Does your 401K not allow you to rebalance with your contiburtions? Mine I can do it with contributions or actually sell/buy things to rebelance. And I can rebalance differently than the mix I choose to invest in (I could invest 20% in equities but rebalance to 30% every year). Is this not common?
My 401k is basically all in SPX. I have other stuff in my non-401k accounts though.
I can elect to change my future contributions without rebalancing my current positions, which is what I do more often than rebalancing by buying/selling existing positions. There’s also an auto-rebalance feature you can set to monthly/quarterly/annually. That feature rebalances to your current contribution allocation by buying and selling. That’s why I don’t like auto-rebalancing.
I just rebalanced to 60% US Large Cap, 20% EAFE, and 20% short duration fixed income . I added the fixed income and took off my small cap exposure.
I’m 29 and would generally have 100% equity exposure, but think with QE tapering soon, the equity market might pull back. At the same time, even if rates rise, the short of the curve shouldn’t move too far until the funds rate is adjusted, which is at least another year out in my opinion.
I have mixed feelings about EAFE, EEM and non-US stuff in general. US is expected to raise rates faster than the rest of the world - Europe in particular, but now Japan is also an issue. Whis will push demand for US assets over non-US assets. Diversification is useful for sure, but I believe there is still a good case to be overweight US assets.
^Ohai - Assuming your outlook on US interest rate hikes is true, wouldn’t foreign assets then outperform? Rising rates generally aren’t good for multiples, think Fed model.
US dollar may be stronger, so there may be a currency hedge needed of course. I assume EAFE and EEM types of funds are available in US$-hedged flavours?
Rates increasing means more people converting into USD. Once that’s done, they buy USD assets.
Up almost 30% , BUFSX killed it this year.
Fixed income assets perhaps. Higher rates means lower earnings and higher discount rates too.
Not if higher rates are due to an expanding economy, which in turn increases earnings.
Fed is so far away from increasing rates anyway. At least 24 months.
Yellen is the worst thing that can happen to hawks.
I am getting tired of all the naysayers. Yes the market has run up a lot, but do you want to get ready to success or get ready for failure? What if we are just at the beginning of the next epansion? (Finally). Awful lot of construction in California these days.
We’ll know 20 years from now when we look back.
BTW, today is the 17th year anniversary of Greenspan’s famous “irrational exuberance” speech. For the record, asset prices continued ripping for another 3.5 years.