https://invest.usgoldbureau.com/news/rebalancing-your-portfolio/Rebalancing Your Portfolio
As mid-February creeps near and the first quarter of the year officially reaches its halfway point, we’re feeling the urge to step back and take stock of how our 2020 goals are shaping up. While Americans love a good New Years’ resolution, it’s no secret that for most people, many of those well-intended aspirations that were so motivating in January tend to fall to the wayside come February.
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Sounds like a kid watching for Santa Clause before Thanksgiving’s arrived. Whatever floats your boat I suppose.
“So what’s a person to do? How do you make sure you’re maximizing those hard-earned dollars and setting your investments up for success year after year? The answer can be summed up in one word: Rebalancing.”
The last line there is designed to save reader some time.
I like this tidbit at the bitter end: "Ready to take the next step? Our team of Precious Metals Experts is standing by to assist. Give us a call today at 800-775-3504."
Dang, the words of a tv infomercial; or QVC or HSN. Buy now, cause we're go'in to run out of a product you know you need.
'Course, when the site is named, U.S. Gold Bureau; it does take much to assume what the "re-balance pitch will be, eh?
Our household, starting with the colder period of our winter season has a seasonal, dietary re-balance from the dairy aisle; from pre-Thanksgiving until mid-January. We re-balance with egg-nog while the seasonal supply is available. Kinda like eating the heck out of fresh sweet corn during the summer months.
Well, anyway. We're all wasting too much time and too many electrons with this.
Finding and linking a useful investment oriented informational site is more than a: seek and ye may find task, eh?
While the guy is nearly half way through the month of February, which he feels will than put him half way through the first quarter, I’ll note that he’s cheating a bit. February is the shortest month..
I used to rebalance more often than nowadays. It can be self-defeating when overdone. There’s a bit of truth in the old adage: “Let your winners run ...”
Yeah, with the 2020 runup in DSEEX I went and looked at total egg proportions and thought about dialing it back from 64% toward 60%.
But since I have ~5y' worth of bondy things, I then thought 'Why? Why not leave alone, what does it matter?'
So I am letting that winner run.
Bought some FAMEX at market height today, which will be a challenge to watch ....
Maintaing my asset allocation.
Over periods of more than a year, stock and asset prices tend to mean revert. An asset class with an above-average past return will tend to deliver a below-average future return and vice versa. In tax-sheltered accounts, letting the losses and gains run for two to three years before rebalancing seems to be the optimal strategy.
Rebalance your portfolio approximately once every few years. In taxable portfolios, do so even less frequently. Rebalancing your portfolio more than once per year is probably too often.
Rebalancing is not too hard. Don't be afraid of capital gains taxes, they are at historic lows if you have little or no earned income.
I am wary of bond funds. As I shave off my stock index fund gains little by little, I've actually been buying individual bonds of 1 to 2 year duration until recently. The offerings really dried up in January, though, and even money markets are paying more than 1-2 year near-junk-grade stuff. Once rates hit zero (and I think they will) what will happen to valuations? I dunno.
My calculations say I can live for a few years off my for-now 3% bond ladder yield so I am buying my time. 15% cash as well, shooting for higher.
Don't forget that I-series savings bonds pay over 2% if you are willing to hold them a long time.
1) 4.35%
2) 2.82%
3) 3.36%
I remember the '80s, where it was easy to find a CD (FDIC-guarantee!) yielding 14%. But I had no money, then. (sigh.) The last DECENT bond rate I took was an individual foreign gov't bond bought in 2003, a 10-year "Zero." Over 5.6%. I'd kill for that, now.
That zero "yielded" zero (duh). It paid no interest. That 5.6% figure was the rate of return you got on the bond, including interest payments (none) and "appreciation". That is, total return.
(BTW, that "appreciation" would be taxed as ordinary income under today's tax laws.)
Now suppose you bought a 10 year bond for $1090 (par $1K) with a coupon of 3%. Your current yield would be 2.75% ($30/$1090). But your yield to maturity would be only 2%, because you'd get back just $1K at maturity.
http://www.moneychimp.com/calculator/bond_yield_calculator.htm
A way to think about it (and the way the IRS thinks about it), is that part of that $30 in annual "interest" is return of principal. Effectively, this "current yield" is eating away at your investment.
This is why I prefer to look at SEC yield. This is also why in your post it helps to compare the SEC yield of the bond funds with the yield to maturity of the zero bond. Were the bond fund yields you gave current (or trailing) yields, or were they SEC yields?