Author Topic: Should I "rebalance" my IRA now?  (Read 956 times)

patch45

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Should I "rebalance" my IRA now?
« on: August 06, 2017, 06:43:56 PM »
I'm 24, working as a software developer, and I started my IRA in 2015. For 2015 & 2016 I contributed the max to VGHCX, Vanguard Healthcare Fund after I let my dad convince me that was a better idea than just a regular index fund. Relevant info:

  • 0.37% expense ratio
  • $11k of shares purchased
  • $1.1k returns for a current total of $12.1k
  • 7.2% rate of return according to Vanguard personal performance page

I am also in the process of maxing out, through automatic weekly withdrawals, VFINX the S&P500 index fund. Relevant info:

  • 0.14% expense ratio
  • $4.2k of shares purchased
  • $200 returns for a current total of $4.4k

I realized after more research that I'd really rather not try to pick even sectors of the economy in my investing, so I want out of the healthcare fund, especially due to the much higher expense ratio. To a lesser extent, I'm thinking I should invest in the total market fund VTSAX as opposed to just the S&P500 fund.

My question is this: with both of my funds currently up by over 7%, would now be a good time to sell them and pick up all VTSAX shares, with maybe a small amount of the bond market fund? I'm not trying to "time the market", more wondering if there's anything I'm missing here since I'm new to the game.

Thanks!

Frankies Girl

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Re: Should I "rebalance" my IRA now?
« Reply #1 on: August 06, 2017, 06:56:21 PM »
What does your investment policy statement and asset allocation look like?

If you don't have either one of those figured out, then do so now, and then get your IRA in line to match up, and then follow your IPS going forward on when to rebalance.

My IPA says I rebalance if my AA gets more than 5% out of range in any given year, and I have my investments and AA figured out as well
I frequently have no idea what I'm talking about. Like now.

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Re: Should I "rebalance" my IRA now?
« Reply #2 on: August 06, 2017, 08:27:31 PM »
VFINIX and VTSAX are both good.  One is just the S&P 500, and the other includes small and mid caps. 

I would definitely sell the health care fund and just put the money towards indexing.  You're dad is probably a great guy, but in this area my guess is he doesn't know what he is doing. 

patch45

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Re: Should I "rebalance" my IRA now?
« Reply #3 on: August 06, 2017, 09:36:54 PM »
FG- interesting reads there, I had a general idea in my head for what I want now (age-5) in Vanguard Total Bond Market and the rest in Vanguard Total Stock Market (and the closest I can get to equivalent for what my company's 401k plan offers), but I really see the value in having a set plan to look to for guidance in tougher times.

LAS- He's generally very financially savvy, but I agree that in this instance he didn't give the best guidance. Seeing his past performance in that holding in addition to a couple arguments he made about the invariable need for healthcare was enough to convince me at the time. But now I'm seeing the wisdom in not even playing that game