Have you changed your asset allocation?

I tend to re-balance every six months (In July and January). Re-balancing – make it regular and timely. Its helped save me some money (I didn’t suffer as much in Feb/Mar as others, as I took a share of my stock increases for 2019 and purchased bonds with them). So now its July and time to re-balance again.

Now, my standard allocation is:

  • 30% Index Bond funds
  • 17.5% S&P 500 Index
  • 17.5% Small cap Index
  • 17.5% International stocks index
  • 17.5% REITs index

I have found in the first six months of 2020 that my bonds were up to around 33% of my investments, while my REITS were down around 15%, and the stocks were lower as well. Usually, I’d just rebalance everything to the numbers above, and be “on my way.”

However, the Chinese Covid virus and the market volatility had me thinking. The “Fed” (US Federal Reserve Board) in an attempt to keep the market afloat, has dramatically dropped interest rates, and begun buying debt again. The result is that, as before, savers got punished and folks looking to increase their debt could find easy money. It thus made bonds less attractive, as any new debt issued is going to be at lower interest rates for the foreseeable future.

What is someone to do as they close in on retirement? Typically you pull money away from the volatile market and embrace safer investment alternatives – but you can’t do that with rates this low. I’ve tried experimenting with an income account for years, and I just can’t make it work with dividends. So I am stuck, like so many others, in shifting my allocation to more stocks.

In early July, I returned to the allocation that we had for most of the last 20 years:

  • 20% Index bond funds
  • 20% S&P 500 Index
  • 20% Small Cap Index
  • 20% International stocks index
  • 20% REITS index

Based on my previous horrible timing, I’m assuming we’ll have a stock collapse in the next 3 months, so be ready.

Have you made any changes to your investment allocations recently, based on current events?

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Mr. 39 Months

3 thoughts on “Have you changed your asset allocation?”

  1. After the huge COVID swing, and being tired of the market uncertainty, and continued potential for a correction and volatility, we made a huge change this year – going with a ‘tactical asset allocation’ provider – allocate smartly – to tell us how to reallocate.

    We picked a couple of their investment strategies, and it essentially spoon feeds us, at the end of each month, what the optimal allocation should be for the strategy we picked. It adjusts the investments and allocations based on dozens of market indicators. Then I do a monthly rebalance within our brokerage accounts. So, in effect, we change our allocations monthly, but based on expert market research, rather than our own intuition.

    Been on it for about 3 months, and while time will tell, so far we are pretty happy. When the market goes up like crazy, like it did in April/May we’ll definitely miss out on some of that upside, but when the market is flat or down, such as in the last 6 weeks, we will outperform. And we have piece of mind that if there is a big correction again, it will be a softer landing for us.


    1. Interesting. I still prefer to manage my own, but I can see how you might want to just do a “set it and forget it” strategy and let someone else do the heavy lifting. I’m going to post your article to my Saturday links email.


      1. The strategies are set it and forget it, but it’s not like having a money manager who does all the transacting for you as well. It only works if I do the manual reallocation every month. So there is work involved. And by seeing their allocation strategies in detail, and adjust over time, I also get some education 🙂

        Thanks – would be great if you share!

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