My Current Asset Allocation and Net Worth Growth – July-October, 2011

• Have contributed the maximum allowed by law for 2011 to my Vanguard Roth IRA ($5000).
• Am maintaining my target of 6-9 months of expenses in a cash reserve fund in my Dollar Savings Direct high yield online savings account.
• Have rebalanced my mutual fund portfolio to maintain my asset allocation target %’s (75% equity, 25% fixed income overall) 
• Have donated $1,300 to Multiple Sclerosis Foundation in 2011 (5% of income) and passed my target fundraising amount of $5000 for my MS 150 ride that took place June 11-12, 2011. I will most likely be shooting for raising $7500 for 2012. Rock n’ Roll!
• Have saved 30% of self-employment income from my blog in order to pay taxes for the 2011 year.
• Have accumulated 1% of my condo value for home maintenance repair expenses that randomly pop up. I read a post a while back discussing that 1% is probably not the best ultimate goal to save for, but it is a start for me to feel pretty secure in being able to fix things that go awry. 

• Overall Fixed Income / Equity Allocation
• Currently, 27% of my net worth is invested in fixed income instruments (cash or bond funds), and 73% is invested in equity.
• This is only 2% off from my targets for these categories of 25% (fixed income) and 75% (equity) and well within my +/- 5% allowable band limits. So, all looks good here!

• Equity Allocation
• In the equity portion of my portfolio, 72% is invested in US Domestic Equities with the remaining 28% being held in international equities. 
• This is almost perfectly aligned with my equity breakdown targets of 71% and 29%, respectively, for US Domestic and international holdings.

While the overall percentages for these categories look fairly good, a detailed look (table below) at the allocation breakdown reveals the real story and provides for better analysis of the current state.

Remember: in order to maximize the likelihood of increasing your net worth, a red flag goes off if your current % allocation in a category is greater than +/- 5% off of the target allocation. This is my trigger that I need to rebalance that aspect of my portfolio.

% Cash (money market target 5%) 9%
% non-inflat. Bond Funds (target 15%) 15%
% TIPS Bonds (target 5%) 4%
% International Equity (Target 11%) 10%
% International Emerging Markets (Target 11%) 10%
% Domestic Large Cap (Target 8%) 8%
% Domestic Small Cap (Target 8%) 9%
% Domestic Small Cap Value (Target 14%) 14%
% Domestic Large Cap Value (Target 13%) 13%
% REIT (target 10%) 9%

Analyzing my current asset allocation percentages, it appears that my current asset allocation is aligned with my target levels within the +/- 5% band limits.


Because of this, no action needs to be taken at this time, as this will correct itself as we move forward in the summer and I naturally spend more money.


Note: Even though no action was required today, I did have to do some rebalancing at the end of September (not explicitly covered by a net worth update) to account for the ~6% downturn in the market in recent months. 

• At that time, I invested ~$400 of new money in my taxable Vanguard mutual fund account, buying more shares of the Vanguard Small-Cap Value Index Fund. 
• Additionally, in my tax sheltered IRA account, I sold approximately 1% of my net worth held in a short-term bond index fund and exchanged the money to buy more shares of an equity index fund. The goal of this was to maintain my asset allocation targets despite the decrease in the market.
• See how rebalancing forces you to buy equity when the market is undervalued? This is why I am a big supporter of this strategy.

My next moves for the October-November, 2011 time frame will be to do the following:

• Now that I have fully funded my Roth IRA, any extra money I have will go towards paying off my condo loan and obtaining even more equity in that investment. The only other option I would have is to invest in my individual mutual fund (taxable) account. But, I feel that it would be a more efficient use of my time to build up more equity in my condo. What do you all think?
• Additionally, as I indicated the other day in my financial goals update, I am also going to slightly increase my monthly savings for a vacation I am wanting to take to the Grand Canyon and for installing a washer/dryer in my condo.
• Continue investing $41.67 each month in microloans to help the working poor and support sustainability Latin America.  This is part of my 2011 goal of having $500 in microloans. I am currently more than half way there!
• Save 30% of any income from blogging for 2011 tax payments next year at tax time. I will also need to execute on a quarterly payment very soon.

Wish List 

• At some point, purchase the Vanguard Total Stock Mkt Idx (MUTF:VTSMX) to replace S&P 500 index fund. This gives better, broader diversification to the US stock market.
• Install a stacked washer/dryer combination unit in to my condominium. This one will be a long shot, but it just may be possible! More than likely, this will be something that I will do in 2012-2013.