Although this post has been documented on May 10, 2013, it was July 1, 2013 (the start of the third quarter), by the time I got around to documenting these changes. Ordinarily, I would have posted this update sooner. Extraordinary factors called life delayed it from happening. Regardless, I did manage to reinvest my portfolio at the right time, but the moves were so minor that they hardly warranted putting into words accompanying thoughts surrounding them. As the markets flatten out, especially without new money coming in, there is not a lot of impact to my quarterly changes.
Most professional advisers would recommend rebalancing a portfolio like mine once a year. That is sound advice. The reason I do not follow it is that advice is intended for a target audience who is less involved in their investments than I am. If you're reading financial blogs like this one in your spare time, rebalancing quarterly may be a better idea than sitting on the sidelines for 12 months. Conversely, if you think about your 401(k) once a year, say tax time for example, then rebalancing once a year is probably more suitable. Also, why are you reading this?
Vanguard Explorer Fund* 24% / -1% / 25%
Vanguard High-Yield Corporate Fund* 5% / x / 5%
Vanguard Total Stock Market Fund* 25% / x / 25%
Vanguard PRIMECAP Fund* 26% / +1% / 25%
Vanguard Total Bond Market Fund* 10% / x / 10%
Vanguard Total Int'l Stock Fund* 10% / x / 10%
* - the information listed above is from a prior blog post; apparently, I never captured the actual numbers for this period, but the concept for rebalancing remains the same every quarter, so the minor shifts are irrelevant. My analysis (which was written timely) provides more detail.
The most surprising changes this quarter were that the Total Stock Market Index fund was lagging its percentage. Meanwhile, the actively-managed PRIMECAP Fund was way ahead. Even further ahead than the aggressively-minded Explorer fund. The least surprising change was that the majority of assets being removed this quarter (all amounting to less than 1% of the portfolio) went into the Total Bond Market Index fund. We expect that fund to lag this year, and in fact, the further it retreats, the stronger it may get in coming years.
The biggest news from this quarter was that the Dow reached new highs, even breaking the elusive 15,000 benchmark for the first time ever on May 7, 2013. That's where bullish wisdom says to put all your money in the market and bearish wisdom says to pull all your money out of it. Conventional wisdom (in terms of investing) says to maintain your original strategy. Think of it this way: it is your portfolio, so why would outside factors change your goals? Despite the fact that the market is rooted in "high risks equate to high rewards" principles, thrill seekers typically make bad investors. It is far from thrilling most of the time. Successful investing is strictly a discipline. Its reward is enlightenment to see through the excitement, which includes the media frenzy after setting new highs.
