Author Topic: Portfolio Adjustment - When to Pull the Trigger?  (Read 1783 times)

Maximus28

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Portfolio Adjustment - When to Pull the Trigger?
« on: September 20, 2022, 06:55:21 PM »
Alright, I committed some investing mistakes in my pre-MMM/FIRE days. I am looking for suggestions and advice on how to transition my portfolio.

Current Portfolio: 401Ks: 50% S&P 500 (FXAIX), 25% Small Cap Value (FCPVX), 25% Mid-cap (FSMAX)
                          Roth IRAs: 92% Medical Sector (FSMEX), 8% S&P 500 (FXAIX)
                          HSAs: 88% Technology Sector (FOCPX), 12% S&P 500 (FXAIX)
 
Desired Portfolio: 50% S&P 500 (FXAIX) and 50% Small Cap Value (AVUV) across the board in all accounts.

Note: All new contributions into the Roths and HSAs are 100% FXAIX, 401K is still 50/25/25.

The sector funds have pretty much matched the S&P 500 returns since we've been invested within 0.5% returns since 2017 (ROTH) and 2018 (HSA), excluding activity in September 2022. However, the sector funds are down much more than S&P 500 YTD. The sector funds are down 27.5% YTD vs -16% YTD for S&P 500 (excluding September).

Do I rip the band-aid off now and re-allocate or should I wait until the sector funds recover before transitioning to 50/50 S&P/SCV? Ideally I would like to see the YTD returns of the sector funds closer to the S&P before making the move. Technically, these funds have pretty much matched S&P returns since the accounts were invested, so moving now still isn't a bad scenario.

I am approximately 7 years from FIRE, so I will remain 100% stocks until 3 to 5 years from FIRE.
« Last Edit: September 20, 2022, 06:57:01 PM by Maximus28 »

MDM

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Re: Portfolio Adjustment - When to Pull the Trigger?
« Reply #1 on: September 21, 2022, 02:41:58 AM »
Because there is no tax cost to buy and sell within those accounts (assuming you aren't in a state that disregards HSAs), you might as well move everything now to the way you want it.

Whatever you choose, it's likely that you will be able to look back some time from now and find some fund that performed better.  Such is life....

Maximus28

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Re: Portfolio Adjustment - When to Pull the Trigger?
« Reply #2 on: September 22, 2022, 10:25:01 AM »
Because there is no tax cost to buy and sell within those accounts (assuming you aren't in a state that disregards HSAs), you might as well move everything now to the way you want it.

Whatever you choose, it's likely that you will be able to look back some time from now and find some fund that performed better.  Such is life....

Yes and the ease at which we can back test portfolios is both amazing and dangerous. I do not want to get into a stint of chasing returns. Whenever I make the change, the portfolio will remain unchanged until the time to start transitioning to a drawdown portfolio.

Freedomin5

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Re: Portfolio Adjustment - When to Pull the Trigger?
« Reply #3 on: September 22, 2022, 04:10:10 PM »
So stop timing the market and just transition now to the asset allocation you want? Because no one knows when or if sector funds will become closer to the S&P.

Maximus28

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Re: Portfolio Adjustment - When to Pull the Trigger?
« Reply #4 on: September 26, 2022, 11:04:58 AM »
Follow up question: Our 401Ks are at Fidelity. Fidelity does not allow automatic investing into ETFs, so AVUV will not work with auto investing features. Knowing that, would you try to manually buy AVUV every 2 weeks in multiple accounts or pick a small cap value mutual fund (such as FISVX) and let automation do the work?

MustacheAndaHalf

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Re: Portfolio Adjustment - When to Pull the Trigger?
« Reply #5 on: September 26, 2022, 07:03:04 PM »
Follow up question: Our 401Ks are at Fidelity. Fidelity does not allow automatic investing into ETFs, so AVUV will not work with auto investing features. Knowing that, would you try to manually buy AVUV every 2 weeks in multiple accounts or pick a small cap value mutual fund (such as FISVX) and let automation do the work?
Those choices are fairly close.  AVUV has more value stocks (58% vs 48%), while FISVX tilts more to small cap (99% vs 95%).  Given your goal of automatic investing, I'd favor FISVX (which also has a 0.05% expense ratio).
https://www.morningstar.com/funds/xnas/fisvx/portfolio
https://www.morningstar.com/etfs/arcx/avuv/portfolio

Maximus28

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Re: Portfolio Adjustment - When to Pull the Trigger?
« Reply #6 on: September 28, 2022, 01:40:32 PM »
Follow up question: Our 401Ks are at Fidelity. Fidelity does not allow automatic investing into ETFs, so AVUV will not work with auto investing features. Knowing that, would you try to manually buy AVUV every 2 weeks in multiple accounts or pick a small cap value mutual fund (such as FISVX) and let automation do the work?
Those choices are fairly close.  AVUV has more value stocks (58% vs 48%), while FISVX tilts more to small cap (99% vs 95%).  Given your goal of automatic investing, I'd favor FISVX (which also has a 0.05% expense ratio).
https://www.morningstar.com/funds/xnas/fisvx/portfolio
https://www.morningstar.com/etfs/arcx/avuv/portfolio

Good points, thank you for the advice!