After a pretty good year on just about any stock market index, you might be wondering whether you’ve got the right mix.
First, time for the disclaimer – we’re not investment professionals over here. So you’ll have to take this piece of advice with a grain of salt – or, as we sometimes say, a “salt lick.” However, you might be wondering whether you have the right asset allocation. In other words, is it time to rebalance your portfolio?
The above is one of our retirement accounts – the one we told you about in that post on adding 10K to your retirement portfolio. It’s one piece of a larger puzzle – and we invite you to make sure that you’re looking at all the pieces to YOUR puzzle.
In the case of this particular puzzle piece, let’s focus on the three different asset classes:
- Large Cap
- Small Cap
When I set this plan up at the beginning of the year, I chose three mutual funds. I didn’t want to overdo it, and I also wanted to be in the stock market (as opposed to playing with bonds or some exotic investments). There was a method to my madness: my wife’s account, with TIAA-CREF, is one that has a “Target Date” approach.
The assumption with any Target Date fund is that they’re less conservative early, then more conservative as you get closer to retirement. With 20 years (or more) before a realistic retirement date, this is a good place (IMHO) to park some of our retirement.
That being said, the above portfolio is more aggressive. Why?
Like everyone else, it seems, we’re making up for lost time here. Who didn’t take their lumps in the Great Recession?
You Can’t Time the Market
We want to stress something we learned a long time ago: You can’t time the market. Or you can try, and go crazy in the process.
We originally set out a 40/30/30 ratio – 40% of all our investments would be in one Large Cap fund, one from Invesco. 30% in the International/Global fund, in this case the Templeton Growth Fund. 30 % in the Small Cap fund, called the Hartford Small Cap Growth Fund.
We didn’t change the ratio for the entire 7 months we were in this program, which tells us this…
None of the three has outpaced the others by too much. The total percentages are still, roughly, the same.
How Does It All Fit?
In the weeks to come, we plan on opening the curtain a little more…but we can tell you this much: it’s not time to rebalance.
This particular account is also one that we’ll pay attention to, but won’t obsess over just yet. If the macro signs start telling us that the pullback is near, we might consider some changes. but it would have to be a global pullback – since we have International stocks at work here – and one that affects the entire market, not just big stocks.
Where we’ll hedge is in other stuff – those things we’ve mentioned before, like precious metals, other currencies, and side hustles to build some more liquid assets.
But, for now…we’re gonna hang tight with this account.