Learned I want more conservative AA - should I rebalance or gradually glide?

[c_is_for_cow]

I’ve given this a lot of thought. During the pandemic, we’ve been 70/30 and watched our portfolio go way down. I rebalanced from bonds to stocks in March, and our portfolio has come back up and are currently sitting at 75/25. I’m 43 and my wife is 40. I’d like to go down to 60/40, maybe for life, mainly because I’ve learned the difference in returns of 70/30 and 60/40 aren’t significant enough to warrant the extra risk of a 70/30 portfolio. My question is, if we want to go down to 60/40, is it ok to rebalance in one transaction from stocks to bonds, or is it safer to do a gradual glide path? Asking because there seems to be so much volatility this year. For example, earnings reports are due this week and could tank the market if coronavirus hurt those companies worse than investors thought. My gut says to just do it, but this is one of the emotional sides of investing I just need to think through and get a 2nd opinion on.

Thanks,
Cow

[3funder]

How well are you doing in terms of saving? Before you dial back your original allocation, make sure you don't need to take that level of risk.

[lakpr]

I would vote on the side of doing it all at once, if you are absolutely sure that 60:40 is the asset allocation you want permanently. No point in dragging it out, I'd like to deal with issues one time, be done with it, and forget it.

[dwickenh]

Tear the band aid off all at once!!

[wolf359]

If the market is up and you're at 75/25 when you want to be at 70/30, then you're at a rebalancing point anyways. There's no problem with switching down to 60/40 all at once instead.

It's switching to a more conservative asset allocation in the middle of a crash that kills returns. Right now you're selling stocks high and locking in your profits into bonds. When the market is up is the best time to make that type of change. If you gradually glide and the market crashes, you may find yourself at 60/40 anyways. Either way works, but doing it all at once while the market is high will give you a higher current portfolio balance.

Write down the reasons you're making this switch into your investment policy statement. Refer to it when you want to switch again. It's the constant switching of AA that affects your long-term returns.

Making the change isn't a problem. It's constantly making changes that is. Your asset allocation should be something you can stick with long-term, regardless of market conditions.

[Watty]

If the money is in a retirement account where taxes are not an issue then I would go on and move the money right away.

If they are in a taxable account then I would figure out what the tax impact would be before moving the money since that could complicate the decision especially if you have some short term gains that will become long term in the near future.

It would also be a good time to write out an Investing Policy Statement (IPS) to help you stick with whatever you decide is right for you.

https://www.bogleheads.org/wiki/Investm ... quirements

[cashboy]

just opinion of course:

do it now (if in tax deferred).

not sure what stocks (or funds) you have, but many have recovered (more than I would have expected). get to where you want to be while you can.

[Triple digit golfer]

If this is all tax protected accounts and you already determined that 60/40 is good for you, do it all at once immediately.

[yules]

Tear the band aid off all at once!!

I argue that going from 75/25 to 60/40 is putting the band aid on all at once, since bonds are for protection/safety of a portfolio.

Yules

[Scooter57]

FWIW there is a greater chance 2nd quarter results will look better than expected and boost the market higher, because expectations are so low. Plus the Oxford vaccine early results are coming out tomorrow and all the investors who don't understand how vaccines work will think the virus is all done.

Things only get ugly in another quarter or two when people start to realize that wishing and hoping only work when you are bamboozling people, not when you have to solve a very complex problem.

[JaneyLH]

Last November I decided to move from 70/30 to 50/50. At age 65, I made the move all at one time. Sure glad I did! Once you decide your portfolio is too risky, it's probably best to do the deed and ease your mind.

[c_is_for_cow]

Thanks for all the replies, much appreciated. I’m going to rebalance all at once via a tax-deferred transaction.