Investing

Rebalancing Your Retirement Portfolio

Ah, it’s that time of year again. Like Free Money Finance who posted a great article on rebalancing, I am also rebalancing my portfolio. As I stated in my post on this last year, my target allocations break down as follows:

45-55% Domestic Stocks
35-40% International Stocks
10-15% Real Estate

I further break down international stocks into emerging and developed markets. I also break down domestic stocks by value and growth.

Formerly, I rebalanced every quarter, but I have been pretty lazy this year. Most asset classes went up around the same percentages last year, so none of my allocations got totally out of whack. But inertia will only take me so far, so it’s time to get down to the dirty deed once again.

As of December 31, 2006, I had 55% in domestic equities, 30% in International equities, 2% in Cash (unreinvested dividends from my ETFs) and the remaining 13% in Real Estate. My Real Estate percentage is spot on, but I need to shift some of the domestic money to international equities and use the excess cash I generated to buy more international funds.

One of the international ETFs that I love but will lowering my percentage is symbol EEM. Right now, it is about 10% of my portfolio. When it took off, it was as high as 13% before I trimmed it back a little. I will be trimming it further to about 8% of my portfolio and may go as low as 5% at some point. It’s been a great ride, but I’m primarily a value investor and it makes me nervous. I think there are tremendous opportunities in the developing world, which is why I’m still investing in it. I am just taking a little profit.

I also believe heavily in international markets in general, which is one reason I have such a high weighting in them compared to a lot of analysts. I think a lot of the international markets that have been weighed down for years will be the growth engines of the next fifty years (my investing horizon) and will present great opportunities. I also want to diversify outside the US and especially outside the dollar, which I think will continue to weaken with our current account and budget deficits not going away any time soon. Most of the money that I will be putting into international stocks will be placed in an International Dividend fund (PID).

Later, I will continue with checking to see if your plan is working.

Possibly Related Posts (Auto Generated):

1. Rebalancing my portfolio (Part II)
2. Rebalancing my portfolio (Part I)
3. 10 Things to Know About Saving for Retirement, Part 1
4. 10 Things to Know About Saving for Retirement, Part 2
5. 10 Things to Know About Saving for Retirement, Part 2

© 2007 Kirk Walsh.