Portfolio Maintenance - Guidance Requested

[buddtholomew]

I have an additional 10K in Cash available for investment in a taxable account and am weighing the following options. I have a total of 10K in ST and LT capital gains incurred after selling PRPFX earlier this year and transitioning to the 4x25 HBPP.

1. Do nothing. All assets are well within their 15/35 tolerance bands. Keep the 10K liquid for rebalancing purposes when a 15% band is breached.
2. Sell GLD and VTI (approximately $2500) to capture gains and offset losses respectively.
3. Invest a portion of the 10K in VTI to restore equities to 25% of portfolio.
4. Invest the whole 10K to restore all assets to 25% of portfolio.

VTI: $23,071.47 22.42% $(3,941.63)
GLD: $28,072.20 27.28% $5,095.07
TLT: $26,704.79 25.95% $3,785.04
CSH: $25,053.65 24.35% $99.97

[AdamA]

I personally would view this as a chance to safely speculate.  None of the options are wrong, so pick the one you think is going to do the best, and see if you're right.  If it were me, I'd buy bonds.

I have an additional 10K in Cash available for investment in a taxable account and am weighing the following options. I have a total of 10K in ST and LT capital gains incurred after selling PRPFX earlier this year and transitioning to the 4x25 HBPP.

1. Do nothing. All assets are well within their 15/35 tolerance bands. Keep the 10K liquid for rebalancing purposes when a 15% band is breached.
2. Sell GLD and VTI (approximately $2500) to capture gains and offset losses respectively.
3. Invest a portion of the 10K in VTI to restore equities to 25% of portfolio.
4. Invest the whole 10K to restore all assets to 25% of portfolio.

VTI: $23,071.47 22.42% $(3,941.63)
GLD: $28,072.20 27.28% $5,095.07
TLT: $26,704.79 25.95% $3,785.04
CSH: $25,053.65 24.35% $99.97

[buddtholomew]

I personally would view this as a chance to safely speculate.  None of the options are wrong, so pick the one you think is going to do the best, and see if you're right. If it were me, I'd buy bonds.

Very interesting perspective. Buying bonds was not one of the options I was considering. Would you care to elaborate further on your suggestion?

[AdamA]

Very interesting perspective. Buying bonds was not one of the options I was considering. Would you care to elaborate further on your suggestion?

It's just a personal opinion.  Interest rates have "no where to go but up," according to many.  I think this will be proven wrong over time, so I like bonds right now.

My larger point is that as long as you stay within the rebalancing bands, you can add to whichever position you'd like without invalidating the PP warranty.   

[Odysseusa]

VTI: $23,071.47    22.42%    $(3,941.63)
GLD: $28,072.20    27.28%    $5,095.07
TLT: $26,704.79    25.95%    $3,785.04
CSH: $25,053.65    24.35%    $99.97
 

If I am you and have $10K, I spread them like below.


VTI: $23K + $5K = $28K
GLD: $28K + $0K = $28K
TLT: $26K + $2K = $28K
CSH: $25K + $3K = $28K

[KevinW]

My vote is for option #1, do nothing until a rebalance band is tripped.  But I'm boring like that.

[Lone Wolf]

I like option #4 (the "buy lagging assets option"), so long as this makes sense from a trading cost and tax perspective.  When I have cash coming online for some reason, this is generally what I do.

I look at it as an opportunity to get back to 4x25% without much risk of tax consequences.

[buddtholomew]

I like option #4 (the "buy lagging assets option"), so long as this makes sense from a trading cost and tax perspective.  When I have cash coming online for some reason, this is generally what I do.

I look at it as an opportunity to get back to 4x25% without much risk of tax consequences.

What interests me most is how taxable investors manage those investments that have appreciated in value substantially (20%+). Do they contribute to lagging investments and restore the portfolio to 4x25% or sell the outperforming asset and incur capital gains?

[AdamA]

What interests me most is how taxable investors manage those investments that have appreciated in value substantially (20%+). Do they contribute to lagging investments and restore the portfolio to 4x25% or sell the outperforming asset and incur capital gains?

I think that's probably the important thing to consider.

I would rebalance in such a way as to minimize expenses.  This will depend on the type of account you hold your assets in (tax deferred).