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Personal Investments • Help this 56 yr old lady rebalance

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...it took a full 2 years to gain back all I had lost in 2022, & I really don’t want to go through that big a fall again if I can help it (does anyone?!).
Hi and welcome! Let's start with this statement. A desired asset allocation (AA) is the blueprint for your portfolio structure and determines what you need to shift around for annual rebalancing moves. It's determined based on your personal Risk Tolerance. You didn't mention an AA in your post, just a bunch of funds that probably have a higher percentage of stocks than you can tolerate currently. I'd recommend taking the Vanguard Investor Questionnaire and seeing what AA it recommends for you. Armed with that information, people can make a much more relevant recommendation about shifting your portfolio around to meet your AA and hopefully simplify to a smaller set of funds that's easier for you to manage.

Without a desired AA, we can at least look at your current AA, which is 78/22; 22% of stocks are in international. All of your bond exposure is from the Target Retirement 2020 fund. If you wanted to go with a single target date fund that drops you from about 80/20 down to about 70/30, then you're looking at Target Retirement 2035 (VTTHX); if you'd be more comfortable at 60/40, then choose Target Retirement 2030 (VTHRX); another choice at 54/46 would be Target Retirement 2025 (VTTVX).

The Pro is that you can simply hold ONE target retirement fund in each IRA, which gets you down to two funds total and they're automatically rebalancing; you don't have to do anything so the ultimate in simplicity.

The Con is that you get the sub-allocation to international that represent the global market rather than what you might want (.i.e., your current portfolio is 20% int'l stock, but TDFs are 40% and also hold int'l bonds). You also can't control the glide-path; it is what it is (constantly shifting down to 30/70 seven years past its target date as opposed to step-changes at certain age milestones which you might prefer).

Just to reiterate, you really need to pick an desired AA based on your risk-tolerance, so I really encourage you to read the Wiki article and at least take the Vanguard quiz to see what it suggests. You're really picking an AA to reduce the volatility to something you can handle. This chart might also be helpful (volatility is on the vertical axis; there's not much point going less than 30% stock). 95% of stocks swings will fall within two standard deviations, so an 80/20 fund is about 16x2 = ±30% swings. Choose a volatility that will let you stay the course and sleep at night.

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Statistics: Posted by bonesly — Wed Jan 03, 2024 6:10 pm — Replies 4 — Views 474



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