My Personal Finance Odyssey

Portfolio Allocation – Made Some Moves February 27, 2008

I finally acted on some of the portfolio allocations I had been considering the last couple of months. Of course, as is often the case, I wish I had gone ahead and made them sooner! In doing so, I actually made an unplanned allocation, which was to T Rowe Price Health Sciences (PRHSX). I had owned this fund in the past and dropped it at some point (do not recall the exact reasons, but suspect it was to allow me to allocate more to International funds). Longer term, I think being invested in the Health Sciences (ie drug makers, biotech, etc) is a sound investment (risks due universal healthcare, etc not withstanding).

Overall, my approach was to take some of the monies I had invested in my moderate allocation fund (PRWCX), which weathered the recent downturn fairly well, and push it into some other funds where I did not feel I had enough exposure.

Although I won’t know the exact %s until after today’s close, here is a rough approximation:

1) ADDED Latin America (PRLAX) to my portfolio – I expect this to be around 6%. My target is actually 5%, but went ahead with a slightly higher % right now for the following reasons:

- Ease: I won’t be making regular investments in this fund throughout the year, and so the 6% will gradually be reduced due to additional contributions to my other investments. Basically, I want to stay between 5-6% and not have to mess around with rebalancing too much

- Asset Location: I used existing monies from one of our Roth IRAs to create this new position with the idea that the Latin America fund will generate higher returns over time and thus reduce my eventual tax burden versus the alternative investment. Coincidentally, the amount needed was so close to what I already had in there (invested in PRWCX), I just swapped the whole thing.

Asset Location for Tax-Efficiency

2) ADDED Health Sciences (PRHSX) – this is a pretty straightforward swap from one of my existing IRAs invested in PRWCX. I think this should end up around 6% after today’s close. Again, a bit higher than my target of 5%, but I don’t intend to make any additional contributions here, so it will gradually come down.

3) INCREASED International Equity (PIEQX) – I added ~1% to get it to 10% of my portfolio. Just a little tidying up. Again, I pulled it from PRWCX.

4) DECREASED Capital Appreciation (PRWCX) – Overall, I must have drawn my portolio allocation here by 10-12%. This will put me UNDER my target of at least 10% for this fund, but I’ll get it back in line over the coming months.

5) ADDED American Funds Growth Fund (RGAEX) – I will discontinue my contributions to Dodge & Cox (DODGX) for now and start building a position here. Ultimately, my intention is to replace my current investments in the TRP Growth Fund (PRGFX) with this one which has a slightly lower expense ratio and slightly better historical performance.

In the next few days, I’ll post the my updated portfolio with the latest changes.