Friday, July 4, 2014

Market is Up, Time to Rebalance

The Dow is at a record high and it is the middle of the year, two great reasons to look at your investment asset allocation.  The market run-up has probably pushed your stock allocations over the targets.  Re-allocating your investments will maintain diversification in your portfolio and also has the benefit of "taking some of your winnings off the table".

My current allocation is as follows:

Asset ClassAllocation %Target %Difference
Domestic Bonds33.538-4.5
Large Stocks20200
Small Cap Stocks9.763.7
International Stocks20.1200.1
International Bonds3.54-0.5
Cash12.3120.3
Other0.900.9
TOTAL100100

This is a conservative allocation based on my age and family status, your allocation may be different.

So I need to sell some small cap stocks and buy some bonds, the other allocations are pretty close to target.  This means selling some of my small cap index ETF and buying some bond index mutual funds.  I will try to buy the bond funds within my IRA's or as municipal bonds as this is more tax efficient.

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