Mutual Funds/rebalancing

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Question
Is this a good time to rebalance and sell some stock mutual funds and purchase more of the Total Bond Market Index fund? With all the bad press about owning bonds now it makes it hard emotionally to do so as you may well know.

Answer
Hi Jeffrey. Your question is a great one and something many people are wondering. At the same time, it is difficult to answer since each persons situation is different. The one thing I think is important for people to realize is that stocks and bonds carry very different types or risk and therefore, a "bad year" for stocks can be much different than a "bad year" for bonds. I think its important that people be thoughtful about exchanging bond risk for too much stock risk, unless they are prepared for this. A better strategy is to determine what your longer term stock/bond allocation should be and dont stray too far away from this. If bonds have you worried, then you should consider not only how much you have in bonds but how your bond portfolio is invested. You mention the total bond market index fund which is very US Treasury heavy. Since US treasuries are the part of the bond market that many people fear, you may decide you do not want to have so much of your bonds in this index and instead diversify into other areas of the bond market. This becomes a more detailed conversation and a hard one to have in a forum such as this. If it is helpful, visit my companies website at www.bdfllc.com and go to the education tab where you will see a series of bond presentations that I think will be both educational and interesting. I hope this helps.

Mutual Funds

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John D Smith, CFP

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I can answer detailed questions regarding mutual fund investing, retirement planning, education planning and related comprehensive wealth management and investment concerns.

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I have been providing fee only investment management and comprehensive wealth management services for the past 19 years.

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I have a degree in Financial Planning & Counseling and I am also a Certified Financial Planner practitioner.

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