Portfolio Tweakers - Unite and be ashamed no more

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500Kaiser
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Portfolio Tweakers - Unite and be ashamed no more

Post by 500Kaiser » Sat Jan 25, 2014 4:54 am

I am interested in what Asset Allocation "tweaks" folks have made in the past 12 months.

For this posts purposes, a "tweak" is:
1) An adjustment to your AA that you intend to keep for longer than 12 months.
2) NOT just adjusting 1% to update an age in bonds allocation.
3) Something you actually executed, or put in your plans to execute.

Every year, during my IPS update, I go through an exercise to evaluate my situation and allow for a one time adjustment for the next 12 months. The annual tweaks I made in December for the next 12 months are:

1) I removed REIT's from my AA based on the current yields/valuations (and some reflection on recent posts/debates in this forum on these) and that I find myself moving towards a simpler portfolio (3 Fund) as I get older.

2) I took money off the table. Instead of just lowering equities 1% because I'm a year older, I lowered 3% from stocks to bonds.

3) I did NOT adjust my SV allocation, but I thought about it based on valuations.

4) I added a table to my IPS to purchase TIPS, based on valuations/thresholds (which haven't been met yet), adopting Mr. Swedroe's ruleset on this topic.

I'm sure this could raise a debate centered around market timing and staying the course. I respectfully ask that this thread not turn into that. All those hard core non tweakers, stay the course, this is just market timing people - you can always start your own thread!
Higher risk = higher HOPEFUL returns, not expected returns.

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G-Money
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by G-Money » Sat Jan 25, 2014 7:47 am

1. Finally added FTSE All-World ex-US Small-Cap in mid-2013, after mulling it over for nearly a year.
2. Finally sold off my trace allocation to REITs (it was down to <6% of equities).
3. Sold TBM and TIPS and moved to PenFed CDs for higher expected returns with lower risk.
Don't assume I know what I'm talking about.

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by livesoft » Sat Jan 25, 2014 7:55 am

500Kaiser wrote:I am interested in what Asset Allocation "tweaks" folks have made in the past 12 months.

For this posts purposes, a "tweak" is:
1) An adjustment to your AA that you intend to keep for longer than 12 months.
[…]
I won't tell you about all the tweaks that I do not intend to keep for less than 12 months, but the longer ones are centered around getting to "round numbers" of shares in smaller accounts like Roth IRAs. In those accounts there were odd lot positions of 139, 307, 202 shares of ETFs simply because there was no money in them to round-up. But with end-of-2013 distributions and some 2014 contributions, I was able to buy 1, 3, and 8 shares to get to 140, 310, and 210 shares. And I didn't even consider AA when doing this. I just wanted non-odd numbers of shares in these holdings because that appeals better to my sense of order with ETFs. With open-ended mutual fund shares I don't care about roundness, but for some reason with ETFs, I do.

My goal for every ETF position is to have the number of shares end in four zeroes.
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TheTimeLord
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by TheTimeLord » Sat Jan 25, 2014 9:32 am

Reduced REITs from 20% to 10%
Took 50% of my FI allocation out of Bonds and placed it in cash.
Moved Roth to 100% equity for a period.
Ignored rebalancing into Emerging Markets still waiting for more pain.
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by Scooter57 » Sat Jan 25, 2014 9:46 am

Removed REITs from my very small IRA as the more I read up on them, the less I liked them as an investment and I preferred to use the space for other things.

Put 20% of my stock allocation in Taxable into individual stocks as most of my investable assets are taxable. This allows for tax loss harvesting and avoids the capital gains put out by funds that invest in midcap and small cap and value.

Increased my very small percent allocation to stocks going forward to a still-conservative 10% larger allocation more in line with the guidelines suggested by experts I respect. I did this by changing the end point of the Value Averaging value path I am going to use this coming year, not by lump summing anything in.

Added valuation metrics to my IPS which influence how I follow my valuation path. This change is why I am more confident about increasing my stock percentage as it ensures that my investments will be made with "a margin of error" in valuation terms.

Sold all my inherited high expense crappy-quality bond funds and put the money into a CD ladder with a large amount in 5 year 2% Credit Union CDs with a 6 month early withdrawal penalty and the ability to take partial withdrawals. Much of it is invested locally, which makes it possible for these CUs to lend to my neighbors for their homes and cars.

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500Kaiser
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by 500Kaiser » Sat Jan 25, 2014 7:42 pm

Scooter57 wrote:......Increased my very small percent allocation to stocks going forward to a still-conservative 10% larger allocation more in line with the guidelines suggested by experts I respect. I did this by changing the end point of the Value Averaging value path I am going to use this coming year, not by lump summing anything in.

Added valuation metrics to my IPS which influence how I follow my valuation path. This change is why I am more confident about increasing my stock percentage as it ensures that my investments will be made with "a margin of error" in valuation terms.........
Scooter, would you be willing to expand a bit more on valuation metrics. I'm not sure I am familiar with what you are referring to. Thanks for considering, Kaiser.
Higher risk = higher HOPEFUL returns, not expected returns.

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by HongKonger » Sat Jan 25, 2014 8:11 pm

2013: Sold all my Asia Apex small cap and Emerging Asia. Halved my US small caps. Sold off 2 individual stocks that were still 30% down from 2008.

Tweaks thus far in 2014: Purchased Hang Seng index tracker, increased individual REITs, have an order in to buy Europe (VGK) and a plan to buy some CDs within the next month.

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by DonCamillo » Sat Jan 25, 2014 8:19 pm

Stopped investing any new money in equity funds. Switched to balanced funds. That will simplify rebalancing.

Moved my previous IRA equity fund to Vanguard to reduce the ER by 75%.
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by gkaplan » Sat Jan 25, 2014 9:10 pm

I went from 72/28 Equity/Fixed Income to 60/40 Equity/Fixed Income, because I hit my "number" early last year. To accomplish that asset allocation change, I exchanged my entire Vanguard REITS fund for the Vanguard intermediate TIPS fund.
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Ged
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by Ged » Sat Jan 25, 2014 9:21 pm

I moved my retirement from tentative plan in 4/2016 to 10/2013.

In Oct reduced my equity holdings to 40% from 50% due to stock market rally reducing need to take risk and changed retirement plan needs for increased stability.

Earlier in the year did significant TLH in emerging markets and used the losses to offset gains from sales of some legacy holdings of individual stocks - no more individual stocks left!

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by ofcmetz » Sat Jan 25, 2014 9:51 pm

After learning more about the TIAA real estate fund and reading some comments by Valuethinker, I reduced my target down from 15% of our portfolio to 10% for that fund. Other than that haven't changed much this last year.
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by jginseattle » Sat Jan 25, 2014 11:53 pm

A year ago I increased my allocation to International equities. This did not result in increased returns for 2013, but I don't regret the move.

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nedsaid
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by nedsaid » Sun Jan 26, 2014 12:23 am

We should all form a support group and come up with a 12 step plan for all of us "Tweak-a-holics." And yes, I have tweaked my portfolio a lot over the years. I pretty much stopped in 2008. But I have nearly fallen off the wagon.

I went from bank CD's, to individual stocks, to mutual funds, to index funds, and then to ETFs during my investing career. Darn it, Larry Swedroe got me thinking about commodities. But reading other Boglehead posts kept me on the straight and narrow.

Now influenced by Boglehead threads, I have considered "un-tweaking", maybe lightening up or getting rid of asset classes like REITs and Small Cap Stocks that seem to be overvalued. But then I read more and decide to stay the course.

I considered "bucketizing" as popularized by Ray Lucia until he got into trouble. So then I decided not to bucketize. Then I read about Dr. Pfau who seems to advocate something that sounds a lot like the bucket strategy. Then I decide to keep doing what I am doing.

So despite temptation, I have been sober and "Tweak-Free" for 5 1/2 years. But who knows, a Money Magazine article might inspire me to do another reconstruction project on my portfolio. Which will send me back to rehab, begging the Bogleheads to take me back. That is if I promise to "stay the course."
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by BolderBoy » Sun Jan 26, 2014 12:31 am

I rebalanced twice last year, which is a form of "tweaking" I suppose.

Friday demonstrated I did the right thing.

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by nedsaid » Sun Jan 26, 2014 12:31 am

I do like the thoughts of 500Kaiser. It is good to re-evaluate our investment approach. He does what I have advocated and that is paying attentions to valuations.

While I advocate going with a plan and sticking to it, I also believe that one cannot ignore market conditions and extremes in valuations. Sometimes a tactical move does make sense. But I think it should be the exception and not the rule. I also view the Investment Policy Statement as a bit of a work in progress. Why not have the knowledge and experience gained in the markets over time be reflected in your Investment Policy Statement. If you as an investor have improved, shouldn't your IPS improve also? And even if you have an IPS, shouldn't you be allowed to deviate from it somewhat if market conditions warrant it?

So a bit of flexiblity as an investor is a good thing. I will admit that it is difficult to decide whether to be flexible or to just stay the course. But as investors, we should be thinking things through all the time.
A fool and his money are good for business.

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by pop77 » Sun Jan 26, 2014 8:19 am

Brought down the split between Emerging Markets/ International Developed markets in international allocation from 50/50 to 33/66. It turned out to be a good move for 2013. Long term don't know. As Emerging Markets are down, this means in 2014 more of the 'new money' will go into Emerging market stocks and bonds.

Officially split my bond allocation into USBonds/US Inflation protected and International Bonds (GIM). Put in a lot of new money into GIM last year to make that happen. Was not a pleasant experience in 2013 but hopefully a good one long term.

After reading TFB's http://thefinancebuff.com/2014-i-bond-vs-cd.html, added PenFed's 5 year CD's as part of inflation protected asset class (substituting Ibonds). I can always pull out the money and put it back into Ibonds, if inflation goes up unexpectedly before end of the year.

Still thinking whether to switch from a commodities futures fund (HACMX) to a commodities producers fund (GNR). There are so many convincing arguments here. But still not executed. Wonder what you all do when you are somewhat convinced that you should do a tweak but resist because you do not want to accept the 'losses'.

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by fposte » Sun Jan 26, 2014 12:57 pm

I redirected most of my 403b contributions to go into TIAA to get TIAA Traditional. Not because of any deep concern over bond funds, just because I never got around to doing the paperwork for the TIAA enrollment before.

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by Startled Cat » Sun Jan 26, 2014 1:06 pm

Sold my REITs.

Tilted heavily towards international stocks.

Equity AA is now 48% international developed, 28% US large cap, 10% US mid/small cap, 13% EM.

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by Leeraar » Sun Jan 26, 2014 2:14 pm

All this dumping of REITs. Isn't that a buy signal?

(Can't resist tweaking the tweakers! :wink: )

L.
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FNK
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by FNK » Sun Jan 26, 2014 2:57 pm

Ditched all my bonds, took a 401(k) loan, paid down mortgage, refinanced. Results: saving about $8-10K/year on the mortgage and sitting out the interest rate increases. Win!

Implemented tax-adjusted asset allocation.

Got some intl bonds. Meh.

Thinking hard about delaying and steepening the glide path, but not pulling the trigger.

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by leonidas » Sun Jan 26, 2014 3:25 pm

The last real tweaking I did was dump all my tips in feb '13 and increased em stocks from 20 of my intl to 40.

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by mickeyd » Sun Jan 26, 2014 4:02 pm

The only thing that I did last year (other than rebalance back to 60/40) was to exchange my TIPS fund in the IRA and Roth to the Short Term TIPS fund to take advantage of the shorter duration.

Future tweaks/AA changes will have me exchange Roth REIT fund to TSM fund and exchange Value fund and ST Value funds (IRA) to TSM. All moves are to make my AA simpler as I age.
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by Rodc » Sun Jan 26, 2014 4:05 pm

I look each January 1 to see if I have improved options in my 401K. This year I have Fidelity Spartan REIT index fund. So I moved REITS from a vanguard fund in my brokerage account to this fund in my main account where I can buy and sell at no cost.

Last year we got the new vanguard total world x-US index fund at a few basis points so consolidated developed and emerging markets. Emegering was in the brokerage account.
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by sscritic » Sun Jan 26, 2014 4:09 pm

I bought nothing and sold nothing in 2013, which means my asset allocation at year end had to be different than my asset allocation at the beginning of the year (unless everything moved in unison during the year, which didn't happen).

If by tweaking you mean change, then by doing nothing I tweaked my asset allocation.

P.S. Is letting excess income accumulate in cash buying something? In that case, I bought cash this year.

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by Fallible » Sun Jan 26, 2014 4:21 pm

500Kaiser wrote:I am interested in what Asset Allocation "tweaks" folks have made in the past 12 months.
...
I'm sure this could raise a debate centered around market timing and staying the course. I respectfully ask that this thread not turn into that. ...
What category the tweaking falls into would depend on many factors: changes in your financial situation, changes in your risk tolerance (which is always changing and may derive from a better understanding of investing based on growing experience with it), correcting mistakes made in your original AA, and so on. Also, some of these could be incorporated into your IPS depending on how broadly you've stated your overall goals.

I would not consider any of these market timing, even if they might turn out to be wrong moves. That's because market timing is making changes based on what you think the market will do, which of course no one can know for certain.
John Bogle on his often bumpy road to low-cost indexing: "When a door closes, if you look long enough and hard enough, if you're strong enough, you'll find a window that opens."

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by staythecourse » Sun Jan 26, 2014 4:36 pm

The question for the tweakers is does it matter??

All we know is that one's variability in returns is basically based on one's asset allocation. Nothing more and potentially a lot less based on one's costs and active management. Since we know the autocorrelation of yearly returns for Large cap stocks, small cap stocks, corporate bonds, and government bonds are a big fat ZERO then making any changes on valuations makes not difference in the short run. My guess is the tweakers are doing it as a psychological reason of feeling like they have more control over their investments then they do.

I am becoming quite saddened at how much of an active management forum this has become. If bogleheads can't even walk the walk then no wonder their will always be active managers/ companies out there.

Good luck.
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by Leeraar » Sun Jan 26, 2014 5:14 pm

staythecourse wrote:The question for the tweakers is does it matter?? ... I am becoming quite saddened at how much of an active management forum this has become.
Both Morningstar and Vanguard have evidence (proof) that investors' portfolios under-perform their investments. Part of this is understandable*, but much of it is because investors are "tweaking" their investments and tampering with their AA. The evidence is clear: Leaders attract more investment, laggards attract less.

Just look at this thread. Everyone is dumping REITs. Is that because REITs have done really well and investors are rebalancing? No, REITs have done poorly of late, and investors are locking in their relative losses and bolting to the last hot thing.

IMO, this kind of tampering is really dangerous. You zig and the market zags, and that's another half percent or so gone. Some seem to argue that tinkering with your AA does not matter. I do not think so.

L.

* If you are making periodic investments in an advancing asset, you will under-perform that asset.
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by mickeyd » Sun Jan 26, 2014 5:33 pm

Everyone is dumping REITs. Is that because REITs have done really well and investors are rebalancing? No, REITs have done poorly of late, and investors are locking in their relative losses and bolting to the last hot thing.

Be cautious about speaking of "everyone". Part of my IPS directs me to reduce REIT allocation when I consolidate my AA in order to simplify it later in life. I had no idea that REITs have recently done poorly.
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by HongKonger » Sun Jan 26, 2014 5:46 pm

mickeyd wrote:
Everyone is dumping REITs. Is that because REITs have done really well and investors are rebalancing? No, REITs have done poorly of late, and investors are locking in their relative losses and bolting to the last hot thing.

Be cautious about speaking of "everyone". Part of my IPS directs me to reduce REIT allocation when I consolidate my AA in order to simplify it later in life. I had no idea that REITs have recently done poorly.
And don't lump all REITs together when you actually mean one specific kind (individual or fund, commercial or residential) and in one specific country.

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by TheTimeLord » Sun Jan 26, 2014 6:34 pm

Leeraar wrote: No, REITs have done poorly of late, and investors are locking in their relative losses and bolting to the last hot thing.
I really don't regret the losses I have ended up avoiding in REITs nor the gains made from the redeployed funds. I just became very uncomfortable with my level of exposure to REITs so I adjusted.
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by harikaried » Sun Jan 26, 2014 6:47 pm

About 1 year ago:
- US/Intl split of 60/40
- Cash was a percentage of AA
- REIT 10%

Since that time:
- Simplified US/Intl split to be 2:1 (makes checking easy: "is US ~double Intl?")
- Cash switched to percentage of expenses
- REIT 0% (adjusted equity/fixed-income accordingly)

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by nedsaid » Sun Jan 26, 2014 10:48 pm

I considered to stop adding to REITs, I am still buying them with 10% of new monies at my workplace savings plan. I just checked the Vanguard REIT ETF and the yield is now 4.32%. So yields have come up a bit, from the 3's to the 4's. So valuations are looking a little better.

I have also read on this forum that small caps are getting expensive, but I have stayed the course there as well. The S&P 600 Small Cap Index shows a 20 P/E and the Vanguard Small Value Index Shows a P/E of 17 versus a Total Market P/E of 16.

So I have pretty much stayed the course. In 2013, I kept the purchase percentages of my workplace savings plan the same. It is 60% stocks and 40% bonds. All of my IRA purchases for 2013 were bond funds. My dividends from my brokerage IRA have all gone into a bond fund. And mild rebalancing from stock funds to bond funds in my Mutual Fund IRA. My asset allocation has remained steady at 69% stocks and 31% bonds and cash.
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Boglenaut
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by Boglenaut » Sun Jan 26, 2014 11:08 pm

I do tend to tweak, but set myself rules for how long I must consider it. I also "hear" Taylor telling me to simplify, so do my tweaking sparingly. The tweaking is definitely just around the edges.

But it explains my signature. ;)

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matjen
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by matjen » Sun Jan 26, 2014 11:13 pm

Sold my REITS and put the proceeds into bonds.
Took a few percent of equities and moved to munis.
However, also gained access to DFA and tilted to SCV a bit more. Especially in international.
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LH
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by LH » Mon Jan 27, 2014 12:41 am

In february 2013 made following changes:

1) created a 3 percent gld allocation taken evenly from my scv,us tsm, us reit, emerging, australiasia, and europe stock asset classes. DCA'ed into allocation slowly over past year.

2) went from 16 percent bonds to 19 percent bonds.

Current allocation stock/bonds/gld is 78/19/3 at start of 2013 it was 84/16/0


Currently
13 percent each: US tsm, US REIT, US SCV .... Emerging, Australiaasia, Europe

9.5 percent each: US aggregate bonds, US TIPS

3 percent gold: gld


Also:

3/2013 changed 529 allocation from 80/20 stocks/bonds to 60/40 stock/bonds. one kid starts college 2021, the other 2022.
Last edited by LH on Mon Jan 27, 2014 12:49 am, edited 1 time in total.

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by tpm871 » Mon Jan 27, 2014 12:48 am

I made a few changes, mostly influenced by interest rates. I wouldn't say that I am trying to time interest rate changes; I just think that the long term direction is up, so I made long term changes to my AA:

Sold my US Intermediate Treasuries fund (which I had rather than TBM), and set up a five year CD ladder instead. I don't really see a downside, since the yields for CDs are better, there's no management fee, and there's no risk of principal loss (even if rates shoot up).

Sold my REITs back in May, after reading wbern's advice. I think that REITs will struggle as interest rates increase. In replacing that position, I increased my allocation to small cap value and emerging markets. I am still value averaging into these higher allocations rather than investing the lump sum. So far, that worked well for emerging markets but not as well for small cap value, so the lump sum vs. value averaging difference may be a wash.

I am slowly transitioning from an intermediate term TIPS fund to a five year ladder of individual TIPS. That will take a while, since I need to wait for each five year TIPS auction to fill in the ladder. Similar reasoning as my switch to CDs: no management fee, no risk of principal loss (when held to maturity).

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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by Random Musings » Mon Jan 27, 2014 3:58 pm

Finished my ramp up of foreign equity exposure to 40% of portfolio - per my investment policy.

Reduced small-cap exposure on equity side - hence tilting a little towards large. Valuation.

RM
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Re: Portfolio Tweakers - Unite and be ashamed no more

Post by Bogle101 » Mon Jan 27, 2014 4:21 pm

Added:

All World ex-US small cap
All World ex-US REIT

Kept:

Vanguard Healthcare
Vanguard Energy

Subtracted:

Wellington
Wellesley
(not because they are bad, but because I'm young and they are conservative imo)
25% S&P 500 | 25% Extended Market | 20% International | 10% REIT | 10% Sector Funds | 10% Cash

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