How Do I Know What To Sell To Increase My Bond Allocation?

A reader asked me a question recently.

It was a good one, so I thought I would share it as a post, along with my response.

Hi Andrew,

Millionaire Teacher is great, plus I follow you on Asset Builder. Really appreciate what you do.

Now I’m at the point where I want to work one more year and figure out my drawdown strategy. The problem is, I don’t know any other early potential retirees — everyone else is on accumulation phase — and I’m having psychological trouble with rebalancing to 40% bonds from my current 25%.

Basically, I don’t know which stocks or ETF’s to sell, and I find myself not wanting to sell anything, even though one other friend pointed out that my portfolio is very aggressive if I’m planning to even partially retire in a year, and I expect a correction relatively soon (1-3 years). I do have a bit of cash, but a good chunk of it is in my 7 & 11 y.o. kids’ educational funds, and it seems mean to make them carry 40 or 50% bonds when they have the longest time horizons–but it makes more sense than me having to sell some of my high earners, right?

You also mention using your bonds as a dry powder keg that you sell when the market drops, but I don’t remember seeing exact percentages, e.g. if you dropped down to 25% bonds in 2009 so you could buy more stocks.

I know you’ll probably tell me to hire an advisor, but any input is appreciated re. rebalancing psychology and asset allocation across different family members’ portfolios and during market fluctuations.

Thanks very much,


Hi Michelle,

Your portfolio has likely had an amazing run over the past five years, especially. I think it’s pretty risky for a retiree to have just 25 percent in bonds, unless you have a trust fund or a defined benefit pension on its way. At 47 years old, I have 40 percent in bonds. That said, my retirement will likely last far longer than my working career (perhaps I should call it semi-retirement because I still enjoy writing) so, about six years ago, I decided to keep my bond allocation at 40 percent of my total. As I wrote in my new book, Millionaire Expat:

“Knock on wood, you might see me waterskiing in my 80s. You might yell out, ‘Hey Andrew! What’s your bond allocation?”‘ If my hearing aids work (I’m guessing I might have them by then) I’ll hollar: Forty percent of my portfolio’s total!”

If you followed any of the portfolio models in my books, then your decision of what to sell would be easy. I don’t know your nationality, so I don’t know exactly what you need to sell. But as a Canadian, my portfolio looks like this:

40% Bond index
20% Canadian stock index
20% U.S. stock index
15% Developed international stock index
5% Emerging market index.

For the sake of an example, assume the above portfolio were worth $1 million.

My current allocation would look like this:

$400,000 Bond index
$200,000 Canadian stock index
$200,000 U.S. stock index
$150,000 Developed international stock index
$50,000 Emerging market index.

Now, let’s assume I decided to boost my bond allocation to 50 percent. I wouldn’t. But for the sake of an example, it might help to answer your question. I would want roughly the same proportions, but with a shift to a higher allocation of bonds. For example, my goal allocation would be something like this:

50% Bonds
15% Canadian stock index
15% U.S. stock index
15% Developed international stock index
5% Emerging market stock index

In dollar terms, my goal would be this:

$500,000 Bonds
$150,000 Canadian stock index
$150,000 U.S. stock index
$150,000 Developed international stock index
$50,000 Emerging market stock index

To get to this allocation, I would just need to do the following:

1. Sell $50,000 of the Canadian stock index
2. Sell $50,000 of the U.S. stock index
3. Buy $100,000 of the Bond market index

This would get my allocation close enough. And I would maintain that allocation, rebalancing once a year as the market bumps it around.

I noticed that you also said, “I expect a correction relatively soon (1-3 years).”

This part concerns me more than your portfolio allocation. You shouldn’t try to predict (or even give an opinion) on where you think the markets might go. After all, nobody knows when the next crash will come. Thinking about it becomes a slippery slope because you might be tempted to speculate on that thinking. Investing is a lot simpler than you might think. I maintain a constant allocation. I rebalance once a year. That’s the strategy I recommend.

I hope this helps.



Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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15 Responses

  1. Michelle says:

    Andrew, thank you. That makes a lot of sense.

    Did you maintain your constant allocation during market falls, like in 2009, or did you move a little more into stocks?

    If your family had multiple portfolios, would you maintain a constant allocation across portfolios, TFSA vs. RRSP vs. taxable? I’m sure you also take age into account (children’s (RESP/trust funds) and the elderly who may or may not be waterskiing).

    Thanks again.

    • Hi Michelle,

      I maintained a constant allocation in 2009. I know….boring, right?
      I would maintain constant allocations across each type of account. But the purpose is different. With a children’s education account, I would shift slightly higher to bonds every couple of years. Take a child’s RESP for education. By the time a child is about 16 years old, I would have about 70 percent in bonds. By the time they are 18, I would have 100% in bonds.

      With RRSPS and TFSAs, I would keep things simple and maintain a constant allocation that would reflect my time horizon and risk tolerance.


  2. sid says:

    Hi Andrew,
    what emerging market etfs do you like on the TSX ? This is something I dont have in my portfolio and wasnt mentioned in your previous books.

  3. Charles Hearsum says:

    Hi Andrew,

    As a UK national living in the Middle East I have followed your advice over the past 9 months and ditched FPI and gone into stock/bond ETF combinations. As stock markets are currently recording all time highs would this be a good time to use new funds to purchase bonds (VUCP/IGLS) rather than stocks ?



  4. Belinda says:

    Hi Andrew, I am an expat teacher who has decided to retire in the UK. Having invested in global bonds with Vanguard in US dollars (VWRD), I am slightly concerned about the foreign exchange costs I’ll have to pay if I sell these bonds a little at a time over retirement. I also have a global stock ETF that is listed in dollars. Would you recommend I convert these bonds and ETF into the equivalent GBP funds now so that I won’t have to pay the exchange costs in the future? Thanks. Belinda

  5. ron says:

    Belinda, VWRD is stock, not bonds.

  6. Belinda says:

    Hi again Andrew (and Ron, thanks for the correction!). Not sure I worded my question well – what I meant was, won’t the commission I pay for converting dollars to pounds (rather than the exchange rate itself) add up if I’m, say, taking 4% out of my investments every year? Wouldn’t it be better for me to have all my funds in pounds so I don’t have to pay this commission? Is converting from a dollar fund to a pound fund an easy thing to do? Many thanks for your time

    • Hi Belinda,

      I don’t think I fully understand your question. It’s probably the kind of thing we could easily hash out in a phone call, but that’s not practical. If you have already hired Mark Zoril (he charges $96 a year) this is likely the sort of thing he could explain during one of your conference calls with him.


  7. ron says:

    Belinda it does not really matter. The value is derived from the assets in the pool, not from the currency. I typically try to minimize currency conversions as that is simply the cheapest. Which currency you hold does not really matter.

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