Changes To Asset Allocation Obviously, the past few weeks have been a reality check for investors who thought they had the proper asset allocation for their portfolio but were wrong. I consider myself part of that group. Multiple years of gains can make one complacent and oblivious to the downside, especially when it hits hard. I have a fairly large portfolio (just about 7 figures) and my asset allocation is about 40% equities, 50% bonds and 10% cash. However, I realize that my equity portion is too aggressive and my bond weighting is geared more toward high yield bonds. So, my equity portion feels more like 60% equities, which is way too high for me given that my goal first and foremost is a low risk, income oriented portfolio. With a million dollars in my portfolio, I would be happy with 3-5% returns on average over the next 15 years, when I hope to retire.
My question is - what is the best way to change your asset allocation, slowly over a period of a year or two or drastic changes over a period of a few months? I know it's not the best time to make those changes, but maybe I should wait for the market to settle down.
what has held up well? Hi Puddnhead!
LandShark? I admire your taste in carbonated beverages :-)
Brilliant call? Not until I decide when to re-enter the market and "there is the rub". Is this a garden variety 10% to 12% correction, an unusually steep correction (20% or so) in an ongoing secular bull market (as in April thru October 2012) or are we in the 3rd or 4th innings of a full blown bear market that will drop the S&P 500 30% to 50% from its high of 2134 on June 2015?
All I know is what I have stated on a different thread - it was far too difficult to make too little money from June 1 to December 31st 2015 and I felt it was time to step to the sidelines for a bit. It still does not feel right.
Investors Snub Money Managers For Market Clones An argument for index funds is that active managers in part are going into cash That will be good for performance until the market turns around I don't have the data but suspect few large cap managers outperformed the S+P500 index between March 9 2009 and and may of that year..
Dow Set For Triple-Digit Drop As Oil Breaks Under $30
Tactical Asset Allocation The concept is doomed to failure because shifting large allocations is not very practical or cheap even if you are able to time it well. Any fund with over $200-$250 million in assets is going to find it difficult to move their allocation significantly within a time frame that allows it to exploit the strategy. But that number is also the number that fund managers will tell you is about the minimum to make the fund viable for them to spend their time. Most are aiming for the fat fees of a much larger fund.
So new funds come up, some do well, get bloated and do tactical allocation in the edges which does not even move the needle of an otherwise buy and hold fund. Some funds may get lucky being in an overweight position in a sector that shot up but they find it difficult to then take profits and be overweight somewhere else to repeat the performance.
Individual investors or investment groups with enough time and skills are in a better position to do this than in the structure of typical mutual funds.
At best they can position it for smaller returns in long term trend changes, but returns are much less attractive as one wrong bet can throw it off.
Tactical Asset Allocation In an ideal world investors should have their funds invested in Tactical Asset Allocation funds within their risk range. Wouldn't everyone like a fund that makes shifts between equity classes, and between equity, cash,bonds, commodities, currencies etc. and makes the right move at more than, say 65% of the time? Are there any funds out there that have a record of doing this? If there are I suspect they are few in number. I've seen David sight BBALX and others, MDLOX, and there are high hopes for the relatively recent offering from T Rowe Price. Wouldn't it be great to select say three choices and just re-balance every now and then.
Any other candidates?
