Personal Investments • Rebalancing or Market Timing

My target AA is 60/40. Right now I am just a tad rich in stock, around 60.9%. My stock fund is up about 16% ytd with S&P 500 near record highs and the future is looking brighter for bonds. I have said that my upper limit on stock is 60% since I am 75 and spouse is 72. My plan was to rebalance with a 5 percentage point increment to 55/45 but I am reluctant to leave the hot stock market even though the bond market is tempting.

What would a prudent BH investor do? My sense is to follow my rebalance plan and not be influenced by current trends which feels too much like market timing. On the other hand, it seems somewhat dogmatic to blindly rebalance just because I planned to do so if stock creeped above 60%. Thanks for your advice.

You’re 75.

Nothing wrong with selling some stock with big gains and buying bonds that are yielding 4-5%. You could buy an intermediate TIPS fund or tips ladder and get 1-2% real return. that seems nice to me.

How large is your portfolio relative to your expenses?

Portfolio is $2.82m excluding paid off house. No debt. Pension and SS cover most expenses, except $10-15k depending on travel. But, if I pass first, spouse will need to draw $50k annually. $1.6m is in ira, 94% taxable. Retired when I was 51 so we did not have a long accumulation phase.

You’re in good shape, it seems. I am by no means an expert but if I were you I’d be happy at 50/50 stocks/bonds and split the bonds 25% VTIP for inflation protection and 25% into VGIT for nominal treasuries and be done with it.

Your dividends alone are probably sufficient to pay the taxes and required 50k expenses for your wife after you pass.

You could even afford to be very conservative and create a TIPS ladder for 50k real income for the next 28 years until your spouse turns 100. You’d probably have at least 1.5M left over for stocks, generating 22-30k dividends each year.

Statistics: Posted by artbuc — Thu Jun 20, 2024 3:44 am — Replies 18 — Views 1128