Posts Tagged ‘asset allocation’

I recently watched the 1977 bodybuilding documentary Pumping Iron.  Towards the end of the film, Arnold says the following:

“I don’t have any weak points. I had weak points three years ago, but my main thing in mind is, my goal always was, to even out everything to the point… that everything is perfect. Which means if I want to increase one muscle a half inch, the rest of the body has to increase. I would never make one muscle increase or decrease, because everything fits together now, and all I have to do is get my posing routine down more perfect, which is almost impossible to do, you know. It’s perfect already.”

I could not think of a more fitting way to describe properly maintaining the asset allocation of a portfolio.  While everyone’s specific allocation may be different due to their age and/or risk tolerance – the maintenance of that allocation requires mental fortitude to stick with it.

I’m currently in the process of re-balancing my investments to match my desired allocation and had to make a difficult decision.  I try to maximize my Roth IRA contributions each year, and rather than re-arrange my holdings by selling shares, I try to update my allocation with new contributions.  The problem I ran into was one of my asset classes is doing extremely well in terms of percentage gains, yet was a smaller portion of my overall portfolio than my desired target allocation. (The cause of this is likely due to my 401k contributions that occur at regular intervals, whereas I make my Roth contributions at irregular intervals.)  I felt like I was battling “buy low, sell high” vs. having a properly diversified portfolio.

In the end, I thought about Arnold’s quote.  I didn’t want to have a weak point and remain under-allocated in one of my asset classes. I moved forward and invested more shares in the well performing asset class.  My portfolio allocation is now closer to my desired target.  Now I just need to work on my posing…

Read Full Post »