Moving Into An Equity Position – Lump Sum

We sold our house in September, the market is at an all-time high, interest rates remain near an all-time low…


My existing portfolio mix is 60/40 equity/debt. I’m happy with that position so will ring fence those assets and continue to rebalance quarterly.

With the new money…

  • 40% Intermediate Bond Fund
  • 30% Short-term US Government Bond Fund
  • 30% Equity (20 US / 10 Int’l)

I came at the equity number because I could live with the impact of a 20-50% equity market decline (6-15% of total portfolio) if a big drop happened the day after I invested. Considering greater exposure to a drop was too painful.

To move my allocation from 30% equity to 60% equity:

  • Take 130 weeks to do the move
  • Move equal amounts each week by exchanging short-term bond fund for the two equity funds that I use (VTSAX/VTIAX) – set up an automatic exchange on Vanguard
  • Track the individual purchases (automatically via Vanguard) to create options for tax efficiency – if you track your cost based on specific purchase IDs then you can specify the exact shares that you want to sell/exchange at a later date
  • Review quarterly
    • 20% drop in the market will trigger a 10% increase in equity weighting
    • 30% drop in the market will trigger another 10% increase in equity weighting
    • 40% drop in the market will have me shift to my goal weighting of 60% equity

My strategy (30% equity to start) is more usual for an investor older than me. It is particular to my own situation and not advice for you.

For expert advice, check out All About Asset Allocation by Richard Ferri.

Here’s my original article, about buying equities, from March 2014.