Getting to desired bond allocation: buy or sell our way there

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  • AGoodLifeMD AGoodLifeMD 
    Status: Physician
    Posts: 9
    Joined: 09/28/2017

    We currently have 88:12 ratio stocks to bonds.  I would like to be 80:20 at some point in the next 3-5 years.  We have a very large next egg compared to our annual investement purchases so I can’t get there in one year or maybe even 5 years (we were supersavers with a much larger paycheck when younger).  I buy 1-2 times per year when the money in savings gets large enough.

    My question is: Should I buy only bonds each purchase until the 20% bonds is reached OR should I continue stock and bond buying at something like 50:50 and just rebalance by selling stock next time the market rises OR do something different than these 2 choices?

    I think this will be an ongoing issue as my next egg grows with the market and my paycheck gets smaller as I work less.  Seems like I may have to get used to rebalancing every few years to keep risk in line with tolerance.



    #179107 Reply
    ENT Doc ENT Doc 
    Status: Physician
    Posts: 3165
    Joined: 01/14/2017

    Buy into it if at all possible.

    #179109 Reply
    Liked by Zaphod
    Avatar jacoavlu 
    Status: Physician, Small Business Owner
    Posts: 1998
    Joined: 03/01/2018

    Usually one would shift things around in a deferred account such as 401k or IRA to bring their portfolio in line with target. You could do that right now assuming you have deferred money and decent investment choices.

    The Finance Buff's solo 401k contribution spreadsheet:

    #179111 Reply
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    Hank Hank 
    Status: Attorney
    Posts: 1228
    Joined: 03/27/2017

    If you’re in the accumulation phase, buy to rebalance towards your desired asset allocation. If you’re living off your assets in retirement, sell to get back in balance.

    #179840 Reply
    Zaphod Zaphod 
    Status: Physician, Small Business Owner
    Posts: 5755
    Joined: 01/12/2016

    Best to try to keep buying if it looks like that will get you to the desired allocation by the time you no longer will be contributing. If it doesnt, I’d rebalance at that time after your last contribution to get there.

    #179843 Reply
    Avatar Bmac 
    Status: Physician
    Posts: 290
    Joined: 10/21/2017

    As alluded to above, I think a lot depends on whether you are able to rebalance within tax-deferred accounts or would need to generate significant taxable gains within taxable accounts. If the latter, then preferably move toward your goal with new purchases only (100% into fixed income until end desired asset allocation reached).

    #179846 Reply
    Avatar Tangler 
    Status: Physician
    Posts: 259
    Joined: 08/23/2018
    medical school scholarship sponsor

    Like others suggested, If in taxable accounts then reballance by buying bonds, if in an IRA then either buy or exchange to more bonds.
    Also, you mentioned saving in a bank account and then when buying when you have a certain amount.
    Why would you wait with $ in savings prior to buying? Would it not be better to invest as soon as you have the $ so as to max out time in the market to compound?

    #180632 Reply

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