Changing Asset Allocation

[manaboutown]

Currently I am rereading a book published in 2013 written by Donna Skeels Cygan CFP MBA, a financial advisor based in Albuquerque, NM where I once lived. After her book was published I read it and consequently interviewed and considered hiring her as a financial advisor but decided to stick with DIY.

Rereading her book, "The Joy of Financial Security" prompted me to seriously review my asset allocation, which I never gave much thought to when I was younger but at age 81 bears scrutiny. Anyway, I find it a literal gold mine of what to consider.

Donna addresses the psychological side of investing as well as the nuts and bolts which has helped me pass my "sleep at night" test.

If anyone is currently wanting to take a hard look at the asset allocation in their portfolio I recommend her helpful book.

[retiredguy123]

I would like to reduce my percentage of stocks, which are at 40 percent, but every time I calculate the capital gains taxes, I say never mind.

[Caymus]

I would like to reduce my percentage of stocks, which are at 40 percent, but every time I calculate the capital gains taxes, I say never mind.

That is always one on the best "problems" to have.

Do they pay dividends?

[retiredguy123]

That is always one on the best "problems" to have.

Do they pay dividends?
All of my stock investments are in indexed mutual funds. They do pay dividends and capital gains distributions, which are taxable income. Also, I take the income as cash and do not reinvest them back into the funds. That is one way to reduce your stock market exposure.

[manaboutown]

All of my stock investments are in indexed mutual funds. They do pay dividends and capital gains distributions, which are taxable income. Also, I take the income as cash and do not reinvest them back into the funds. That is one way to reduce your stock market exposure.

That is pretty much what I am doing in addition to putting most of my continuing savings into cash rather than stocks. My securities portfolio is currently 65% stocks and 35% cash. I want to move it to 60-40 and eventually 50-50 if I live long enough.

[Smalley]

All of my stock investments are in indexed mutual funds. They do pay dividends and capital gains distributions, which are taxable income. Also, I take the income as cash and do not reinvest them back into the funds. That is one way to reduce your stock market exposure.

In my opinion, very good advice to stop re-investing dividends. We stopped not too long ago but should have stopped sooner. A good way to be tax efficient.

[thevillager1988]

Posts like this are one of the reasons I love our TOTV family!

[MidWestIA]

Fidelity had webinars from Asbury research he tracked some things like sector etfs and gave be active or cut back in the marke advise. I started tracking that and stocks-etfs I was interested in or hot everyday so now I know what's going on that I care about better than the tv & internet talking heads. I have some kinda bond but am all in otherwise BUT after 2021 2022 I learned to have stop loss orders in place at all times.

Just make multiple portfolios on morningstar with different buy dates, download and paste to xls sheets. Use yahoo finance chart to see in addition to that

[FromDC]

In my opinion, very good advice to stop re-investing dividends. We stopped not too long ago but should have stopped sooner. A good way to be tax efficient. I am a buy-and- hold investor while reinvesting dividends. Could you explain why it is more tax efficient to stop reinvesting dividends? Thanks!

[retiredguy123]

I am a buy-and- hold investor while reinvesting dividends. Could you explain why it is more tax efficient to stop reinvesting dividends? Thanks!
Dividends and capital gains distributions are taxable income regardless of whether or not you reinvest them. I direct the mutual fund to transfer all dividends and distributions into my cash reserve money market account. It doesn't reduce taxes, but it does ensure that you will have money available to pay the income tax. It reduces the stock portion of your portfolio over time, but you can always buy additional shares on your schedule. Sometimes, you can get a large capital gains distribution that you didn't expect. Also, you always have the same number of shares in the fund, and your cost basis is always the same, unless you manually buy or sell shares. That is helpful if you have one investment company tracking the value of funds from another company. To me, there is no advantage to automatically reinvesting unless the fund is giving you some type of discount. Buy shares on your schedule, not on the fund's schedule. It only takes about a minute to change your mutual fund distribution options from reinvest to cash for both dividends and capital gain distributions.

[rsmurano]

Not all dividends and gains are taxed! In your non-taxable accounts, any dividend or capital gain (short or long term) are not taxed, these monies are only taxed when you take an RMD or decide to sell after 59.5 years old. Any dividends or gains in your Taxable accounts are taxed.
I don’t touch my non-taxable accounts so all gains and dividends are reinvested. Since we can live off our taxable accounts and SS, I don’t reinvest any gains and dividends.
As for investment allocation, I never bought bonds, they don’t make you any $$$ and I would rather make $$$ when the market is going good. When I’m fully invested, it’s 95% Indexed funds and apple. Now with all of the turmoil in the country, I sold all of my non-taxable holding when they were at their highest 1.5 years ago. I have most of these $$$$ invested in money market funds getting 4.85%. I have purchased decent size allocations in my non-taxable accounts of technology indexed funds and energy this year to take advantage of some of this tech craze over AI.

[PersonOfInterest]

Currently I am rereading a book published in 2013 written by Donna Skeels Cygan CFP MBA, a financial advisor based in Albuquerque, NM where I once lived. After her book was published I read it and consequently interviewed and considered hiring her as a financial advisor but decided to stick with DIY.

Rereading her book, "The Joy of Financial Security" prompted me to seriously review my asset allocation, which I never gave much thought to when I was younger but at age 81 bears scrutiny. Anyway, I find it a literal gold mine of what to consider.

Donna addresses the psychological side of investing as well as the nuts and bolts which has helped me pass my "sleep at night" test.

If anyone is currently wanting to take a hard look at the asset allocation in their portfolio I recommend her helpful book.

I don't think Asset Allocation applies to my small amount of retirement savings.

[FromDC]

This is what I have summarized from Posts #10 and 11. I appreciate the responses.

In my IRA (non-taxable) account, I should reinvest the dividends/gains since I am not taxed until I take an RMD.

In my mutual funds (that are taxable accounts), I should move the dividends/gains to a mutual fund cash account and initiate any 'buys' when I want to.

[Stu from NYC]

This is what I have summarized from Posts #10 and 11. I appreciate the responses.

In my IRA (non-taxable) account, I should reinvest the dividends/gains since I am not taxed until I take an RMD.

In my mutual funds (that are taxable accounts), I should move the dividends/gains to a mutual fund cash account and initiate any 'buys' when I want to.

I have a different opinion on dividend distribution in taxable accounts. As you get them and reinvest you are also doing dollar averaging for the dividends. Better way to increase investments more efficiently.

[JeepsterGlenn]

If your investments are in a 401k you only pay taxes when you withdraw funds so it doesn’t matter on dividend reinvestment unless you withdraw…

[retiredguy123]

I have a different opinion on dividend distribution in taxable accounts. As you get them and reinvest you are also doing dollar averaging for the dividends. Better way to increase investments more efficiently.
If dollar cost averaging is your goal, I think that setting up an automatic monthly transfer of a fixed amount (or percentage amount) from a cash account to a stock fund would work better. With a stock fund, you never know how much the dividends will be, and, sometimes, when they will come. And, they are not always based on the total value of the fund.

[rsmurano]

Should you Reinvest gains in a taxable acct? It depends! Do you need the money to live on? If you do, don’t reinvest, if you don’t need the money, then reinvest. Pretty simple. I invest in quality index funds and I would rather keep the base shares so I don’t have to sell any of them to live on so I think it’s better to live off the dividends and keep the base intact.
A couple of clarifications: you want to keep your emotions out of your investment strategy. I know too many people (me included in the early years) that hold a stock/fund way too long and lose money, mainly because they are emotionally tied to a stock/fund. Put trailing stop losses on your shares so if something happens like a % downturn or other criteria, you sell without knowing. It’s easy to buy, it’s harder to sell, especially something that has made you good money in the past.
As for knowing what your dividends will be, price and date, it is posted by the fund or stock way before it happens. I can calculate what the dividend will be on the specific date, you need to know this for tax purposes every year.

[retiredguy123]

Should you Reinvest gains in a taxable acct? It depends! Do you need the money to live on? If you do, don’t reinvest, if you don’t need the money, then reinvest. Pretty simple. I invest in quality index funds and I would rather keep the base shares so I don’t have to sell any of them to live on so I think it’s better to live off the dividends and keep the base intact.
A couple of clarifications: you want to keep your emotions out of your investment strategy. I know too many people (me included in the early years) that hold a stock/fund way too long and lose money, mainly because they are emotionally tied to a stock/fund. Put trailing stop losses on your shares so if something happens like a % downturn or other criteria, you sell without knowing. It’s easy to buy, it’s harder to sell, especially something that has made you good money in the past.
As for knowing what your dividends will be, price and date, it is posted by the fund or stock way before it happens. I can calculate what the dividend will be on the specific date, you need to know this for tax purposes every year.
I have Vanguard and Fidelity stock mutual funds, and I don't reinvest any of the dividends or capital gain distributions, so I don't really care when they are paid. But, I have never received any advanced notification of when or how much these payouts will be. They just seem to show up after the fact. I do check my account at the end of the month to see how much was deposited into my cash reserve account. Am I missing something? Where is this information posted in advance of the payout?

[rsmurano]

I have Vanguard and Fidelity stock mutual funds, and I don't reinvest any of the dividends or capital gain distributions, so I don't really care when they are paid. But, I have never received any advanced notification of when or how much these payouts will be. They just seem to show up after the fact. I do check my account at the end of the month to see how much was deposited into my cash reserve account. Am I missing something? Where is this information posted in advance of the payout?

Easy, have you ever looked at the stock/fund specs? There is a section called distributions and yields. It tells you the dividend yield, ex-date and previous pay date. So if it’s paid every qtr, add 3 months to the pay date.
Some of my stuff is paid the last few days of December each year but most are paid quarterly. MM yields are a little different.
You can also go to your last quarterly statement and see what you got that qtr and what you have made ytd.

[retiredguy123]

Easy, have you ever looked at the stock/fund specs? There is a section called distributions and yields. It tells you the dividend yield, ex-date and previous pay date. So if it’s paid every qtr, add 3 months to the pay date.
Some of my stuff is paid the last few days of December each year but most are paid quarterly. MM yields are a little different.
You can also go to your last quarterly statement and see what you got that qtr and what you have made ytd.
They show a 30-day yield, so I could estimate the future quarterly dividend. But, I wouldn't know how to calculate the December capital gains distribution amount. They sure don't tell me what it is going to be in advance.

[rsmurano]

December is like any other qtr end, you will know exactly when it gets paid out by the pay date.
The easiest way is to look at your quarterly statement for your account and see what was paid for that qtr

[JoelJohnson]

Currently I am rereading a book published in 2013 written by Donna Skeels Cygan CFP MBA, a financial advisor based in Albuquerque, NM where I once lived. After her book was published I read it and consequently interviewed and considered hiring her as a financial advisor but decided to stick with DIY.

Rereading her book, "The Joy of Financial Security" prompted me to seriously review my asset allocation, which I never gave much thought to when I was younger but at age 81 bears scrutiny. Anyway, I find it a literal gold mine of what to consider.

Donna addresses the psychological side of investing as well as the nuts and bolts which has helped me pass my "sleep at night" test.

If anyone is currently wanting to take a hard look at the asset allocation in their portfolio I recommend her helpful book.

I had a financial professor in college that said almost the same thing, "Never Invest Beyond the Sleeping Point", if you can't sleep at night, then you have too much invested.

[rsmurano]

I have a different opinion on dividend distribution in taxable accounts. As you get them and reinvest you are also doing dollar averaging for the dividends. Better way to increase investments more efficiently.

It’s dollar cost averaging and yes, you reinvest your gains and you can be buying shares at their lowest price or at their highest price, or somewhere in between. When I was working and couldn’t spend more time playing with my portfolios, I would buy and hold. Now retired, I’m much more hands on. If I owned any of the top 7 high tech stocks, I would not be reinvesting my gains because it would buy much less since they are at their highest value, I would take these gains and buy shares in companies that were hit hard last year that still have room to grow.
When we all worked and contributed to our 401k plans each month, that was dollar cost averaging and we didn’t need the money plus we had time on our hands for the market to recover, which is old folks don’t have much anymore.

[rsmurano]

I had a financial professor in college that said almost the same thing, "Never Invest Beyond the Sleeping Point", if you can't sleep at night, then you have too much invested.

IMO, if you don’t invest into the market you should be more worried and lose more sleep not knowing if you will outlive your investments. This doesn’t mean you have to buy funds/stocks, it could be ultra safe money market funds at close to 5% yields.

[dougawhite]

If you want to make good money in the stock market just buy what I sell and sell what I buy...;-(

[Stu from NYC]

If dollar cost averaging is your goal, I think that setting up an automatic monthly transfer of a fixed amount (or percentage amount) from a cash account to a stock fund would work better. With a stock fund, you never know how much the dividends will be, and, sometimes, when they will come. And, they are not always based on the total value of the fund.

Not exactly my goal but if you are going to be a consistent long term investor (which I generally am) best to not try and time the market but to keep investing. Do not always do this by equal amounts but dollar cost average is an efficient way to invest as a long term investor

[Boomer]

Villages Investment Education Club, tomorrow, Thursday, 6/22, at Sea Breeze, 3:00 PM.

This time it will be a dividends discussion.

Boomer