Stantz
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by retiredjg »

Jackson12 wrote: Wed Oct 25, 2017 5:37 pm
retiredjg wrote: Wed Oct 25, 2017 3:27 pm So it appears your portfolio has just moved outside your band. Are you adding money to the portfolio? If yes, buy only bonds or other fixed income assets for awhile. That should fix it.

If that does not fix it, you will need to sell some stocks and buy bonds - apparently this would have to happen in your taxable account. In this case, sell only enough to move back into your band. Selling 2% of the portfolio should do it.
We are not adding new money, except for annual Roth funds, usually after looking at our tax bracket at tax time. However, if any Treasuries matured soon we could shift those funds from a settlement fund to bonds. Two will mature within a year but who knows where the market will be then?
If the Roth contributions going entirely to bonds does not bring your overall AA back within the band, you only have two choices. Either sell stocks and buy bonds or live with the allocation you have.

I suggest selling stocks and buying bonds. Sell only shares that have long term capital gains, not short term gains. Sell enough to get back into your band.

To help prevent this in the future, all the dividends in your taxable account should go to a money market account (or go directly to a bond fund). You should not be reinvesting dividends in stock funds as you already have to much in stock funds.
User avatar
ruralavalon
Posts: 26351
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by ruralavalon »

Jackson12 wrote: Wed Oct 25, 2017 9:44 am We reallocated our formerly complicated portfolio to a simplified index fund portfolio at Vanguard this year. .

Since then ,our equity funds have increased to the point where we have a significantly larger percentage of our portfolio value in stocks than our targeted allocation.

This concerns us.

Since we've had our Vanguard funds for less than a year, should we wait to rebalance and ride it out till the " longer than a year" period kicks in ?

We're concerned about taxes .This may be a very newbie question but we're still confused. Anticipated tax bracket is 15% but could end up higher.

Edited to add, per request:

What was the desired asset allocation?

60/40

What is the actual asset allocation now?

66/34 we have been working with a 5 percent range up or down. .

There are also some 5 year CDs outside Vanguard ( but the highest interest we could find) and our Retirement fund and some cash ( cash in emergency fund at a online bank ) , and older Treasuries ( with 7%'or more interest at maturity ) outside Vanguard.

If interest rates warrant we thought we would break the CDs and possibly take advantage of higher interest rates in our conservative allocation.
In my opinion that's enough off target to warrant rebalancing.

What is your age? What is your tax bracket, both federal and state?

Please outline all long-term investment/retirement accounts, indicating what funds are in each and in what amounts. Include everything invested for the long-term including both the CDs and the Treasury bonds. Don't include checking accounts, emergency funds or anything not invested for the long-term. Also please tell us how much you are adding annually in new contributions to any account or investment. Please see the post "asking portfolio questions" for a good format.

With that information it may be possible to suggest rebalancing ideas that may avoid triggering unnecessary tax liability.

You can simply add this to your original post using the edit button, it helps a lot if all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
JW-Retired
Posts: 7189
Joined: Sun Dec 16, 2007 11:25 am

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by JW-Retired »

Jackson12 wrote: Wed Oct 25, 2017 6:01 pm What was the desired asset allocation?
60/40
What is the actual asset allocation now?
66/34 we have been working with a 5 percent range up or down.

This is the portfolio as a whole.
Jackson12,
Can you clarify that your desired asset allocation is now 60% stocks and 40 % bonds?

Back in a July 9 thread you said:
"Desired asset allocation:....is this way off base? : 57 to 60% bonds, 37 to 40 % equities"

I'm wondering if you might have the stocks/bonds AA convention reversed?
JW
Retired at Last
Jack FFR1846
Posts: 18499
Joined: Tue Dec 31, 2013 6:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Moved to Vanguard this year. Set target allocation. Now significantly outside target range. Now what?

Post by Jack FFR1846 »

Based on your edit, your target is 60/40 with a 5% band.

You're at 66/34 so indeed, you can rebalance. This is rather simple. Sell equity and buy bond such that you end up at 60/40.

But it's also not simple. Do you have the ability to sell only equity with long term cap gains? If so, fine. You'll pay the rate based on your income plus gains in the LTCG tables (less than ordinary income).

If you want to rebalance and not pay taxes, you can't. This seems to always be the goal and like being able to jump in the air and fly, it's just a dream.*

*.....unless you can put more money into your investments and buy bonds. That moves the allocation and does not trigger taxes from sales of appreciated assets. But I think you said that you can't do that.
Bogle: Smart Beta is stupid
Post Reply