Six Month Review Template – Re-balancing portfolio

This is the second part of my “Six Month Review” template. Previously I looked at the performance of my investments, with emphasis on what seems to be trending well, and what is not. Based on that, I can make decisions on whether to sell off certain assets or to put money into others.

The next thing I do is to look at my asset allocation, and determine if it has gone “out of whack” with certain investments performing well, and others doing poorly. If they vary too much, you want to sell off your “winners” (sell high) and use the funds to buy your “poor performers” (buy low). In this way, you get your asset allocation back in line with your plan, and hopefully set yourself up for when your “poor performers” jump up, and your “winners” lose steam.

401K/IRAs

My general rule of thumb here is that I only rebalance if they are more than 1.0% out of line with my asset allocation. If you remember, my planned allocation for my IRAs is:

  • 30% Bond Index Fund
  • 17.5% S&P500 Index Fund
  • 17.5% International Index Fund
  • 17.5% Small Cap Index Fund
  • 17.5% REIT Index Fund
Name Note Actual
TRowe Price S&P 500 Wife’s IRA 18.5%
Extended Equity Market Index Wife’s IRA 19.2%
International Equity Index Wife’s IRA 17.0%
Real Estate Wife’s IRA 18.2%
US Bond Enhanced Index Wife’s IRA 27.1%
Equity Index 500 Wife’s Roth IRA 17.9%
Extended Equity Market Index Wife’s Roth IRA 18.4%
International Equity Index Wife’s Roth IRA 17.1%
Real Estate Wife’s Roth IRA 17.5%
US Bond Enhanced Index Wife’s Roth IRA 29.1%
Vanguard 500 Index Fund My VG IRA 17.9%
Vanguard REIT Index Fund My VG IRA 17.5%
Vanguard Small-Cap Index Fund My VG IRA 18.5%
Vanguard Bond Index Fund My VG IRA 29.3%
Vanguard Int’l Index Fund My VG IRA 16.8%
Vanguard 500 Index Fund My Roth IRA 18.2%
Vanguard REIT Index Fund My Roth IRA 17.5%
Vanguard Small-Cap Index Fund My Roth IRA 18.3%
Vanguard Bond Index Fund My Roth IRA 29.0%
Vanguard Int’l Index Fund My Roth IRA 16.9%

For July 1, here is how they looked:The one’s highlighted in bold are the ones that are more than 1% out of alignment. I’ll sell a portion of those off to fund purchases in those areas below (typically bonds and/or international).

For my work 401K and Deferred, they don’t have a REIT option, so my allocation is a straight 25% for each area:

Eagle Small Cap growth My 401K 27.6%
Vanguard 500 Index Fund My 401K 26.8%
Vanguard Total International Index My 401K 21.4%
Vanguard total bond Mkt My 401K 24.1%
Eagle Small Cap growth My Deferred 27.0%
Vanguard 500 Index Fund My Deferred 26.3%
Vanguard Total International Index My Deferred 22.4%
Lord Abbot Total Return My Deferred 24.3%

Again, I’ve highlighted those areas that are above 1% in variance. I’ll sell those off and buy additional shares in the International and bond funds.

For my dividend account (my father’s inherited IRA), my allocation is 25% dividend stocks, 25% REITs with good dividends, and 50% bonds.

Pop’s IRA @USAA 26.6% 25.00% Stocks
Pop’s IRA @USAA 23.9% 25.00% REITS
Pop’s IRA @USAA 49.5% 50.00% Bonds

Usually for these, I use the dividend money they throw off to purchase additional shares in those that aren’t doing well. I’ll try not to sell of shares of stocks or REITS – just keep them as they are and use the dividends to re-balance.

Most mutual funds (Vanguard, TRowe, etc.) make it relatively easy to do the re-balancing, often on just one page. It’s when you are dealing with your own stocks & bonds (like in my dividend account) where you have to break out the calculator/spreadsheet and do the math yourself.

Overall, I have a few adjustments to make, but not as much as I have had to do in the past. Last January, after that great stock market climb in 2017, I had a lot of re-balancing to do to bring everything back into alignment. I sold off my stocks in Jan 2018 when high, and purchased other assets. The stock returns have just recently got back to above 0, so it was a good move.

Next time, we’ll talk about how I analyze my budget for the first six months, and make adjustments.

 

Mr. 39 Months.

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