U.S. and International stock markets are rising like muffins juiced on Lance Armstrong’s breakfast.
As a result, my bond allocation has slipped to just 37% of my portfolio’s total. I’ve been buying nothing but bonds during the past few months with my personal savings, but to no avail.
Purchases from my salary aren’t realigning my portfolio back to my goal allocation. As you can see below, U.S. stocks have gained more than 30% during the past 12 months; international stocks aren’t far behind. My bond index, as noted by the red line, has dropped in price.
As a 43 year old without an upcoming pension, I can’t mess around with money.
I want my bond allocation reflecting my age, with the remaining money split between a U.S. stock index, and an international stock index.
I manage the money with the strategy I describe in my international bestselling book, Millionaire Teacher.
I don’t speculate where the markets are headed. Nor would I ever dissuade someone from building a fully diversified portfolio because of speculation that one asset class is higher than a kite and the investor should “wait.”
Waiters belong in restaurants. Pondering the question, (Should I wait?) means you’re asking your gut or some other part of your body for the answer.
Pieces of our anatomy rarely make sound decisions. Just look at teenaged pregnancy stats.
So…today I sold $80,000 in stock indexes: roughly $50,000 of my U.S. stock index (VTI) and roughly $30,000 of my International stock index (VEA).
With the proceeds, I bought $80,000 of my Canadian short-term government bond index (VSB).
I don’t know where stock markets are headed. And I never will.
Re-balancing my portfolio from time to time, however, means that I’m always a little bit greedy when others are fearful and a bit fearful when others are greedy.
If the markets continue to rise, fine. I have plenty of money in global markets.
But if the markets collapse, I’ll be dancing on rooftops.
With nearly 7 figures invested in Canadian short-term government bonds, I’ll be able to deploy them into falling stocks…just when most investors are jumping ship.
Most people speculate. Most people buy high and sell low. Don’t be most people.
Build a diversified portfolio of index funds or ETFs, and rebalance dispassionately when markets go nuts.