Author Topic: Should I catch up on bonds now?  (Read 1372 times)

rmisio

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Should I catch up on bonds now?
« on: June 11, 2022, 07:18:09 AM »
I started a new job about 1.5 years ago and I now realize my target asset allocation has gotten a little out of whack because I wasn't including bonds in my 401k for the new job, whereas bonds are 10% of my target asset allocation.

I was thinking of taking one of two approaches to rectify the situation:

1.) In the new 401k, adjust my contribution to the new allocation going forward so it matches my target allocation. This alone wouldn't get me to my target allocation, but it would stop it from deviating from it so much going forward.
2.) Rebalance so my allocation across all retirement accounts matches my target and do #1 so it stays that way.

But... not I'm wondering if this is the best thing. We are undeniably in a non-trivial pullback, so in theory the market is having a big sale. Given that and given that I'm not really planning to retire for 10+ years, wouldn't stocks be more attractive for me?

I understand there's some elements of timing the market in my thinking and I'm prepared to hear some pushback along those lines, but would love some perspectives on my thinking here :)

ixtap

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Re: Should I catch up on bonds now?
« Reply #1 on: June 11, 2022, 08:33:59 AM »
Now would be a good time to sit down and write an IPS. It looks like you have a target AA, but no plan for achieving it..

Your IPS should include both triggers for rebalancing and a plan for rebalancing. For example, we make all new contributions to stocks, then rebalance twice a year if there is >5% difference.

So, how far are you from your desired allocation? A third option would be to change your 401k contributions to whatever is under weighted whenever your reach a trigger.




wageslave23

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Re: Should I catch up on bonds now?
« Reply #2 on: June 11, 2022, 10:33:53 AM »
Stocks potentially have a long way still to go down from here so I wouldn't put too much stock in buying "on sale". I have no idea where the bond market is headed either (see my thread on the topic). So I'd say follow your heart (and your AA).

vand

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Re: Should I catch up on bonds now?
« Reply #3 on: June 12, 2022, 07:31:03 AM »
An Asset Allocation target that isn't adhered to is about as useful as a used teabag.

lutorm

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Re: Should I catch up on bonds now?
« Reply #4 on: June 12, 2022, 08:31:58 PM »
I am not buying bonds except rolling through 6-month T-bills right now. With interest rates going up it just doesn't seem sensible to lock in a long-duration bond and then watch its value drop since the new issues will yield even more. But the T-bills are my "bond tent" since we're <1yr away from FIRE so I primarily want to avoid the interest rate risk.

dividendman

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Re: Should I catch up on bonds now?
« Reply #5 on: June 13, 2022, 09:17:55 AM »
I am not buying bonds except rolling through 6-month T-bills right now. With interest rates going up it just doesn't seem sensible to lock in a long-duration bond and then watch its value drop since the new issues will yield even more. But the T-bills are my "bond tent" since we're <1yr away from FIRE so I primarily want to avoid the interest rate risk.

Do you buy those from treasurydirect.com?

baconschteam

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Re: Should I catch up on bonds now?
« Reply #6 on: June 13, 2022, 09:56:39 AM »
An Asset Allocation target that isn't adhered to is about as useful as a used teabag.

My grandma reuses her teabags several times.

lutorm

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Re: Should I catch up on bonds now?
« Reply #7 on: June 15, 2022, 12:45:52 AM »
I am not buying bonds except rolling through 6-month T-bills right now. With interest rates going up it just doesn't seem sensible to lock in a long-duration bond and then watch its value drop since the new issues will yield even more. But the T-bills are my "bond tent" since we're <1yr away from FIRE so I primarily want to avoid the interest rate risk.

Do you buy those from treasurydirect.com?
Fidelity.

 

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