Tapering down tilts

[wickywack]

Several years ago, I set an asset allocation, basically a 3-fund portfolio with separate tilts on the equity side to us small-value, us reits, and emerging markets.  I've been sticking to it closely, but I am considering eliminating these tilts.  I'm not (I think!) bothered by recent under-performance or the current crash.  I am just finding it more work than I expected to maintain the balance across different accounts (joint/spouse/me, taxable,401k,403b,457b,roth iras) that grow at different rates and have access to different funds and less convince it'll matter much in the long run.

Any thoughts on how to go about this?  If I just switch now, I feel like I'm selling low (e.g., on small cap value with respect to the market) and maybe being reactive to recent performance.  Would it make sense to taper off via a pre-planned glide path of some sort over the next 10 years?

FWIW, my current equity breakdown is:
- 60% US
  - 37.5% US total market
  - 11.25% US small value
  - 11.25% US REIT
- 40% Intl
  - 30% Intl total market
  - 10% emerging market

I'd be proposing to go to 60% US total and 40% Intl total.

[David Jay]

Absolutely! I did it and it feels great. I went all the way to a single fund LifeStrategy Moderate (60/40) in tax advantaged accounts.

Right now, because of the big drop in small cap and REIT, I would be inclined to make the move in small steps, maybe something like 5% per year.

[edit] I came to BH with a Coffeehouse portfolio 5 years ago and have been simplifying ever since.

[wickywack]

Absolutely! I did it and it feels great. I went all the way to a single fund LifeStrategy Moderate (60/40) in tax advantaged accounts.

Right now, because of the big drop in small cap and REIT, I would be inclined to make the move in small steps, maybe something like 5% per year.

[edit] I came to BH with a Coffeehouse portfolio 5 years ago and have been simplifying ever since.

Just curious, did you transferred in small steps yourself? How did you reconcile with "staying the course"?

General question: is there evidence and/or an argument that tilts are better earlier or later in one's investing timeframe?

[dachshunddad]

I decided not to tilt from a simplicity and stay the course standpoint. 3 funds is a lot easier to manage. I would also taper over time given the drop in small value.

[David Jay]

Absolutely! I did it and it feels great. I went all the way to a single fund LifeStrategy Moderate (60/40) in tax advantaged accounts.

Right now, because of the big drop in small cap and REIT, I would be inclined to make the move in small steps, maybe something like 5% per year.

[edit] I came to BH with a Coffeehouse portfolio 5 years ago and have been simplifying ever since.

Just curious, did you transferred in small steps yourself? How did you reconcile with "staying the course"?

General question: is there evidence and/or an argument that tilts are better earlier or later in one's investing timeframe?

I came to BH believing in broad-based index funds, but the portfolio I had found was Bill Schultheis’ Coffeehouse. As I learned more I saw the beauty of simplicity. Over about 3 years, I combined the two large cap funds into SP500, combined the two small cap funds into SCV and then sold off the REIT. Finally I replaced Large and Small with Total Stock. I kept that for my final work years and the first year of retirement.

A couple of months ago I took the ultimate step of moving to a single fund portfolio (except for cash for retirement living expenses until start of SS). I took this step to make it easy for my wife to manage if I am gone.

[Hyperchicken]

I have to carefully re-read the title of this thread every time I see it in the forum list...

[sleepysurf]

...I came to BH with a Coffeehouse portfolio 5 years ago and have been simplifying ever since.

I'm in the same boat, trying to simplify the residual Coffeehouse portfolio I've had in a taxable account since 2004. I was still in accumulation phase 2007-08, so kept adding to my Small and Value holdings. Now retired, I'm seeking simplicity (a la Rick Ferri's "Stages of an index Investor").

This downturn (especially if a further drop Monday) would allow me to convert 90+% of my remaining Small and Value positions to the Total Stock Market Index, in one fell swoop, with minimal tax consequences. I'm going to sleep on it tonight, and reevaluate in AM.

[typical.investor]

Have you tried not replicating accross accounts? I.e. looking at your portfolio as a whole?

[wickywack]

Have you tried not replicating accross accounts? I.e. looking at your portfolio as a whole?

Not sure I understand the question. I'm not replicating across accounts. I'm maintaining percentages across my portfolio.

E.g., I'm only investing in REITs in my 401k because (a) I have access to Vanguard's US REIT Index there and (b) it's recommended to not invest in REITs in taxable. That was fine when I started, but it's tricky to maintain over time since my 401k isn't overall growing at the same proportion as the rest of my portfolio.

[livesoft]

I have donated shares of VBR (small-cap value) that I have owned since TLHing out of IJS back in 2009 to my DAF over the years. I don't expect to ever, ever sell a share of VBR in my lifetime. That is effectively a tapering down. Basically, I don't consider any of my shares of VBR as part of my retirement portfolio anymore.

The OP may be able to do something similar with investments in their taxable account.

[sleepysurf]

... This downturn (especially if a further drop Monday) would allow me to convert 90+% of my remaining Small and Value positions to the Total Stock Market Index, in one fell swoop, with minimal tax consequences. I'm going to sleep on it tonight, and reevaluate in AM.

After much thought, I decided to simplify a little, but still maintain some Small and Mid "tilt" by exchanging all my "Coffeehouse" Small Cap Value (VSIAX) and Small Cap Blend (VSMAX) holdings to the single Vanguard Extended Market Index (VEXAX). That, combined with the Large Cap Value, S&P 500, and other (legacy) Large Cap stocks I still have, brings me closer to replicating the Total Stock Market, with a slight tilt to Small and Mid. There were no net Cap Gains with this exchange, and no change in my overall stock allocation (albeit still down from my 50% target).

[DesertInvestor]

I almost tilted small international, I'm glad I stayed with a core three fund and 15% small value. Longer I invest, the more wisdom I find in simplicity as Rick Ferri has said. I decided now is not the time to totally abandon SCV given its terrible performance. I compromised by selling DFA in 401k and converting it to bonds, then buying cheaper Small cap value vanguard fund in taxable (to take advantage of any TLH), and reducing tilt to 10%. I think that is reasonable compromise between desire to simplify and not lock in severe loses. At the least I can reduce the expense ratio (DFA target value is 0.4).

[tibbitts]

Several years ago, I set an asset allocation, basically a 3-fund portfolio with separate tilts on the equity side to us small-value, us reits, and emerging markets.  I've been sticking to it closely, but I am considering eliminating these tilts.  I'm not (I think!) bothered by recent under-performance or the current crash.  I am just finding it more work than I expected to maintain the balance across different accounts (joint/spouse/me, taxable,401k,403b,457b,roth iras) that grow at different rates and have access to different funds and less convince it'll matter much in the long run.

Any thoughts on how to go about this?  If I just switch now, I feel like I'm selling low (e.g., on small cap value with respect to the market) and maybe being reactive to recent performance.  Would it make sense to taper off via a pre-planned glide path of some sort over the next 10 years?

FWIW, my current equity breakdown is:
- 60% US
  - 37.5% US total market
  - 11.25% US small value
  - 11.25% US REIT
- 40% Intl
  - 30% Intl total market
  - 10% emerging market

I'd be proposing to go to 60% US total and 40% Intl total.

My feeling is the SCV and REIT tilts are a lifetime commitment, and might take longer than that to pay off. I don't think you have the choice to back out. I don't buy that you find it too difficult - I think you're bailing because they haven't paid off so far.

If you actually do find tilts too difficult I think you're making it too hard. Bogleheads think in terms of precision and these aren't things that have to be precise. I'm sure that commitment to precision has served Bogleheads well in their careers, but it just isn't necessary when it comes to tilts. I mean seriously - you're listing .25%???

[panhead]

Yeah, I've thought about it as well. Like some here I have a slightly modified coffee house portfolio. I like, and still like the tilts and the idea behind them, and it also satisfied my desire to be able to tinker a little. As I get older, I am leaning toward moving toward the 3 fund portfolio as well. It will make things easier for the wife if I'm not around at some point, and it will be easier for me to manage as I age.

Hard for me to do it though, especially now. I've been buying more SCV and REIT lately, not selling.

In my case, inertia might win and I'll end up doing nothing. I'll leave instructions on what to do should I leave the planet first.