Last night, I decided to login to Vanguard to check out the damage from the recent market turmoil. Their Portfolio Watch feature actually makes this very easy, as I can now see our entire portfolio (including non-Vanguard investments) on a single screen.
Surveying the damage
What I learned upon logging in was mildly depressing. Not surprisingly, our investments have taken a beating. Along with the overall decrease in our holdings, our 80%/20% stock/bond allocation has drifted down to 76%/24% stocks/bonds. Moreover, our equity allocation has drifted from a 70%/30% domestic/international split down to 65%/35% domestic/international.
Given that domestic stocks have been at the epicenter of recent troubles, this shift was to be expected. In fact, if it wasn’t for our ongoing contributions of the prescribed percentages into each asset class, it would’ve been even worse. But now I’m left with a quandary. To rebalance or not to rebalance, that is the question…
Where to from here
In the past, I’ve usually rebalance on a (somewhat) set schedule. Every 12 months or so, I’ve checked on things and rebalanced as necessary. More recently, I’ve considered rebalancing as soon as our allocation gets more than a certain amount out of whack, but I never really defined that cutoff. As things stand right now, our bond allocation is about 20% high (24% vs. 20%), though our stock allocation is only about 5% low (76% vs. 80%).
The good news is that the majority of our investments are in tax sheltered accounts. Thus, I can rebalance our portfolio without triggering a taxable event. Nonetheless, I’m leaning toward just leaving things alone for the time being. If we get too much further out of line (e.g., dropping to 75%/25% stocks/bonds) I’ll probably consider rebalancing, but for now I’m content.
What about you? How is your allocation holding up?