It’s February 2020 and the market has been supposedly responding to news about the coronavirus. Stocks are down, bonds are up. But, the sun is still out, I’m still retired, and my morning cup of coffee is still delicious.
I feel so deliciously human for sharing my morning cup of coffee with the rest of the world. When I’m drinking it, I know that millions of other people are enjoying the same cup. It’s as if we are all sitting together, savoring that moment together.
Today, I also share with the rest of the world a similar anxiety regarding my investments. I feel for those who fear it and I feel for those who don’t know what to do.
The difference is that I do know what to do. I wrote my investment manifesto years ago. In it, I outlined that when my bonds go up in value and my stocks drop, I must sell some of the appreciated bonds and buy more stocks.
Asset Allocation Rebalancing
That’s exactly what has happened over the past few days. My stocks have crashed and my bonds are going up.
So, I logged into my Vanguard account, my Charles Schwab account, and my Fidelity brokerage and executed the following orders.
I sold off about 5% of my bonds (BND, VMLTX, VBTLX) in the various accounts and bought more stocks with the proceeds.
I used the proceeds and equally distributed them among my stock funds (VTI, VTSAX, VTIAX, VEMAX).
Purpose of Rebalancing
The purpose of doing this is to most importantly maintain my asset allocation of somewhere around 90% stocks to 10% bonds.
The reason this concept of asset allocation and rebalancing of a portfolio works is because it supposedly helps you sell lock in some of your gains and buy more of funds which are undervalued.
If I only was invested in stocks – as in, a 100% stock index fund portfolio – I wouldn’t have any wiggle room for rebalancing.
5 replies on “I Bought More Stocks”
I just re-balanced my 401k as well, changing my asset allocation from 70(stocks), 30 (bonds) to 90 (stock), 10 (bonds). This is just one account so that’s not my total asset allocation but I’m not too sure on the mechanics of 401k asset re-balancing. I’m hoping they’ll immediately sell the bonds at their higher value and buy more depressed stocks…all tax free of course as it’s a retirement account. Why would it be different? I really need to pay more attention to all of this now that I’ve pulled the plug on work.
More importantly…just as I started to rehab my shoulder for getting back to the climbing gym this damn Corona hits. I have to think climbing gyms are a nasty place to hang out for awhile, especially in Paris where washing hands is a theoretical activity. Thoughts?
Works the same – whether it’s a tax advantaged account or the regular brokerage. Curious, why the shift towards more aggressive equities? Just something you’ve been meaning to do in that particular account?
Lots of rest, avoid stress, eat well, contract the fucking thing and hopefully build immunity to other coruna viruses in the future.
If you live in a crazy busy touristy city or busy city then it makes sense to avoid the common areas. Order your groceries to the house, stock up, avoid the busy places and ride it out.
Conceptually it just makes sense to me to sock as much as I can in US indexes only right now. I don’t/won’t own any property right now and am now reducing the bonds I have. We currently have excellent physical and mental health, two-three years of our low living expenses in cash and feel that that alone, coupled with our near infinite geographic and situational flexibility, is sufficient to weather most maelstroms. Of course, my wife is working 2 more years so yes consider that I will reorient some of my thinking at that time. Basically, I’ll spend more time thinking about it in 18 months and maybe bonds will be more compelling to me then. I’m open to arguments if you’ve got information I should read about on the future of bonds. I’d rather be climbing or running at the moment but sure I’ll consider it if you have previous articles. I tend to think it’s a bit of a simplistic, archaic strategy but perhaps I’m wrong…again…not really thinking about it for another year so don’t thrash me too hard. 😉
I do think it’s best to get the first wave of this damn virus if possible to build some type of immunity before it starts mutating-if that would even help, whether it was human engineered or not. That said I’d like scientists to understand more about it before I dive in and start licking climbing holds. I’m prone to URTI’s anyway so that has me a little over cautious. All that said I’ve been filling the pantry with rice and beans for two weeks….
I like your reasoning with bonds and don’t see a reason to be too conservative. Depending on your age it’s good to have your bases covered to prevent any portfolio fluctuations. My own tactic is that I’ll just live in spain on 500 euro a month if shit hits the fan. For someone else it might be to have a stronger bond base, to be able to rely on social security, to have some annuities, some CD’s, or high yield savings. But, you said it better than anyone – I’d rather fucking climb than worry about this stuff too much.
As long as I don’t lose my ability to earn money, I’m not worried too much about my asset allocation and want to think about the future of the wealth when I’m dead.
All the cash in the bank right now wouldn’t make a household feel safe in such a coronavirus situation. The smartest thing is to do exactly as you are saying, fill up the pantry, figure out how to be self-reliant, stock up on any medications you might need, and be able to stay indoors for 6 months, if needed.
I just bought some stocks as well. Glad to see you have also. I’ve usually been right in the past when following Warren Buffet’s advice of being greedy when others are fearful and fearful when others are greedy. I also don’t see the Coronavirus really damaging businesses or the economy long term.