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?
Mr. 39 Months