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Started By
Message
401k spin-off
Posted on 4/4/19 at 7:20 pm
Posted on 4/4/19 at 7:20 pm
First off I have learned a ton of this board been a lurker for years but didn’t sign up till this year.
All the discussion of 401k and market pull back has made me conduct a checkup on my portfolio, pretty much have just been putting in 10% and getting my company match of 8% in company stock and letting it ride.
Portfolio is at an all time high currently hold about 22% company stock, and the rest in mid cap or large cap mutual funds (van primcap, Windsor2, van midcap index)
I have never liked the fact that the target funds were in bonds at an early age but I’m 43 now and starting to think maybe I should rebalance some. Thoughts on moving all the funds that are not company stock to a balanced fund 2035 which is 22% bonds. Then changing my current paycheck allocation to VTSAX.
I enjoy working and do not intend of retiring early and more than likely will work part time after retirement so can handle market swings later in the game.
All the discussion of 401k and market pull back has made me conduct a checkup on my portfolio, pretty much have just been putting in 10% and getting my company match of 8% in company stock and letting it ride.
Portfolio is at an all time high currently hold about 22% company stock, and the rest in mid cap or large cap mutual funds (van primcap, Windsor2, van midcap index)
I have never liked the fact that the target funds were in bonds at an early age but I’m 43 now and starting to think maybe I should rebalance some. Thoughts on moving all the funds that are not company stock to a balanced fund 2035 which is 22% bonds. Then changing my current paycheck allocation to VTSAX.
I enjoy working and do not intend of retiring early and more than likely will work part time after retirement so can handle market swings later in the game.
4
Posted on 4/4/19 at 7:58 pm to Ol boy
I'd be cautious about moving into bonds at this time. Bond funds drop as interest rates rise.
Posted on 4/4/19 at 10:40 pm to Ol boy
Nothing wrong with bonds. I've found any drop in price to be essentially made up with yield payments. I'd be more concerned with having a single company stock. My parents have three major company stocks and I advised them to put the rest in bonds because of all of that non-diversified risk. Enron is the extreme example, but why take all of that risk unnecessarily? As an aside, realize that 'managed funds' cost a hell of a lot more and even though the percentage may seem small it can cost you hundreds of thousands of dollars over the life of the fund. You can achieve the same thing by just investing in market index and a bond index -- plus keep your money out of the hands of target fund managers.
Posted on 4/5/19 at 12:04 am to RoyalWe
On the company stock I had sold off almost half my holding in it last year at what was a almost a lifetime high, but the stock is a very high yield divend payer nevertheless I will unload some more at the next peak.
As for the bond funds that’s kind of my thought process that I get out of stocks somewhat now an get into that 25% range of bond index as is recommended. If there is a market dip go back all in on stocks as well as my contributions that would have never been changed.
As for the bond funds that’s kind of my thought process that I get out of stocks somewhat now an get into that 25% range of bond index as is recommended. If there is a market dip go back all in on stocks as well as my contributions that would have never been changed.
Posted on 4/5/19 at 6:20 am to Ol boy
Bonds are going to go down with rising interest rates. I do not think this is a good time to switch to bonds, you are basically buying at the peak.
Posted on 4/5/19 at 6:56 am to Chris4x4gill2
Thanks for the heads up,, was thinking the yeild would be enough to offset any loss of share price drop?!? Will do some more research. Prolly best to just stay all in stocks as I have been.
Posted on 4/5/19 at 5:11 pm to Ol boy
At age 43 I would not and did not at you age buy bonds or rebalance my portfolio. At your age you should take more risks for high returns as you have time to ride out fluctuations in the market. I went through 1988, 2001, and 2008 dips in the markets and they all came back within 6 months. I retired at 63 and rebalanced my portfolio a year before I retired.
Posted on 4/5/19 at 8:55 pm to GarlandTiger
Appreciate the insight,,think I’m gonna just ride it out.
Posted on 4/5/19 at 11:30 pm to Chris4x4gill2
The Fed has already halted raises for now. So no guarantee rates will go higher or not. 30 year mortgage rates have dropped .5% since last summer. BND (vanguard total bond fund) is up 2.6% ytd and up 4.5% for the past 1 year...
If you buy individual bonds, you can't lose money if interest rates change unless you sell it before it matures. You can even make money if current rates are lower. Though you have to worry about default risk, but if it's treasury/govt bonds that's very very unlikely.
With bond funds, if rates rise the price drops and so you lose money (not shares). However, you're getting a higher interest payment. If you hold, it will get back to even at some point. If worried about interest rates rising, you can buy short term bond funds which aren't as sensitive to interest rate changes.
To the OP, you need to decide if bonds should be part of your portfolio or not. You're better off coming up with a long term plan and sticking to it and not drastically change your strategy whenever. Even if that's 100% stocks.
Would you be ok if the market dropped 50% this year? Or would you panic and sell most of it; alot of people did that in 2008 and didn't get back in till after the recovery; some still haven't. This stopped alot of people from being able to retire for many years as originally planned.
I was probably 95% stocks before 2008 and was very tempted to sell when it crashed. Luckily I didn't; I am 25% bonds now and will go to 35% in the next few years as my portfolio grows.
I should be on track to hit my number before 60 and shouldn't need the gain (and risk) of 100% stocks. For someone who is behind in their saving may need to be that aggressive to reach their goal.
If you buy individual bonds, you can't lose money if interest rates change unless you sell it before it matures. You can even make money if current rates are lower. Though you have to worry about default risk, but if it's treasury/govt bonds that's very very unlikely.
With bond funds, if rates rise the price drops and so you lose money (not shares). However, you're getting a higher interest payment. If you hold, it will get back to even at some point. If worried about interest rates rising, you can buy short term bond funds which aren't as sensitive to interest rate changes.
To the OP, you need to decide if bonds should be part of your portfolio or not. You're better off coming up with a long term plan and sticking to it and not drastically change your strategy whenever. Even if that's 100% stocks.
Would you be ok if the market dropped 50% this year? Or would you panic and sell most of it; alot of people did that in 2008 and didn't get back in till after the recovery; some still haven't. This stopped alot of people from being able to retire for many years as originally planned.
I was probably 95% stocks before 2008 and was very tempted to sell when it crashed. Luckily I didn't; I am 25% bonds now and will go to 35% in the next few years as my portfolio grows.
I should be on track to hit my number before 60 and shouldn't need the gain (and risk) of 100% stocks. For someone who is behind in their saving may need to be that aggressive to reach their goal.
This post was edited on 4/5/19 at 11:32 pm
Posted on 4/6/19 at 1:13 am to gpburdell
quote:that
However, you're getting a higher interest payment. If you hold, it will get back to even at some point. If worried about interest rates rising, you can buy short term bond funds which aren't as sensitive to interest rate changes.
Was my understanding of how it would work. My thoughts were to maybe rebalance now while it was at a peak to get myself in that 80-20 spot that most people advise while taking advantage of the market.
As for the panic I have been in the market since 2000 and took some serious hits never panicked or pulled out, but never had as much to lose LOL.
As of now my portfolio is still on track and if I punch in a calculator it spits out about the same number it did back in 2000!! Retirement is still 17yrs out so I think I’m gonna just hold fast to the market.
Posted on 4/6/19 at 10:05 am to Ol boy
quote:
but never had as much to lose LOL.
Exactly. Swallowing a 30k loss in your 20s is alot different than losing 300k in your 40s and it just gets harder the closer you get to retirement.
Also, I have a double whammy that I manage my parents portfolio too which has made me appreciate risk alot more as they are retired. I keep their portfolio at 50% stocks which lets us sleep easier at night.
This post was edited on 4/6/19 at 10:20 am
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