I am making a number of significant moves this week in our 401(k) asset allocation. It started yesterday with selling all of our mutual fund holdings after a temporary market rally, except for the Vanguard Inflation Protected Securities Fund (VIPSX). I will briefly explain the reasons for what I am doing.
Second, I have decided to transition from the “10 Speed” variety of couch potato portfolio to the “Four Square” couch potato allocation. This will reduce our 401(k) holdings from ten to four, making it easier for me to manage risk inside our self-managed brokerage account. It will also substantially reduce the percentage of equity holdings in the portfolio and therefore our market risk going forward.
Finally, our 401(k) account holdings were due for a re-balancing anyway so it made sense to accomplish all of this at the same time.
After the dust settles, I expect that our asset allocation in our 401(k) account will look like this: 25% in VIPSX, 25% in Vanguard’s Total (U.S.) Stock Market ETF (VTI), 25% in Vanguard’s All-World (except U.S.) Stock Market ETF (VEU), and 25% in BWX (an international treasury bond index ETF). We already own the VIPSX and BWX.
I also have some cash accumulated in our 401(k) account that I am using to buy TIPS for the guaranteed income portion of our retirement plan.
At first I was hesitant to eliminate certain assets, such as our REIT index fund. But we own plenty of residential real estate now (with more to come) so lowering our ETF exposure in that category doesn’t bother me.
Are you making any changes to your retirement investments?