Portfolio Rebalance -Just buy more bonds?

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Topic Author
GottaRun
Posts: 41
Joined: Mon Apr 28, 2014 11:17 pm

Portfolio Rebalance -Just buy more bonds?

Post by GottaRun » Mon Nov 06, 2017 10:58 am

In my taxable investment accounts, the stocks have grown considerably the past two year.

Our AA is out of wack and I need to sell stocks and buy more bonds.

Should I just buy all bonds for a few months to get things back into alignment?

If I sell off or "transfer" stocks for bonds, I'll get nailed for capital gains (which I'd like to avoid).

any thoughts? thx.

dcabler
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Re: Portfolio Rebalance -Just buy more bonds?

Post by dcabler » Mon Nov 06, 2017 11:05 am

Is there anything you can do in your deferred accounts to bring your total portfolio ( the totality of your taxable and deferred and/or tax-free) accounts back into alignment?

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flamesabers
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Re: Portfolio Rebalance -Just buy more bonds?

Post by flamesabers » Mon Nov 06, 2017 11:08 am

Can you buy more bonds in tax-advantaged investments? If so, I think that would be your best bet to balance your AA without incurring additional tax liabilities. Otherwise, within your tax-advantaged investments you could exchange some equities for some bonds. There won't be any tax liabilities to do this, but you might incur some unfavorable losses. Alternatively, you could buy some savings bonds to bolster your bond allocation without getting hit with the tax inefficiencies of bonds until you choose to redeem them.

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ruralavalon
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Re: Portfolio Rebalance -Just buy more bonds?

Post by ruralavalon » Mon Nov 06, 2017 11:38 am

GottaRun wrote:
Mon Nov 06, 2017 10:58 am
In my taxable investment accounts, the stocks have grown considerably the past two year.

Our AA is out of wack and I need to sell stocks and buy more bonds.

Should I just buy all bonds for a few months to get things back into alignment?

If I sell off or "transfer" stocks for bonds, I'll get nailed for capital gains (which I'd like to avoid).

any thoughts? thx.
In a taxable account it's better to rebalance by new contributions to avoid unnecessary income tax liability. Inside tax-advantaged accounts just exchange between funds.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
GottaRun
Posts: 41
Joined: Mon Apr 28, 2014 11:17 pm

Re: Portfolio Rebalance -Just buy more bonds?

Post by GottaRun » Mon Nov 06, 2017 11:42 am

ruralavalon wrote:
Mon Nov 06, 2017 11:38 am

In a taxable account it's better to rebalance by new contributions to avoid unnecessary income tax liability. Inside tax-advantaged accounts just exchange between funds.
sounds like a plan; I'd rather leave my Vanguard 401K and Roth IRA alone and just tweak my new contributions to even out my AA a bit. thanks!

look at me; I even have the quotes figured out, too! Hello monday!

:sharebeer

dcabler
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Re: Portfolio Rebalance -Just buy more bonds?

Post by dcabler » Mon Nov 06, 2017 12:27 pm

GottaRun wrote:
Mon Nov 06, 2017 11:42 am
ruralavalon wrote:
Mon Nov 06, 2017 11:38 am

In a taxable account it's better to rebalance by new contributions to avoid unnecessary income tax liability. Inside tax-advantaged accounts just exchange between funds.
sounds like a plan; I'd rather leave my Vanguard 401K and Roth IRA alone and just tweak my new contributions to even out my AA a bit. thanks!

look at me; I even have the quotes figured out, too! Hello monday!

:sharebeer
Does that mean you're trying to replicate the same AA in each account regardless of whether it's taxable or tax advantaged? Generally, it's considered more tax efficient to load up on bonds in the tax advantaged accounts and stocks in the taxable accounts, to the degree it's possible in any individual instance.

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ruralavalon
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Location: Illinois

Re: Portfolio Rebalance -Just buy more bonds?

Post by ruralavalon » Mon Nov 06, 2017 12:37 pm

GottaRun wrote:
Mon Nov 06, 2017 11:42 am
ruralavalon wrote:
Mon Nov 06, 2017 11:38 am

In a taxable account it's better to rebalance by new contributions to avoid unnecessary income tax liability. Inside tax-advantaged accounts just exchange between funds.
sounds like a plan; I'd rather leave my Vanguard 401K and Roth IRA alone and just tweak my new contributions to even out my AA a bit. thanks!

look at me; I even have the quotes figured out, too! Hello monday!

:sharebeer
Congratulations :D .
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
GottaRun
Posts: 41
Joined: Mon Apr 28, 2014 11:17 pm

Re: Portfolio Rebalance -Just buy more bonds?

Post by GottaRun » Mon Nov 06, 2017 5:40 pm

dcabler wrote:
Mon Nov 06, 2017 12:27 pm
GottaRun wrote:
Mon Nov 06, 2017 11:42 am
ruralavalon wrote:
Mon Nov 06, 2017 11:38 am

In a taxable account it's better to rebalance by new contributions to avoid unnecessary income tax liability. Inside tax-advantaged accounts just exchange between funds.
sounds like a plan; I'd rather leave my Vanguard 401K and Roth IRA alone and just tweak my new contributions to even out my AA a bit. thanks!

look at me; I even have the quotes figured out, too! Hello monday!

:sharebeer
Does that mean you're trying to replicate the same AA in each account regardless of whether it's taxable or tax advantaged? Generally, it's considered more tax efficient to load up on bonds in the tax advantaged accounts and stocks in the taxable accounts, to the degree it's possible in any individual instance.
No, my portfolio is sitting around 75% stock, 25% bonds when I look at my Roth IRA, 401K IRA and taxable investment accounts. The 75/25 does NOT include my current employer 401K or my spouse current employer 401K.

I'm holding most of my tax exempt bonds (short/intermediate/long) & some international bonds in my taxable investment account.

Your thoughts on loading up a tax advantaged account with tax efficient bonds are the polar opposite of what Vanguard recommends here...?

https://personal.vanguard.com/us/insigh ... e-accounts

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BL
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Re: Portfolio Rebalance -Just buy more bonds?

Post by BL » Mon Nov 06, 2017 6:18 pm

From your link:
For tax-advantaged accounts, consider these types of investments:
1. Taxable bond funds; bond index funds.
2. Actively managed stock funds.
3. Broad-market stock index funds.
This sounds to me like the advice you have received here.
For taxable accounts, consider these types of investments:
1. Tax-managed stock funds.
2. Broad-market stock index funds.
3. Municipal bond funds (depending on tax bracket)/taxable bond funds; bond index funds.

radiowave
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Re: Portfolio Rebalance -Just buy more bonds?

Post by radiowave » Mon Nov 06, 2017 6:33 pm

GottaRun wrote:
Mon Nov 06, 2017 5:40 pm

No, my portfolio is sitting around 75% stock, 25% bonds when I look at my Roth IRA, 401K IRA and taxable investment accounts. The 75/25 does NOT include my current employer 401K or my spouse current employer 401K.

I'm holding most of my tax exempt bonds (short/intermediate/long) & some international bonds in my taxable investment account.

Your thoughts on loading up a tax advantaged account with tax efficient bonds are the polar opposite of what Vanguard recommends here...?

https://personal.vanguard.com/us/insigh ... e-accounts
GottaRun, you may want to estimate your asset allocation for the entire portfolio.

If you want to reduce your overall equity position, you can change your current contributions in both 401k's by adding more bonds if that is feasible (available) and are not too costly (expense ratios of the available funds in your respective 401k plans).
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

dcabler
Posts: 1229
Joined: Wed Feb 19, 2014 11:30 am

Re: Portfolio Rebalance -Just buy more bonds?

Post by dcabler » Mon Nov 06, 2017 7:12 pm

GottaRun wrote:
Mon Nov 06, 2017 5:40 pm
dcabler wrote:
Mon Nov 06, 2017 12:27 pm
GottaRun wrote:
Mon Nov 06, 2017 11:42 am
ruralavalon wrote:
Mon Nov 06, 2017 11:38 am

In a taxable account it's better to rebalance by new contributions to avoid unnecessary income tax liability. Inside tax-advantaged accounts just exchange between funds.
sounds like a plan; I'd rather leave my Vanguard 401K and Roth IRA alone and just tweak my new contributions to even out my AA a bit. thanks!

look at me; I even have the quotes figured out, too! Hello monday!

:sharebeer
Does that mean you're trying to replicate the same AA in each account regardless of whether it's taxable or tax advantaged? Generally, it's considered more tax efficient to load up on bonds in the tax advantaged accounts and stocks in the taxable accounts, to the degree it's possible in any individual instance.
No, my portfolio is sitting around 75% stock, 25% bonds when I look at my Roth IRA, 401K IRA and taxable investment accounts. The 75/25 does NOT include my current employer 401K or my spouse current employer 401K.

I'm holding most of my tax exempt bonds (short/intermediate/long) & some international bonds in my taxable investment account.

Your thoughts on loading up a tax advantaged account with tax efficient bonds are the polar opposite of what Vanguard recommends here...?

https://personal.vanguard.com/us/insigh ... e-accounts
I didn't say tax efficient bonds - I just said bonds. I either didn't know (or likely missed) that you were using tax efficient bonds, such as munis. Most bogleheads are using a total bond fund or treasury fund which isn't tax efficient, so they put them into tax efficient accounts. The vanguard link you posted also agrees with this placement of taxable bonds.

Topic Author
GottaRun
Posts: 41
Joined: Mon Apr 28, 2014 11:17 pm

Re: Portfolio Rebalance -Just buy more bonds?

Post by GottaRun » Mon Nov 06, 2017 11:44 pm

radiowave wrote:
Mon Nov 06, 2017 6:33 pm
GottaRun wrote:
Mon Nov 06, 2017 5:40 pm

No, my portfolio is sitting around 75% stock, 25% bonds when I look at my Roth IRA, 401K IRA and taxable investment accounts. The 75/25 does NOT include my current employer 401K or my spouse current employer 401K.

I'm holding most of my tax exempt bonds (short/intermediate/long) & some international bonds in my taxable investment account.

Your thoughts on loading up a tax advantaged account with tax efficient bonds are the polar opposite of what Vanguard recommends here...?

https://personal.vanguard.com/us/insigh ... e-accounts
GottaRun, you may want to estimate your asset allocation for the entire portfolio.

If you want to reduce your overall equity position, you can change your current contributions in both 401k's by adding more bonds if that is feasible (available) and are not too costly (expense ratios of the available funds in your respective 401k plans).
yes, I need to figure out the AA of all combined investments. Yes, adjusting the overall AA by adding some bonds to our 401K's is certainly an option, but I'll need to look into their respective fees. From what I remember the ER is crazy high for several of the options.

Topic Author
GottaRun
Posts: 41
Joined: Mon Apr 28, 2014 11:17 pm

Re: Portfolio Rebalance -Just buy more bonds?

Post by GottaRun » Mon Nov 06, 2017 11:51 pm

dcabler wrote:
Mon Nov 06, 2017 7:12 pm
GottaRun wrote:
Mon Nov 06, 2017 5:40 pm
dcabler wrote:
Mon Nov 06, 2017 12:27 pm
I didn't say tax efficient bonds - I just said bonds. I either didn't know (or likely missed) that you were using tax efficient bonds, such as munis. Most bogleheads are using a total bond fund or treasury fund which isn't tax efficient, so they put them into tax efficient accounts. The vanguard link you posted also agrees with this placement of taxable bonds.
sorry about that, I should have been more specific. I'm (currently) holding tax exempt, admiral shares of short, intermediate & long term bond funds in my taxable investment accounts.

3funder
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Joined: Sun Oct 15, 2017 9:35 pm

Re: Portfolio Rebalance -Just buy more bonds?

Post by 3funder » Tue Nov 07, 2017 5:10 am

ruralavalon wrote:
Mon Nov 06, 2017 11:38 am
GottaRun wrote:
Mon Nov 06, 2017 10:58 am
In my taxable investment accounts, the stocks have grown considerably the past two year.

Our AA is out of wack and I need to sell stocks and buy more bonds.

Should I just buy all bonds for a few months to get things back into alignment?

If I sell off or "transfer" stocks for bonds, I'll get nailed for capital gains (which I'd like to avoid).

any thoughts? thx.
In a taxable account it's better to rebalance by new contributions to avoid unnecessary income tax liability. Inside tax-advantaged accounts just exchange between funds.
+1

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