Its January, time to re-balance the portfolio! Yeah!

Boy, do I have a boring life. ….

African elephant female and her baby elephant balancing on a blue balls.

Actually, since I enjoy the financial side of life, and like doing math, I do get some happiness from this. For those unclear on the concept, rebalancing is where you look at your current investments and compare them to the asset allocation (the split of where you have invested your money) and see if they are significantly different. If they are, then you sell some assets and buy others in order to bring them back into alignment with your goals.  You will be “selling high and buying low” which is the goal when investing.

Typically, you do this annually, or semi-annually (like I do every Jan and July). If you did it more frequently, you’d drive yourself nuts, and not gain much in the process. I usually look at my allocation, and see if something is more than 2% off from it is supposed to be (i.e. if my allocation is 17.5%, and its 18.3%, I tend to leave it, but if its 20.%, I’d sell part of it and buy something else).  If you remember my previous posts on this from Jan 2018 and July 2018, there is a specific process I go through.

With this year, the regular stocks and international stocks have really suffered in comparison to the bonds (and somewhat to my REITS). 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

This month I’ve found myself selling bonds (and some REITS) and buying stocks, especially international stock funds (which got hammered in 2018). Fortunately, the companies that we use (Vanguard, TRowePrice, etc.) make it relatively easy to do this, so I was able to do my calculations, and then make the moves on the computer for everything within 30 minutes. Again, as a finance geek, I enjoyed the process.

Lately I’ve been considering changing my allocation somewhat, to 20% for S&P500 and small cap, and 15% for REITs and International. We’ll see in February if I act on this.

Hopefully you are considering rebalancing, so you can “buy low and sell high” yourselves.

Have a great 2019!

Mr. 30 Months

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