Portfolio Adjustments based on Market environment

VRG · Post by **VRG** » Thu Feb 22, 2007 1:18 am

Admins/Members,

I have noticed that some of the senior members were suggesting to dump some Bond Funds based on interest rate situation in the US last year.

What I gather is that Bonds are still not attractive and might not be for this year unless something changes.

So my question is: Is it ok to make appropriate changes to an AAP based on such situation? Now, I'm not referring to everyday market (or related factor) fluctuations but for Bonds..at least you can predict. Especially when the Stocks are not really sinking.

I understand frequent buying/selling to make appropriate adjustments wouldn't be recommended in a taxable a/c.

I have 50:50 Stock/Bonds in my IRA's and somehow I feel that I'm missing out on opportunities here.

Anyway, I would like to seek suggestions for both taxable and non-taxable a/c's?

Thanks.

KRV · Post by **KRV** » Thu Feb 22, 2007 2:15 am

Sorry, VRG, I am going to make an example out of your post. :emwink:

Your post is exactly what RRK, Desi and I were saying in some of the heated debates in other threads ("Tips to Build Wealth" and "Active vs. Passive").

In one of my previous posts clearly identified as speculation, I was merely presenting my viewpoints on the direction of global capital markets. Just to show that I put my money where my mouth is, I indicated I preferred a low bond allocation in the current environment.

This is not to "suggest" anyone to change their AAP to dump bonds and move more money into stocks. As a long time forum member, this kind of unwarranted extrapolation is what worries me. The views and actions of one member (no matter how "senior") does not warrant making wanton changes to your well established risk-adjusted AAP. This is one of the reasons Desi often mentions that what works for him does not work for 99% of the forum members.

Nobody has a crystal ball on the markets and I may live to regret my own actions based on my own speculations. However, that is my choice and it would be irresponsible for me to prescribe it to all forum members. I, along with other senior members and the true experts in this forum, share a tacit responsibility to ensure we don't turn this into a "free advice" forum. This is a learning forum and I, for one, would not want to be part of a forum that doles out free advice to anyone with a computer and internet access. That would make us no different than the 'experts' that spew unsolicited advice on TV and internet.

VRG · Post by **VRG** » Thu Feb 22, 2007 3:15 am

KRV;8292

This is not to "suggest" anyone to change their AAP to dump bonds and move more money into stocks. As a long time forum member, this kind of unwarranted extrapolation is what worries me. The views and actions of one member (no matter how "senior") does not warrant making wanton changes to your well established risk-adjusted AAP. This is one of the reasons Desi often mentions that what works for him does not work for 99% of the forum members.
QUOTE]

KRV,

"Follow the crowd" is not the intent of this thread though it appears to be. I want some healthy discussions here, not sound like "I'm encouraging members following other members without understanding their own needs/risks"

I made an AAP request few months back and I wanted to be passive i.e. totally depend on Bobus or Desi for building of my AAP but this doesn't mean that I stop learning.

Bobus and Desi have always given a logical answer for all kinds of questions..so that members can learn.

I'm not the kind of person who'll blame ppl ..let's say if I loose the entire portfolio. The Bond allocation has been on my mind even b4 I requested for my AAP. What I'm mentioning here is not just what I learnt on this forum but from other sources too.

I'm not learning about "direction of the global markets" for the first time. But when I hear something again and again, I would like to discuss the implications so that all of us can benefit.

Having an AAP doesn't mean that I'm done with it for lifetime, it is good to keep learning so that we have better understanding and therefore plan better.

VRG · Post by **VRG** » Wed Feb 28, 2007 11:47 pm

Desi, bobus, RRK,

Can you pls comment on this?

I know this is not a good time as Stock markets tanked..:)

thanks.

laks0 · Post by **laks0** » Thu Mar 01, 2007 12:13 am

VRG;9707Desi, bobus, RRK,

Can you pls comment on this?

I know this is not a good time as Stock markets tanked..:)

thanks.[/quote]

Not an expert, but a few points to ponder

1) AAP(S:B:C ratio) needs to based on your risk assessment and not on market conditions. Your S:B:C is the most important decision you make and will determine your returns and volatility of your portfolio.
2) Usually when members talk about current interest rates, For Bond portion, its about deciding whether to go with longterm bonds or short term bonds and not from Bonds to Stocks. From my limited knowledge(could be wrong as well) in current market conditions, its better to go with short term bonds instead of long term bonds.
3) Then for stock portion diversify across all markets.

Stick to your AAP in all market conditions and rebalance as necessary and you are on your way to acheiving your goals.

VRG · Post by **VRG** » Thu Mar 01, 2007 1:52 am

laks0,

Your answer helps.

You're right, some of the threads were regarding "going from longterm bonds to short term bonds, not from Bonds to Stocks.