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.