Rebalancing today

[dmc]

Well in order to stay lucky, it looks like it’s time to rebalance the portfolio a bit. Im selling some stocks today, actually mutual funds is all I have now. I see even the money market is now paying 2.4% so I’ll let the cash sit there. This will be done in the IRA as to keep from having to worry about taxes at this time.

Since I’ve been retired now for quite a while I’ve reduced my stock holdings quite a bit. I still keep a small amount of my net worth there for some inflation protection. I of coarse like it when the market goes up, a big downturn would not really effect me much. I wouldn’t like it because there is still some real money there, but it wouldn’t cause a lifestyle change.

[LDAHL]

That’s a sensible philosophy. First priority is to secure a reasonable level of low risk, dependable income. Second priority is to maintain a reserve for large but infrequent purchases and emergencies. Third priority is a more growth-oriented portfolio as an inflation hedge, potential legacy or resource for major self-indulgence.

I try to maintain a 60/40 equity/debt ratio, rebalancing annually. I have found that the less thought I give my investments the better I do. The people you hear about that lost everything in this or that downturn are the ones who didn’t understand the risks they were taking or panic-sold at the worst possible time.

[dmc]

Looks like I might need to rebalance again. It’s sure been a good year so far.

[Yppej]

How much do you folks keep aside for large purchases? I am saving up for a car, but think I should have other reserves beyond that.

[dmc]

I’m retired, so I have quite a bit put aside. Last year I bought a new car for myself, the year before that I bought one for the wife. Hopefully we are done with new cars for a few years, but there is always something popping up. The wife is remodeling the kitchen, and I want some upgrades for the plane.

i generally just sell a little stock and pull some from my money market account to keep things in balance. I’m generally 55-60% stock. If I get above 60% stock I sell some off, looks like I’m there. If I’m below 55 I buy some. If I need some funds I just look to see where I am and either take from fixed or stocks. It’s easy for me to do and I can weather a big downturn without worry. I retired when I was 50, 12 years ago in 2007. I made it thru the recession fine. I was a little concerned but did fine.

[Gardnr]

How much do you folks keep aside for large purchases? I am saving up for a car, but think I should have other reserves beyond that.

We have $120k in that account. Roof/heat-cool system/major appliances/1 more new vehicle.

[LDAHL]

We have $120k in that account. Roof/heat-cool system/major appliances/1 more new vehicle.

We set our goal in somewhat the same way:

15% of the estimated fmv of our house for major repairs or replacement items. We just completed a fairly major renovation, so we’re hoping the big surprise items over the next twenty years or so will be manageable with this much.

The current price plus tax of our more expensive car of the two new.

Five times our current property tax bill.

An estimate for future private school and college tuition from now to projected launch.

The idea is to commit a percentage of our pension/salary/SS to this reserve, and in the years we exceed it, sweep the excess into a stock and bond index fund portfolio.

We are also debating whether to add an amount for a year or two of our health insurance out of pocket max.

I suppose a perfect storm of lousy luck could wipe us out, but we’re hoping this is a reasonable coverage of the more predictable risks and major upcoming expense items. And it has the advantage of being fairly easy to administer. You have to strike a sort of balance. Too little, and we have a liquidity crunch. Too much, and we sacrifice the growth potential of the more volatile financial markets.