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Old 12-14-2016, 09:28 PM
 
29,782 posts, read 34,880,403 times
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Quote:
Originally Posted by reneeh63 View Post
Rebalancing is not meant to increase growth but to decrease risk. Usually you're losing a bit of growth and lowering risk to a greater degree. If your plan is to just keep increasing the percentage of your portfolio that's in stocks then just never rebalance. That's not what most aim to do though so don't fool yourself.
Ummmmmm. When equities go up and bonds go down the ratio changes. If equities go up at a faster rate the ratio changes. If equities go down and bonds go up the ratio changes. Do you do a annual review? I am glad that as of now only bonds are having problems and not both. Do you differentiate the holdings in your before and after tax accounts to reflect the way various assets get taxed?

If you are considering a CCRC down the road and it is one with a buyin be aware of the tax hit if you are pulling a large chunk out of a tax sheltered account to pay for. Transitioning and managing for that requires time and tax implication consciousness

Last edited by TuborgP; 12-14-2016 at 09:55 PM..
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Old 12-14-2016, 10:08 PM
 
Location: RVA
2,172 posts, read 1,268,333 times
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I also have done some selling after this current run up. I do not rebalance. I'm about a third cash right now. Zero bonds, I got totally out in Sept. after a decent run, one of my luckier decisions. Since I am not retired yet, I am still investing for growth. There is certainly reason to appreciate an opportunity to make a profit on this but as you posted, you had to be lucky to be in a position ahead of time to make that profit in this short period and be willing to make the call to sell and lock in the gain. Pensions, etc, are based on long term growth, which this 30 day run is not, so far.
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Old 12-14-2016, 10:15 PM
 
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Quote:
Originally Posted by Perryinva View Post
I also have done some selling after this current run up. I do not rebalance. I'm about a third cash right now. Zero bonds, I got totally out in Sept. after a decent run, one of my luckier decisions. Since I am not retired yet, I am still investing for growth. There is certainly reason to appreciate an opportunity to make a profit on this but as you posted, you had to be lucky to be in a position ahead of time to make that profit in this short period and be willing to make the call to sell and lock in the gain. Pensions, etc, are based on long term growth, which this 30 day run is not, so far.
Consider your last sentence. Yes pensions are based on long term growth but the talking points about sustainability usually center on the most recent fiscal year ROI and funding level. Thus if this holds the heat won't be as great compared to a negative return year. We know their fixed income portfolio was already challenged by low interest rates and if coupled with low returns in equities and other investments ouch said the trust fund managers to the legislators when their annual report is released.

For some that report is based on a calendar year and I suspect those trustees are a tad more comfortable now.

Some states are revising their general fund revenue estimates downward because capital gain tax receipts are lower than projected. This if it holds won't hurt when folks sell to pay their taxes

Last edited by TuborgP; 12-14-2016 at 10:23 PM..
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Old 12-15-2016, 05:56 AM
 
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Quote:
Originally Posted by TuborgP View Post
Ummmmm you must be younger and not at a point where you are actually using your investments either taxable or non taxable. Even if you have a cash fund, once used you need to replenish etc etc etc. For us we are nearing the point where we need to replenish our cash fund for 2017-18 and that means a rotation of money to do that and rebalance allocations. Also we have RMD's starting in 2018. With the decline in bonds it might be to our advantage to liquidate equities for either cash and or to buy bonds on the cheap. We also have to position ourselves for my getting SS in 2018 etc etc. Do you ever sell? If so do you do it as needed or do you have a fund to access with minimum tax consequences and minimum loss risk?
I am older and started RMDs this year. The RMDs come out of all my funds based on the amounts of each individual fund.


I think we all feel insecure about the rapid increases due to the Trump effect. I just don't really see alternatives. I am not real comfortable with more bonds and do not know what you mean by buying on the cheap. Bond yields are very low. Interest rates are likely to increase meaning the value of existing bonds will decrease even more. I suppose cash is an option but you need to be very sure before taking that step. I am not comfortable trying to time the market at this point. I was ready to pull back before the election if it seemed that Trump was going to win. Luckily I got caught off guard because any pull out would have cost me huge amounts.


I have some added issues with changing asset allocations. My qualified accounts are in a management account with automatic rebalancing. I cannot control the individual investments and even changing the allocation is difficult. If I adjust my non-qualified accounts, I face tax consequences.
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Old 12-15-2016, 06:25 AM
 
29,782 posts, read 34,880,403 times
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Quote:
Originally Posted by jrkliny View Post
I am older and started RMDs this year. The RMDs come out of all my funds based on the amounts of each individual fund.


I think we all feel insecure about the rapid increases due to the Trump effect. I just don't really see alternatives. I am not real comfortable with more bonds and do not know what you mean by buying on the cheap. Bond yields are very low. Interest rates are likely to increase meaning the value of existing bonds will decrease even more. I suppose cash is an option but you need to be very sure before taking that step. I am not comfortable trying to time the market at this point. I was ready to pull back before the election if it seemed that Trump was going to win. Luckily I got caught off guard because any pull out would have cost me huge amounts.


I have some added issues with changing asset allocations. My qualified accounts are in a management account with automatic rebalancing. I cannot control the individual investments and even changing the allocation is difficult. If I adjust my non-qualified accounts, I face tax consequences.
Read your last paragraph, you have rebalancing you are just not doing it yourself. So you are not changing asset allocations but your managed account is buying and selling to maintain your allocation. Yes? Also we are fortunate to still be adding to our investments so a decline in bond prices as a result in interest rates rising isn't always a bad thing.

Our situation is such that reconsidering asset allocation is reasonable as we move forward and make some plans for down the road.

At any rate isn't positive more desirable than negative? We are going to have a pullback and a recession eventually. At some point a roaring bull market and as we all know they are inevitable. However the more profit we can realize prior to that will serve us well in about ten years. Again we each have our own set of variables.
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Old 12-15-2016, 06:42 AM
 
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Yes, my managed account is maintaining an allocation (of roughly 60% equities).


I fail to understand how increasing interest rates and devaluation of bonds is a good thing. Sure bonds are cheaper now than a few months ago but the downside potential is huge and ongoing. The only hope is to buy short/intermediate bonds or bond funds and hope rates go up slowly. At least that is my understanding.
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Old 12-15-2016, 07:21 AM
 
29,782 posts, read 34,880,403 times
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Quote:
Originally Posted by jrkliny View Post
Yes, my managed account is maintaining an allocation (of roughly 60% equities).


I fail to understand how increasing interest rates and devaluation of bonds is a good thing. Sure bonds are cheaper now than a few months ago but the downside potential is huge and ongoing. The only hope is to buy short/intermediate bonds or bond funds and hope rates go up slowly. At least that is my understanding.
Remember as rates go up and bonds in funds turnover the yield will increase. Eventually things will normalize and there will be a optimum time to buy bonds just as there is a optimum time to buy equities when they have declined. It isn't really market timing if you are adding new money and doing it in a reasonable way.

As far as currently owning a bond fund if not sold you are not realizing a loss and our still getting the interest which will as the fund buys new bonds increase. There will be a optimum time when yield has increased and prices stabilized. Guessing when that is may be just that a guess so folks have to decide for themselves.
https://www.thebalance.com/best-bond-funds-2466875
Quote:
The point here is that bond funds can lose money, which is to say that prices of bonds can fall, especially when interest rates are expected to rise.
But isn't this how diversification is supposed to work? One asset does extremely well and another asset performs below average. That's called a good balance, not a bad allocation! Also, if you are dollar-cost averaging into bond funds, you are buying shares as they fall in price. So when the prices begin to rise again, your "average" share price is lower and thus you benefit more when they bounce back.
Do you really believe bonds are going to be forever toxic? Somebody is buying bond funds today! Sure buying shorter term bonds is better. Buying 20-30 duration could be toxic and I never mentioned bond duration.

Bonds are still a ballast in the portfolio and yield is still yield. Is the yield from your bond fund falling or slowly rising? The issue for you may be RMD's and how to draw them from your funds if not sufficient cash to do it with. I don't know that is your deal and how you have things set up. At least now with equities spiking up you have the option to sell a couple of years of RMD's worth in cash and kick back and chill. Knowing you have a couple of years worth to work with. Do you spend or reinvest RMD's?

https://www.thebalance.com/best-bond-funds-2466875
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Old 12-15-2016, 12:38 PM
 
Location: RVA
2,172 posts, read 1,268,333 times
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Well, there certainly is no doubt that the Trump effect (irrational exuberance) will solidfy fair numbers in to great numbers for calendar year 2016. That is a positive.
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Old 12-17-2016, 05:11 AM
 
71,680 posts, read 71,801,099 times
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whether the increasing interest payments in a bond fund ever make you whole again depends on how long rates continue to rise .

if it is another 3 decades back up like it took going down then you will be behind the curve forever and you never reach a point of equilibrium .

unless you are holding only treasury bonds credit upgrades and down grades effect your time to getting whole again as well .

all in all rising rates are not good for existing bond or bond fund owners as continual rising rates go hand in hand with rising inflation .

you will always be behind the curve when that happens . you only recoup when rates stabilize and trend down again . .
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Old 12-17-2016, 10:09 AM
 
Location: Central IL
15,251 posts, read 8,543,297 times
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Quote:
Originally Posted by TuborgP View Post
Ummmmmm. When equities go up and bonds go down the ratio changes. If equities go up at a faster rate the ratio changes. If equities go down and bonds go up the ratio changes. Do you do a annual review? I am glad that as of now only bonds are having problems and not both. Do you differentiate the holdings in your before and after tax accounts to reflect the way various assets get taxed?

If you are considering a CCRC down the road and it is one with a buyin be aware of the tax hit if you are pulling a large chunk out of a tax sheltered account to pay for. Transitioning and managing for that requires time and tax implication consciousness
I only in the last couple years went from what was essentially 100% equities in my retirement investments. So now that I'm at about 75% equities I just realize that to stay there I need to keep any eye on it...I'm not yet retired so taxes aren't an issue but I need to learn up on all that so I'm ready when it does.
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