Author Topic: Diversification  (Read 2411 times)

Brilliantine

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Diversification
« on: July 07, 2015, 04:12:44 PM »
Hi,

Through a series of not-so-smart decisions, I ended up with 95% VIIIX and 5% BlackRock U.S. Debt Index Fund in my 401k from a previous employer. I have been contributing to this 401k for about 7 years now but I always have been quite aggressive with my investment elections and I dipped into the savings in the form of a loan for a first time home purchase. Since I am no longer with this employer, my only contribution to this plan is in the form of loan repayments.

My question is: if I wanted to exchange a bit towards a less risky distribution, say for instance 70/30 stock/bond, would it be an OK move to do that exchange right now? Would I not be "realizing" some losses that the market suffered? Should I just split my future investments (the loan payments) in a more conservative scheme, and leave the existing portfolio as is?

Thanks!




 

Wolf359

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Re: Diversification
« Reply #1 on: July 13, 2015, 10:38:32 PM »
The answer is "it depends."  Yes, selling your equities while the market is down locks in your losses. 

Can you sleep at night with this riskier allocation?  Can you wait it out until the market recovers?  If so, then wait.  Making the change gradually using additional funds is the better way to go.  When the market recovers, then you can complete the rebalancing to the new allocation.

I'm assuming that you have other retirement savings as well, in your new job.  If so, consider all your assets combined as a single portfolio, then add the bonds where you have more flexibility.  Again, it's a bad idea to sell equities while the market is down, but your overall portfolio may already be in your desired allocation (or close to it.)  If so, don't worry about it, and take care of it over time.

Brilliantine

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Re: Diversification
« Reply #2 on: July 14, 2015, 02:58:15 PM »
Many thanks for the response. Makes me feel much better about the situation. Yes, I have (a very small but rapidly growing) balance in the new 401k and to my surprise (I don't remember setting it up like this) my contributions go in at a much more conservative 60/40 stock/bond mix. Looking at the entire portfolio as a whole was the paradigm shift I needed in order to relax. Thanks again!

forummm

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Re: Diversification
« Reply #3 on: July 14, 2015, 03:04:20 PM »
"Realizing losses"??? The S&P 500 is within a percent of its all time high. If you're certain you want to have a higher bond allocation in your portfolio, now is the perfect time to do that.

Retire-Canada

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Re: Diversification
« Reply #4 on: July 14, 2015, 03:50:04 PM »
"Realizing losses"??? The S&P 500 is within a percent of its all time high. If you're certain you want to have a higher bond allocation in your portfolio, now is the perfect time to do that.



Yup. ^^^ this is 5yr look at VIIIX.