CapitalTime
Articles on investing and capital management, with a quantitative focus.
Buying Bonds in PRP
2021-05-28
When adding new money to my portfolio, I look at my current asset weights to find out where I am underweight. Here’s how my portfolio looked at the start of this week:
| Asset class | Current weight | Target |
|---|---|---|
| Stocks | 32.8% | 30% |
| Bonds | 47.9% | 50% |
| Gold | 19.3% | 20% |
I was already overweight stocks due to their recent strong performance. I am slightly underweight gold, but more significantly underweight bonds.
To bring my current weights closer to the targets, I bought bonds this week. These are new purchases, and don’t involve selling any existing assets.
What if interest rates rise?
It should be noted that I must adhere to my portfolio target weights whether I think interest rates are going up or down. By adopting a passive investing strategy, I have already accepted that I don’t know what the market will do.
If I was capable of predicting which way all these assets will move, then I would not use a passive asset allocation strategy.
— Jem Berkes