Out of balance

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Jack Jones
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Out of balance

Post by Jack Jones » Mon Dec 18, 2017 11:18 am

I'm currently at:

Stocks: 26.73%
Bonds: 15.81%
Cash: 42.45%
Gold: 15%

Stocks and most of the cash is held in my 401k and bonds and gold are held in IRAs. Moving forward I won't be contributing as much to my 401k as I have in the past, so I think I won't have my hands tied as much in the future. Also I should be looking for new employment opportunities soon, so there might be more asset flexibility on the horizon.

Looks like I can shift some cash into stocks to get both below 35%, but it feels like a bad time to do so. On the other hand, I'm 32 and feel uncomfortable having so much money parked in cash.

What would you folks do in this situation?
farjean2
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Re: Out of balance

Post by farjean2 » Mon Dec 18, 2017 1:13 pm

This is like when my kids ask me for advice about a situation they have gotten themselves into and I can tell them how they got themselves into it but not necessarily how to get out.

If you really think you'll be leaving the company soon maybe you don't want to do anything right now. Assuming you will be rolling your 401k over into your IRA you'll be liquidating it any way and then you can distribute the cash to re-balance. If you find you are going to be with the company longer than anticipated and there is a market correction I would definitely shift some of that cash into stocks. And if you decide you're going to be staying with the company for the long term I would definitely stop directing any more 401k contributions to cash. DCA'ing into stock and bond funds, or maybe a target date fund until the rest of it catches up with the cash would make a lot more sense to me.

Just my opinion and probably worth what you paid for it.
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Cortopassi
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Re: Out of balance

Post by Cortopassi » Mon Dec 18, 2017 3:05 pm

How many years have I though the stock market has been overvalued? At least 5-6.

And how many of those years would I have been wrong? All of them.

The market may correct tomorrow, or 5 years from now. If tomorrow, you'll feel great about not having rebalanced. If 5 years from now, it will eat at you more and more the longer you stay out, esp. if it continues upwards and gets harder and harder to pull the trigger on it.

I understand your hesitation for sure. For me, personally, my past hunches about how to invest and when to stay in vs. when to get out, have almost always been incorrect, and the mindless, unemotional sticking to percentages in the PP is what has saved me.
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pugchief
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Re: Out of balance

Post by pugchief » Mon Dec 18, 2017 7:56 pm

Why can't you just use some of the cash to buy bonds inside the 401k? That won't help with the gold, but it's better than where you're at now if you're trying to follow the rules of PP.
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eufo
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Re: Out of balance

Post by eufo » Mon Dec 18, 2017 11:15 pm

That's quite a pickle. It's one I considered awhile ago when I was contemplating how to divvy my holdings between my taxable account and non-taxable. In my case, I decided to hold my allocations the exact same in each account. The main reason... I can only dump so much into my non-taxable per year and I didn't want it to be holding the losers and throw me way out of whack. Even so, with my taxable I could be buying up the laggards and make things all even again, but 401ks are just so limited.

I think pugchief is on the right path of trying to bring at least your bonds back in line a bit. You could also go purchase some physical gold to hold onto. This is the perfect excuse to do it!
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Re: Out of balance

Post by Jack Jones » Tue Dec 19, 2017 9:39 am

pugchief wrote:Why can't you just use some of the cash to buy bonds inside the 401k? That won't help with the gold, but it's better than where you're at now if you're trying to follow the rules of PP.
The best I could do there is an aggregate bond fund. Good expense ratio (0.02%), but only 5.95 years duration.

The cash is currently parked in a stable value fund (0.3249% ER).

Yeah, moving some of the cash to the bond fund would definitely make things look more balanced on paper, but I don't know if I want to own any corporate bonds. Then again, I don't know how I feel about this stable value fund either. It seems pretty complicated involving insurance companies, etc.
Rule #9: Don't ever do anything you don't understand.
Cortopassi, I liked your advice, thank you. I didn't consider how my decision might eat away at me over time.

Farjean2, I'm also tempted to do nothing considering possible employment changes on the horizon.

Eufo also votes for the bond fund. Thanks
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Re: Out of balance

Post by dualstow » Wed Dec 20, 2017 2:05 pm

I'd have no problem buying a bit more stocks, Jack. Stocks could do well for the next five years (I've been listening to Robert Shiller).
It's not like you're betting the farm on stocks.

Still, if your stocks are at 26% and gold is at 15%, shouldn't you be buying gold?
If it's 401k constraints that are the problem, well, I contribute less to my solo 401k, too. I max out my Roth, I've given up on gold ETFs, and I just buy my gold in physical.
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technovelist
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Re: Out of balance

Post by technovelist » Thu Dec 21, 2017 10:56 am

dualstow wrote:I'd have no problem buying a bit more stocks, Jack. Stocks could do well for the next five years (I've been listening to Robert Shiller).
It's not like you're betting the farm on stocks.

Still, if your stocks are at 26% and gold is at 15%, shouldn't you be buying gold?
If it's 401k constraints that are the problem, well, I contribute less to my solo 401k, too. I max out my Roth, I've given up on gold ETFs, and I just buy my gold in physical.
Do you have any cash you could use to buy gold outside retirement accounts? Holding gold in a retirement account is not ideal anyway because that converts capital gains into ordinary income when you take it out.
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Re: Out of balance

Post by Jack Jones » Thu Dec 21, 2017 11:26 am

Not much spare cash at the moment. We just bought our first house. I plan to buy physical gold moving forward though. Pared the 401k contributions back to the company match.
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Re: Out of balance

Post by Mr Vacuum » Fri Dec 22, 2017 12:08 pm

technovelist wrote:
dualstow wrote:I'd have no problem buying a bit more stocks, Jack. Stocks could do well for the next five years (I've been listening to Robert Shiller).
It's not like you're betting the farm on stocks.

Still, if your stocks are at 26% and gold is at 15%, shouldn't you be buying gold?
If it's 401k constraints that are the problem, well, I contribute less to my solo 401k, too. I max out my Roth, I've given up on gold ETFs, and I just buy my gold in physical.
Do you have any cash you could use to buy gold outside retirement accounts? Holding gold in a retirement account is not ideal anyway because that converts capital gains into ordinary income when you take it out.
Wouldn’t that be effectively taxed as ordinary income either way due to the collectibles rule? (Ordinary income rate, max 28%)
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technovelist
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Re: Out of balance

Post by technovelist » Fri Dec 22, 2017 12:41 pm

Mr Vacuum wrote:
technovelist wrote:
dualstow wrote:I'd have no problem buying a bit more stocks, Jack. Stocks could do well for the next five years (I've been listening to Robert Shiller).
It's not like you're betting the farm on stocks.

Still, if your stocks are at 26% and gold is at 15%, shouldn't you be buying gold?
If it's 401k constraints that are the problem, well, I contribute less to my solo 401k, too. I max out my Roth, I've given up on gold ETFs, and I just buy my gold in physical.
Do you have any cash you could use to buy gold outside retirement accounts? Holding gold in a retirement account is not ideal anyway because that converts capital gains into ordinary income when you take it out.
Wouldn’t that be effectively taxed as ordinary income either way due to the collectibles rule? (Ordinary income rate, max 28%)
Yes, with the exceptions that gains can be offset with losses and of course you don't have to worry about rmds but can take gains when you want to (or never if you are leaving a legacy).
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Re: Out of balance

Post by Mr Vacuum » Fri Dec 22, 2017 12:54 pm

technovelist wrote:
Mr Vacuum wrote:
technovelist wrote:
Do you have any cash you could use to buy gold outside retirement accounts? Holding gold in a retirement account is not ideal anyway because that converts capital gains into ordinary income when you take it out.
Wouldn’t that be effectively taxed as ordinary income either way due to the collectibles rule? (Ordinary income rate, max 28%)
Yes, with the exceptions that gains can be offset with losses and of course you don't have to worry about rmds but can take gains when you want to (or never if you are leaving a legacy).
Good points, thanks.
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