I don't know what carnet's answer is, but I've been giving all of this some thoughts over the past several weeks:Bylo Selhi wrote:1. What is the purpose of RRBs in your asset allocation plan?carnet wrote:I'm trying very hard to resist the urge to tinker.
2. Does that still apply?
3. If yes, then hold, else got to 1.
1. Where the purpose is to protect a retiree's nest egg and future real cashflow, then the answer is probably to not tinker, because the goal continues to be achieved. Essentially, if a retiree determined that the 2.4% real return of 500,000 2008 dollars was an integral part of their long-term withdrawal plan, then there has been no change. The book value and market value are significantly different, but the main objective of the RRB remains without impact (giving a consistant real cashflow).
2. Where the purpose is to use RRB as a way to diversify a growth (pre-retirement) portfolio, then one ends up in a difficult position, sitting on a recent and significant capital gain, but knowing that real long-term appreciation of that portion of the portfolio cannot possibly achieve long-term portfolio objectives. Because the goal of a pre-retirement investor is to grow the nest-egg, it's harder to ignore the recent gain. The bottom line is portfolio size and managed growth, not a secure income. It boils down to being in a situation where we have to look at the rate of growth on book value rather than the rate of growth on market value. If we were Vancouver landlords holding onto a 10-year old property that still provides a decent return on book value instead of cashing out, we'd be labelled as crazy.
Over the next 2 decades, I'm aiming for a modest 3.0-3.5% real return on my portfolio. Having 40% of it returning 1.65% makes this modest goal difficult to achieve. It presents both a liability for the future, and an opportunity for the present. I'm essentially market-timing on a portion of these RRBs right now.
P.S.: I don't want to seem like I'm asking for someone to take a decision for me, I'm thinking out loud. At a minimum, I'll have to rebalance in the a short while.