Well?

Your in Index funds? OMG! You Poor Guy !  LOL

Well, it's better than being in funds like : USAGX ( gold ) or EGLRX-Alipine, DODFX,or DODBX,TAVFX! Real Winners!  But should be in UXPIX instead..

1. And how is that mix of investments doing for you now?

2. How has it done in say the past 8 yrs?

3. even if they repeat as they did in 03'?  Were will you be then?

4. and DYK that a 40/60 port did about only 1% apy less than a 80/20 port in the past 10 yrs and outperformed in the past 8 yrs...?  ( 11.5% vs 9.5% apy )

5. and A Bal. fund like VWINX is  not only the best Index Fund/Port YTD for Indexes, but did about the same for the past 8 & 10 yrs vs other Bal. Funds/Ports..and if have to stay in those index funds? I'd put the $ in there..but wait until after your current Port recovers and gets back to even-steven..Probably by next yr sometime..?

6. Or ck out  Other Bal. Funds like WMRIX,OAKBX,FPACX  that outperformed them as well comming in with about  12%+ in the  pst 8 yrs..

7. And All equities did about (a) 15% past 8 yrs and (b) about 9% past 10 yrs so why risk it with these just to make +3% to Less?

8. and you best hope those Equities do at least +40% or more to recover from their current YTD's..just to Get Even..

9. And hope your not to Much in International or Gold? they're Really doing great Aren't they?  The way they're going? will se new Low Records in past 10 yrs and have to do +50% just to get even.. ( Deja Vu from the last Bear of 00-02' )

So, as Clint Eastwood would say?

" Do you Feel Lucky" ?

Then go for it!   What's the Downside if you loose another -20%? You just wait another couple of Yrs and save up to refill the Account..

But, for My Retirement $? I'd be going to a More conservative 50/50 mix at the most to "Infinity and Beyond"... and a 40/60 a few yrs Prior to Retirement time..

This Current market is Good for evaluating what your "Real" risk tolerance will be for the future.. For Past Performance DOES repeat, but even  worse the next time around...I always Deduct another -20% from my APY's of my Funds for FP...

Here are the funds. Sounds like I might want to move some away from the small cap to the large cap?

 Vanguard 500 Index Fund Investor Shares
Vanguard Small-Cap Index Fund Investor Shares
Vanguard REIT Index Fund Investor Shares
Vanguard Short-Term Bond Index Fund Investor Shares
Vanguard Developed Markets Index Fund
Vanguard Intermediate-Term Bond Index Fund Investor Shares
 

parkcity wrote:
I'm a 26-year old investor with a portion of my assets in index funds, which I intend to use towards the down payment for a home in 6-8 years. My portfolio is 70% stocks and 30% bonds. I have about 50% of stocks in large cap, 18% mid cap and 29% small cap, and all are blend.

I'm not sure what you have exactly. It appears you also might have some actively managed funds, so I can't tell what your overall AA is. If the index funds you hold are for the down payment, you are far too aggressive. The rule of thumb is money for goals in less than 5 years should not be in stocks at all. For a 6-8 year time frame, you probably should be around 30-35% otherwise the money may not be there when you want it.

The S&P 500, even though a blend fund, is slightly tilted toward growth. If you wanted additional diversification, you could add a large value fund.  Your small cap allocation is 3x times the market weighting, which is aggressive and will provide a lot of tracking error. May not be a problem as long as you understand what you hold. 17% in international is fine, but total international or FTSE ex U. S. would be a better choice, especially for taxable account.

Paul
 

IMO sector allocation matters much more than style or cap.

so...Why do you have 30% financials? This is huge exposure. If you started with balanced allocations and the financials just doubled by dint of their success, take profits and re-allocate. If you have a specific strategy in mind for this overweighting, you might want to do a reality-check on that.

You don't mention commodities, which should be a component of most allocations. Again, there can be strategic reasons for underweighting, but at least give it some thought.

--Aalan

Thanks for the reply Paul. Maybe my portfolio isn't well aligned with my time frame, as you pointed out. It was developed by a financial planner I met with a couple years ago. But, as I told him, the 6-8 years could be closer to 8-12. I know it's best to have a well defined plan but to be honest, it's hard for me to say where I'll be then and exactly when I'll need the cash for a home. I started investing because I didn't want all my funds -- some are in savings accounts and CDs -- to get eaten up by inflation.

How would you suggest I shift my portfolio from 70/30 to a more moderate allocation? I have some new money to put in bonds or other safer areas but probably not enough to make a big shift in the allocation. Plus, if I start investing more during these erratic times I plan to invest regularly in very small increments. If I sold some of my stock funds now and moved the money to bonds, I'd be taking a pretty sizeable loss.

I didn't think any of Vanguard's index funds were actively managed. Which were you referring to?
 

I don't know how large your portfolio is in comparison to your contributions, but now is not the most ideal time to switch to a more conservative asset allocation.  The stock market is already down 37% from its highs.  Might be better just to stick with it at this point. 

There are no guarantees, but the stock market will probably be higher than it is now in 8 years, and if not then the economy might be in a pretty bad state such that you'll have bigger concerns than buying a house. 

Those were my initial thoughts as well. I have plenty of time on my side so I'd rather not be selling for such a loss. Still, I've read some say now is a good time to rebalance since pretty much everything is down. I'd be selling some equities for a loss but I'd be picking up other stocks (and bonds) for a bargain. Any thoughts on that?

As for the skewed financials, I wasn't aware of it when I opened my account. I went on the word of my then advisor on this mix of funds. Unfortunately, I, like many other young investors, am learning as I go. Scary time to be learning as you go... Looking at the numbers it's mainly because of the REIT index, which leans heavily towards financials, in combination with the Vanguard 500 and small cap indexes. The REIT is locked in for 1 year or there are penalties, so that won't be leaving my portfolio, at least 'till Jan 09. On another note, the REIT isn't getting hit near as hard as the rest of my stock funds.

parkcity,

There are some things that aren't clear about your portfolio. You said you had a portion of your asset in index funds. That made me think that you must also have a portion in actively managed funds. Also it wasn't clear if your whole portfolio is going toward the goal of a home or some if it is targeted for retirement. If you have two goals, then each should have it's own asset allocation. 70/30 is very good for a retirement goal. As you are now aware, there is risk in having too high an equity allocation for short term goals. By the way, is this a taxable account?

You did list your funds, but the percentages don't seem to add up. Are you saying you have 30% in REITs? You mentioned being overweight in financials, which is technically accurate, but REITs are a separate asset class and a good diversifier, so I wouldn't really count it as overweighting the financial sector. But REITs should not be 30% of equity. Much too high.

I do agree that you should not change your asset allocation now.   

I've read some say now is a good time to rebalance since pretty much everything is down. I'd be selling some equities for a loss but I'd be picking up other stocks (and bonds) for a bargain. Any thoughts on that? 

If you are rebalancing, you would be selling bonds and buying equities to keep your AA at 70/30. But if you are adding new money, do your rebalancing that way.

Paul