I have found the hardest thing to do is to rebalance your portfolio to a
more conserative stand. I have retired and have been advised to rebalance my
portfolio to 60-40 stocks and bonds. It is very hard to change my stock
funds making 10-15% per year for a bond fund making 3-7% .
I know it is a matter of safety, but it is still very much agaainst my
nature to make less on purpose.
Do it a step at a time. If you have a stock fund that you are not very
happy with, get rid of it for bonds. Then sell down gradually, a few
percent at a time. Will it be easier to sell when your portfolio has
dropped 20%?
Another thing to think about is that you may not be so adverse to risk
that you need to go to 60-40. I have retired, and decided to go to a
75-25 portfolio. For the amount of income I want from my retirement
funds, that asset allocation gave me the best probability of portfolio
survival. I am comfortable with it, and 25% in bonds and cash is enough
that I won't have to sell equities for several years when a market
downturn occurs. Just remember that 60-40 is not right for everyone.
Dave
Trying looking at the return you need to so that you don't run out of money
during retirement.
Take a look at some of the high quality principal protected products, short
term surrender variable annuities. John Hancock, US Allianz for 2 have 3
year surrender with principal protection to protect on the downside.
There are also Structured Products, sold on the American Exchange,
www.amex.com principal is protected without the death benefit.
Floating rate notes are another option.
Good luck
"W. Wells" <> wrote in message
news:v3lHf.11644$
>I have found the hardest thing to do is to rebalance your portfolio to a
>more conserative stand. I have retired and have been advised to rebalance
>my portfolio to 60-40 stocks and bonds. It is very hard to change my stock
>funds making 10-15% per year for a bond fund making 3-7% .
>
> I know it is a matter of safety, but it is still very much agaainst my
> nature to make less on purpose.
How big is your portfolio compared to what you need to
support yourself? For instance, if your basic needs are
paid for by a half of your holdings, you can invest that
much in a stable mix, and be more aggressive with the
rest.
If all your stock funds were to suddenly and permanently
drop by 20% tomorrow, how would it affect you? This market
has been doing well since march '03. How were you invested
in 2000, and how did that feel? If you're OK financially and
psychologically with riding out the downs, you can stay
more invested...
W. Wells wrote:
> I have found the hardest thing to do is to rebalance your portfolio to a
> more conserative stand. I have retired and have been advised to rebalance my
> portfolio to 60-40 stocks and bonds. It is very hard to change my stock
> funds making 10-15% per year for a bond fund making 3-7% .
The whole point of having a conservative portfolio in retirement is so
that you do not end up eating catfood if the stock market takes a dive.
If you have enough saved up so that you would survive financially even
if the stock market takes a dive then there is no pressing need to
rebalance. If, however, you would be in a real tight spot of the stock
market lost 15% of its value and stayed down for 10 years, then to
motivate yourself to rebalance just imagine having to move to a studio
apartment in the worst part of town.
Andy
On 2006-02-13 09:00:44 -0500, "Andy"
<> said:
> W. Wells wrote:
>> I have found the hardest thing to do is to rebalance your portfolio to a
>> more conserative stand. I have retired and have been advised to rebalance my
>> portfolio to 60-40 stocks and bonds. It is very hard to change my stock
>> funds making 10-15% per year for a bond fund making 3-7% .
>
> The whole point of having a conservative portfolio in retirement is so
> that you do not end up eating catfood if the stock market takes a dive.
> If you have enough saved up so that you would survive financially even
> if the stock market takes a dive then there is no pressing need to
> rebalance.
Further, I read an article recently (I forget where) which referenced
some recent study which suggested that folks, while they ought to
reblance, ought to do so *less* rather than more frequently. Most
folks suggest rebalancing annually or more frequently, say, quarterly.
But the article made a case for spreading it out a bit more, perhaps
every two or three years. I wish I had a reference for it (perhaps it
was the "Getting Going" column in the WSJ?)
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"Andy" <> wrote in message
news:
> W. Wells wrote:
> > I have found the hardest thing to do is to rebalance your portfolio to a
> > more conserative stand. I have retired and have been advised to
rebalance my
> > portfolio to 60-40 stocks and bonds. It is very hard to change my stock
> > funds making 10-15% per year for a bond fund making 3-7% .
On a 60/40 mix, you still ought to be able to do 11, with a standard
deviation of 7ish. One of the sweet secrets of diversification is that
returns drop gradually when you move to conservative, but risk drops like a
rock (this has to do with a statistical matter called correlation.) So, 66%
of the years you'll yield between 4% and 18%, and 95% of the time you'll
yield between -3% and 25%. Bottom line is that if you can live on the 11%,
and reinvest in the good years, you won't have to burn an inordiinate amount
of capital during the bad ones. Check your budget vs. the portfolio yield on
the 11%, and if you can live on that, and stay on budget during the good
years, everything will work out. (You've probably heard you can't take it
with you.)
>
> The whole point of having a conservative portfolio in retirement is so
> that you do not end up eating catfood if the stock market takes a dive.
> If you have enough saved up so that you would survive financially even
> if the stock market takes a dive then there is no pressing need to
> rebalance. If, however, you would be in a real tight spot of the stock
> market lost 15% of its value and stayed down for 10 years, then to
> motivate yourself to rebalance just imagine having to move to a studio
> apartment in the worst part of town.
Yep.
Mike
"On a 60/40 mix, you still ought to be able to do 11, with a standard
deviation of 7ish."
You really think 60-40 will return 11% annually? Can you point to a
source which leads you to believe this?
11% return to me is 100% stocks
6% return is 60-40
8% return is 80-20
these are more SWAGs than anything, based on overall stock market
return being about 10%. More bonds=lower returns and less volatility,
and more income as well.
In article <v3lHf.11644$>,
"W. Wells" <> wrote:
> I have found the hardest thing to do is to rebalance your portfolio to a
> more conserative stand. I have retired and have been advised to rebalance my
> portfolio to 60-40 stocks and bonds. It is very hard to change my stock
> funds making 10-15% per year for a bond fund making 3-7% .
>
> I know it is a matter of safety, but it is still very much agaainst my
> nature to make less on purpose.
Depends on why you are rebalancing, are you dependent on income from
your portfolio (typical reason)? do you want to leave as much as you
can to heirs? do you collect a pension and/or SS? can you live
comfortably on just the pension and/or SS? If you don't need to rely
on your portfolio for living expenses going 60% stocks is too
conservative. Capitalize your pension/SS and add that to your portfolio
as a 'bond', depending on your portfolio size and the amount of your
pension/SS income it could have a profound impact on your stock/bond
allocation....it does for me.
--
Had It
I'm a hypocrite, I'm intolerant of intolerance.