Arrrgh! Been trying to figure out how to reconfigure our mutual fund investments and I feel like pulling out my hair! DH insisted we make some changes, and I agreed.
At the end of every month when we look at our assets and net worth, if one fund is down even just a little bit DH always says something along the lines of "Oh that's not good --- We should sell that fund." [He just can't stand to see anything go down. He's even more risk-averse than I am when it comes to investing, which is interesting considering what a risk-taker he is with his business.] We have the same old discussion over and over again about asset allocation, how the overall performance of the portfolio is more important than looking at individual funds, etc, etc, and then he agrees to keep things as they are. But the same thing comes up every month and it's just like a tired old broken record. End of June ... same discussion ... but he was more insistent. And I frankly have been thinking that it's time to rebalance because of how well our International Stock Fund has been doing.
So I decided, what the heck, let's just reconfigure the whole portfolio, not only for rebalancing but also to give DH more peace of mind. But it can be such a difficult decision to make, because you never know if you are making the right decision.
[DH is very much involved in the decision-making process, but I do most of the researching, reading of prospectuses, running Morningstar X-Rays, etc. He's more of a big picture guy and I am more detail-oriented, which makes us a good team, but it does mean I end up doing the time-consuming stuff. Also, DH speaks English as a second language so it makes sense that I do the heavy reading.]
Well, I don't know if this is the right decision or not, and it may just be lazy or cowardly, but I decided (and DH agreed) that we are going to move all of our Tax-Deferred Savings (Keoghs & various types of IRAs) to a "fund of funds," the Vanguard STAR Fund. It's a mix of 8 stock funds (domestic & international), 2 bond funds, and 1 short-term investment fund. Hopefully it will be up EVERY month from now on, even if just a wee bit. 
As far as the money that is in our non-tax-deferred mutual fund account, I wanted to split that between the STAR Fund and a Money Market Fund, but DH insisted that it all go to a Money Market Fund. He actually quoted CNN Money ... He said "The expert there says when you are getting ready to buy a house your money should be in completely safe investments!" Which I reminded him is completely irrelevant. What the CNN Money expert is talking about is the money you are planning to use to buy the house!!! We are talking about money that I consider to be part of our retirement savings. [The money that is supposedly to buy the house is tucked away in FDIC-insured deposit accounts.] Finally we agreed to do what DH wanted, put it in the MMF (sigh), and then revisit the whole thing again after we have bought a house.
Why, oh why, am I getting a sneaking suspicion that DH is starting to think about buying a more expensive house than what we had originally agreed on ... ??? Oh well, that will be something to blog about in the future, after we have moved to Texas.
But in closing I'll just say "Bless my DH" because he did put everything in to perspective when he reminded me that not everyone has the "problem" of trying to decide (and come to agreement as a couple) where to put their money because they have no money to put anywhere. As usual, he's right.
Blogging is Better than Pulling out your Hair
July 7th, 2007 at 11:36 pm
July 8th, 2007 at 03:58 am 1183867085
July 8th, 2007 at 05:38 pm 1183916302
July 9th, 2007 at 06:36 am 1183962973
When you rebalance, do you rebalance the existing amounts or do just change how new money gets allocated?
July 9th, 2007 at 04:55 pm 1184000155
As far as rebalancing, that had been done when we added new money. However, last September we had our first-ever review with a CFP (something we plan to do annually from now on) and we did do some rebalancing based on our conversation with the CFP and the resulting conversations we had with each other.
And now we've obviously decided to rebalance again. Hopefully this shift to the STAR fund will make things easier, as the fund will do future rebalancing for us.
Things were much easier (but definitely not better or smarter) when our only mutual fund investments were our tax-deferred retirement plan contributions. DH had his tax-deferred retirement account and I had mine, and while we consulted with each other we did NOT do a good job of looking at our overall portfolio as a couple, and we each ended up deciding as individuals where to put our money. Any extra money we had went towards paying down our mortgage. Once the mortgage got paid off (and the house was later sold) and we had money to invest in mutual funds beyond maxing out our tax-deferred retirement contributions, that was when things started to get tricky ... I insisted that we look at our overall portfolio as a couple and come up with an overall asset allocation plan. Smarter and better, but also more challenging as it involves lots of negotiating with my DH.
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What I have figured out since I posted my original entry on Saturday is that DH is OK with fluctuation in the tax-deferred retirement investments, because he is able to take a long-term view on those. But where he starts to "freak out" is when the NON-tax-deferred investments go down, even just a little bit. We definitely have different ways of looking at those non-tax-deferred investments. I see them as retirement savings, whether they are tax-deferred or not. He sees everything outside of our tax-deferred accounts as "current money" and therefore the principal must be protected. What does he thnk we are going to do with that money if it is not for our retirement??? Go out and buy a couple Mercedes? Give me a break. That money is for our golden years! I'm not one to always think I'm right, but this time I am, doggoneit! Oh well, for now I'm agreeing to let the non-tax-deferred mutual fund money sit in a MMF. But I am not going to wait until after we buy a house to revisit; this is definitely something to talk over with the CFP in September, and hopefully he can persuade DH to see things my way.
July 10th, 2007 at 04:02 am 1184040145
I'm not saying lose; I'm not even saying don't freak out. More like making lemonade from lemons.