Rebalancing from 80/20 to 70/30, whining
Rebalancing from 80/20 to 70/30, whining
It's time to sell 25% of my VTSAX and TSP C Fund, and buy VBTLX and TSP G and F Funds. This feels like selling off diamonds to buy manure, or at least I think it would if I had any diamonds. For those who've done a major rebalance like this, how did you bring yourself to do it? I can't type well while holding my nose.
Bond funds. Bleh.
Sim
Bond funds. Bleh.
Sim
Re: Rebalancing from 80/20 to 70/30, whining
The G Fund is the crown jewel of TSP.
Victoria
Victoria
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Re: Rebalancing from 80/20 to 70/30, whining
I can't help but wonder how you got to an asset allocation that was off by 10%. It makes me think that some potential rebalancing was missed somewhere along the way. Or perhaps you have made a significant change to your target allocations. Can you work slowly toward your target allocations using new contributions? Or for that matter you could make the change in smaller increments.
But, I understand your concern. I am not thrilled with bonds and their future prospects, but, I still have a very large allocation to them. It helps me sleep.
But, I understand your concern. I am not thrilled with bonds and their future prospects, but, I still have a very large allocation to them. It helps me sleep.
Bob
Re: Rebalancing from 80/20 to 70/30, whining
Say you start with $70k stocks and $30k bonds. If bonds stay the same and stocks go from $70k to $120k (about a 71% increase) then you would have gone from 70:30 to 80:20.CABob wrote:"I can't help but wonder how you got to an asset allocation that was off by 10%."
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Re: Rebalancing from 80/20 to 70/30, whining
Why sell the diamonds?
Could rebalance slowly by directing the new contributions towards manure.
Could rebalance slowly by directing the new contributions towards manure.
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle
Re: Rebalancing from 80/20 to 70/30, whining
Ummm, am I missing something here? You are selling your winners to buy more of your losers (losers for now, who knows going forward.) I thought this was the beauty of rebalancing - it basically keeps you FROM selling low and buying high.Simbilis wrote:It's time to sell 25% of my VTSAX and TSP C Fund, and buy VBTLX and TSP G and F Funds. This feels like selling off diamonds to buy manure, or at least I think it would if I had any diamonds. For those who've done a major rebalance like this, how did you bring yourself to do it? I can't type well while holding my nose.
Bond funds. Bleh.
Sim
Perhaps there is more to this than you've let on. Are you "rebalancing" because your stock portion has gone UP enough to put your AA out of whack for what you want it to be, or have you decided that 80/20 doesn't sit well with you for [insert reason]?
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Re: Rebalancing from 80/20 to 70/30, whining
Please read this one more time. Repeat if necessary.BolderBoy wrote:
Ummm, am I missing something here? You are selling your winners to buy more of your losers (losers for now, who knows going forward.) I thought this was the beauty of rebalancing - it basically keeps you FROM selling low and buying high.
Hint: selling your winners is not selling low.
I get the FI part but not the RE part of FIRE.
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Re: Rebalancing from 80/20 to 70/30, whining
BolderBoy is saying it, just in a slightly different fashion.TomatoTomahto wrote:Please read this one more time. Repeat if necessary.BolderBoy wrote:
Ummm, am I missing something here? You are selling your winners to buy more of your losers (losers for now, who knows going forward.) I thought this was the beauty of rebalancing - it basically keeps you FROM selling low and buying high.
Hint: selling your winners is not selling low.
Rebalancing keeps you from selling low (aka you are selling HIGH).
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Re: Rebalancing from 80/20 to 70/30, whining
I think he was agreeing with BolderBoy and trying to emphasize the point.Grt2bOutdoors wrote:BolderBoy is saying it, just in a slightly different fashion.TomatoTomahto wrote:Please read this one more time. Repeat if necessary.BolderBoy wrote:
Ummm, am I missing something here? You are selling your winners to buy more of your losers (losers for now, who knows going forward.) I thought this was the beauty of rebalancing - it basically keeps you FROM selling low and buying high.
Hint: selling your winners is not selling low.
Rebalancing keeps you from selling low (aka you are selling HIGH).
Retirement investing is a marathon.
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Re: Rebalancing from 80/20 to 70/30, whining
I guess it was too subtle for me. I was once an engineer and you know how literal we are. Apologies for misunderstanding. :
I get the FI part but not the RE part of FIRE.
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Re: Rebalancing from 80/20 to 70/30, whining
If I were selling now to reduce my equities by 10% from 80 to 70 I would be smiling big time . You've probably had a high percentage of your assets in the market over the past few years and have done very well. I hope you are doing this in response to a written investment policy statement (IPS). One of the functions of such a plan is to keep one from ignoring their risk tolerance.
Re: Rebalancing from 80/20 to 70/30, whining
To start with I don't think diamonds and manure.Simbilis wrote:. This feels like selling off diamonds to buy manure, or at least I think it would if I had any diamonds. For those who've done a major rebalance like this, how did you bring yourself to do it?
Bond funds. Bleh.
Sim
But, a question. If you think bonds are bleh, then why on earth are you investing in any bonds? Seriously.
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Re: Rebalancing from 80/20 to 70/30, whining
I am in the process of moving from 90/10 (for the accumulation phase) toward 70/30 as retirement gets closer. I have 5% to go. I did it mostly by redirecting new contributions over the last four years. I too am not thrilled with the prospects for bonds from this point. I've been buying the stable value fund in my 401k and I-bonds in taxable. It helps that the stable value fund has a better yield than total bond market. In retrospect, I would have done better to get the capital gains that came with the decline in interest rates over the last couple years.
Re: Rebalancing from 80/20 to 70/30, whining
BolderBoy et al: Selling high and buying low - that works for me! I love that perspective.
CABob: I'm not exactly rebalancing, it's more just balancing. Up until recently, I had no IPS and no clear idea of my risk tolerance or asset allocation. By happenstance I was making some reasonable choices like saving regularly, minimizing tax exposure, and buying broadly based low-cost unmanaged index funds. I was also making unreasonable ones like not consolidating my many 401k accounts, not taking full advantage of Roth accounts, and buying only equity indexes and distant (e.g. 2040) target date funds. What little bond allocation I have came from the target date funds. Last year, I finally decided to do a better job. I browsed through Personal Finance for Dummies, which wasn't a bad place to start. Google led me here and a few other places, and the advice here seemed to me to be the best-reasoned and least speculative.
Now I've consolidated my accounts and mostly gotten out of the target date funds. The last step is to get into a simple asset allocation that suits me - 30/30/30/10, the 10 being Vanguard's REIT index fund.
dbr: I'm not exactly sure why I dislike bonds, but I do. Probably a thoughtless no-guts-no-glory bias. However, they're a core part of the asset allocations recommended by many Bogleheads. Since I don't yet have a well-informed mental model of what I'm doing, it seems prudent to follow the example of people who do appear to have that.
Thanks all!
Sim
CABob: I'm not exactly rebalancing, it's more just balancing. Up until recently, I had no IPS and no clear idea of my risk tolerance or asset allocation. By happenstance I was making some reasonable choices like saving regularly, minimizing tax exposure, and buying broadly based low-cost unmanaged index funds. I was also making unreasonable ones like not consolidating my many 401k accounts, not taking full advantage of Roth accounts, and buying only equity indexes and distant (e.g. 2040) target date funds. What little bond allocation I have came from the target date funds. Last year, I finally decided to do a better job. I browsed through Personal Finance for Dummies, which wasn't a bad place to start. Google led me here and a few other places, and the advice here seemed to me to be the best-reasoned and least speculative.
Now I've consolidated my accounts and mostly gotten out of the target date funds. The last step is to get into a simple asset allocation that suits me - 30/30/30/10, the 10 being Vanguard's REIT index fund.
dbr: I'm not exactly sure why I dislike bonds, but I do. Probably a thoughtless no-guts-no-glory bias. However, they're a core part of the asset allocations recommended by many Bogleheads. Since I don't yet have a well-informed mental model of what I'm doing, it seems prudent to follow the example of people who do appear to have that.
Thanks all!
Sim
Re: Rebalancing from 80/20 to 70/30, whining
Huh? If you sell 25% of your 80% and add it to your 20%, I don't think you will end up with 70/30. I know that's not your question, but getting the math right might affect how you see things.Simbilis wrote:It's time to sell 25% of my VTSAX and TSP C Fund, and buy VBTLX and TSP G and F Funds.
Yes, this is whining. You need a good old fashioned market crash to make you feel better.
I wouldn't sell anything unless you have realized you are not comfortable with the risk level of 80/20. If so, that needs to be fixed now. If not, I'd just direct more money to the G fund or to a bond fund for a little while.
Link to Asking Portfolio Questions
Re: Rebalancing from 80/20 to 70/30, whining
Maybe this thread will help.Simbilis wrote:dbr: I'm not exactly sure why I dislike bonds, but I do. Probably a thoughtless no-guts-no-glory bias
http://www.bogleheads.org/forum/viewtopic.php?p=538014
Link to Asking Portfolio Questions
Re: Rebalancing from 80/20 to 70/30, whining
I'm doing the exact same thing this week!
I just keep telling myself that in thirty years I'll think this is a great decision, and I also tell myself that I can't predict the future, so who cares what I think of the future of the bond market.
Plus, it feels good to sell high.
I just keep telling myself that in thirty years I'll think this is a great decision, and I also tell myself that I can't predict the future, so who cares what I think of the future of the bond market.
Plus, it feels good to sell high.
Re: Rebalancing from 80/20 to 70/30, whining
VTSAX and TSP C aren't 80% of my portfolio, it's just that exchanging 25% of those two holdings for bonds will balance things out. The math is as right as Google Spreadsheet can make it
I've been through two market crashes already. However, 8-9% > 4-5%, so it follows ineluctably that stocks are better than bonds. That's logic!
I'm not especially uncomfortable with 80/20 nor comfortable with 70/30. I just can't "feel" the difference. So, I'm trying to be guided by people who've thought about it longer and are apparently better informed, until I feel qualified to have an opinion.
Edit: Thank you for the link. That's what I was looking for, but didn't know it.
I've been through two market crashes already. However, 8-9% > 4-5%, so it follows ineluctably that stocks are better than bonds. That's logic!
I'm not especially uncomfortable with 80/20 nor comfortable with 70/30. I just can't "feel" the difference. So, I'm trying to be guided by people who've thought about it longer and are apparently better informed, until I feel qualified to have an opinion.
Edit: Thank you for the link. That's what I was looking for, but didn't know it.
Re: Rebalancing from 80/20 to 70/30, whining
Do you have any debts that you could pay down this year instead of buying into bonds? If you pay down a 5% interest debt, that's like buying a guaranteed 5% bond. In the super-low yield world we're in these days, it's a great time to pay down your debts instead of buying into bonds.
Re: Rebalancing from 80/20 to 70/30, whining
All my debt is at 2.75% or less, and my only bond holdings are in tax advantaged accounts. We're paying off our remaining mortgage balance over 5 years, but for peace of mind, not for the best marginal return.
Re: Rebalancing from 80/20 to 70/30, whining
Well, I think you have to refer back to your overall investment plan. When I turn 40, I will go from 80/20 to 70/30 as well. I think you just have to think long term.Simbilis wrote:It's time to sell 25% of my VTSAX and TSP C Fund, and buy VBTLX and TSP G and F Funds. This feels like selling off diamonds to buy manure, or at least I think it would if I had any diamonds. For those who've done a major rebalance like this, how did you bring yourself to do it? I can't type well while holding my nose.
Bond funds. Bleh.
Sim
Is there any reason for the hesitation? Is it because you feel the market is will continue higher. Also, keep in mind you are selling at 5 year highs and buying bonds on lows. Just my two cents
Re: Rebalancing from 80/20 to 70/30, whining
I looked back at an old thread and I'd agree that 80/20 is too aggressive for your age. I think this change is appropriate.Simbilis wrote:So, I'm trying to be guided by people who've thought about it longer and are apparently better informed, until I feel qualified to have an opinion.
Link to Asking Portfolio Questions
Re: Rebalancing from 80/20 to 70/30, whining
How many years would it take you to crawl out of the hole if markets crashed by 50%? What would happen to your financial plan if markets crashed, and stayed down for many years, like Japan?
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore
Re: Rebalancing from 80/20 to 70/30, whining
retiredjg: Agreed. Thanks again for the thread link.
scone: If the US has a Japan-style slump and stagnation, I'll be too terrified to retire or spend any of my portfolio - my family will need it. I'll probably work until they have to scrape me out of my chair.
scone: If the US has a Japan-style slump and stagnation, I'll be too terrified to retire or spend any of my portfolio - my family will need it. I'll probably work until they have to scrape me out of my chair.
Re: Rebalancing from 80/20 to 70/30, whining
Personally, I will stay at 80:20 until I have enough to retire. Some people around here are too conservative.
Re: Rebalancing from 80/20 to 70/30, whining
What is your age again? I don't see it in the thread. ThanksSimbilis wrote:retiredjg: Agreed. Thanks again for the thread link.
scone: If the US has a Japan-style slump and stagnation, I'll be too terrified to retire or spend any of my portfolio - my family will need it. I'll probably work until they have to scrape me out of my chair.
Re: Rebalancing from 80/20 to 70/30, whining
Our vital stats are here.
Re: Rebalancing from 80/20 to 70/30, whining
Well, I don't know about AA of 70/30, I think it depends on when you want to retire. And looks like you wanna work til 70, then 70/30 should be fair enough split between 60/40 and 80/20. Everyone is different. Its a tuff question I struggle with as well. I am 34 and just AA to 80/20 and letting it ride.Simbilis wrote:Our vital stats are here.
Re: Rebalancing from 80/20 to 70/30, whining
I'll have to admit that I worded it a little strangely. Glad most folks understood what I was getting at and my apologies to the engineers on the list.TomatoTomahto wrote:I guess it was too subtle for me. I was once an engineer and you know how literal we are. Apologies for misunderstanding. :
It was such an "Ah hah!" moment for me, when I realized what rebalancing does, that I love to proselytize about it.