Fixing RJ's portfolio

[RetireJapan]

Background in this blog post: https://www.retirejapan.com/blog/my-inv ... all-wrong/

Basically I have realised I would prefer if more of our portfolio were in stock/bond index funds in order to create clear rules for how we are going to spend it.

Also came to my attention recently that getting paid dividends in dollars could have forex tax reporting complications. And I hate complications.

Fortunately we're not going to be needing to live off the portfolio just yet, so I have some time to fix this.

Thoughts?

[Butterball]

First of all, I'm sure you know your portfolio isn't "all wrong". It's great! Just not as perfect as you'd like.

I'm in a similar situation (to a much, much lesser extent) than you in that I'm tired of having a bunch of individual stocks complicating my portfolio. And my plan is probably the same as yours (was?) -- just hold them until it's time to start my drawdown.

If it were me, probably wouldn't try to "fix" it all at once, so as to avoid incurring unnecessary taxable events that could be delayed until later. We also happen to be in a market dip (not a huge problem IF you'll be immediately reinvesting the proceeds).

I'd stick to my planned drawdown withdrawal rate and asset allocation plan (overall equities/bonds/cash mix) and just prioritize selling my least-wanted stocks first. You can use the "chunkiness" of stocks to sell out a bit more than you need, and allocate the difference to index stock/bond funds. If your equity mix starts growing high, sell a bit more.

If this system doesn't get rid of your unwanted stocks fast enough for your liking, you could make a plan to DCA out of them over a certain period of time, again reinvesting the surplus into index funds. It wouldn't be an instant fix, but the complications would only be temporary.

On the other hand, if you really don't want to deal with them longer than necessary, I wouldn't sweat about the inefficiency of selling "early". Those stocks have served you well; they were always going to be sold at some point.

[eyeswideshut]

I would just do it all at once and then use the cash proceeds (less what you will owe in tax) to immediately buy the target funds. It will likely mean a more complicated tax return this year as you calculate capital gains and FX but it will simplify your life from 2023 on.

[RetireJapan]

First of all, I'm sure you know your portfolio isn't "all wrong". It's great! Just not as perfect as you'd like.

Ha, ha, indeed. Apologies for the clickbaity title

I'm inclined to take it slowly, but also sell out of smaller positions first to reduce the number of items I need to think about.

[beanhead]

You mentioned yourself a few times that your portfolio is far from simple or efficient.
I guess that does not matter so much in acquisition mode, but can cause complications when you start drawing down. A nicer problem to have than many others, certainly.
Since you have time, I don't think there is any need for one-time, remove the band-aid actions. Plenty of time to decide the best way to simplify.

[Haystack]

The portfolio would be a nightmare for most novices to deal with. This is a cause of concern if you have future health issues and a family member needs to manage this, or for anyone who was to inherit your portfolio.

Dividend stocks just do not make sense for lower-income individuals, especially in Japan where we can take advantage of accumulating funds, just like those fabled UCTIS ETFs.

Moving towards simplicity is important. I would not continue with Japanese dividend funds but go all-in on Emaxis slim.

[RetireJapan]

The portfolio would be a nightmare for most novices to deal with.

That is definitely another concern.

I am planning to train my granddaughter to take over from me, but she's only nine so it's been a fairly slow process so far