I hate it when stock markets rise.
If you’re at least five years away from retirement, you should too. If you’re 20 years away from financial freedom, pray for a market crash. Keep your head when it happens, and you’ll thank yourself, many years from now, as you benefit from discounted stock market products.
The last time I wrote about my investments, I reported purchasing $21,000 of the U.S. stock index (VTI).
I wrote about this purchase on October 2012, and my portfolio looked like this:
- 41.3% Canadian bond index (as a Canadian, I have a home country bond bias)
- 30.4% International stock index
- 28.3% U.S. stock index
The U.S. stock market index that I bought in October has risen 13 percent, including dividends. That’s a pity.
On March 17th, 2013, my portfolio looked something like this:
- 38% Canadian bond index (as a Canadian, I have a home country bond bias)
- 30% International stock index
- 32% U.S. stock index
As mentioned in my book, Millionaire Teacher, I’m comfortable having a bond allocation roughly equivalent to my age. Adding $50,000 to bonds this month will bring my portfolio closer to my goal alignment.
No, I won’t be selling anything to rebalance my portfolio.
Fortunately, I can rebalance it, somewhat, with an influx of fresh cash. My account pays roughly $45,000 in annual dividends, which I couple with savings to make purchases (from freelance writing, our teaching salaries and proceeds from my book). My brokerage, DBS Vickers, doesn’t allow for the automatic reinvestment of dividends.
To Recap My Recent Buys:
- On October 28, 2012, I bought the U.S. stock market index. Unfortunately it’s up 13 percent since then.
- In September, 2012, I added to my Canadian bond index. Fortunately, its price has remained flat.
- In August, 2012, I bought the U.S. stock market index. Unfortunately, it has risen 17.8 percent since then.
- In June, 2012, I bought an International stock market index. Sadly, it’s up 34% since then.
I’m not trying to “time the market” and I don’t think anyone can. Rebalancing (or adding to the lagging market) doesn’t always increase returns, either. But it ensures that you’re always a bit fearful when others are greedy and greedy when others are fearful.
And if you follow such a strategy, over your investment lifetime, you’ll do very well.
Just keep your costs low and your emotions in check. Rebalancing, after all, can require an iron gut.