So my retirement account right now has only SPY s&p 500 tracking stock. I was reading on an SDN anesthesia thread recently that some of you have mixed allocations of say 50 / 50 stocks and bonds, and you wait until there is a significant stock market pull back / bond market rise and you'll sell the higher priced bonds and buy some stocks while they are cheap. What is this strategy called?
For someone who only has stocks, when is the best time to enter the bond market and follow the above mentioned strategy? Do you go for corporates or munis or what? And what rating / yield do u usually go for?
What you're referring to in the first paragraph is rebalancing. Essentially, you decide on a particular asset allocation (% equities, % bonds at a minimum) and when market fluctuations of one or both pushes your held percentages far enough from your desired percentages, you sell whatever you have too much of and buy what you don't have enough of.
Actually, historically over the long term, it doesn't seem to make much difference if you rebalance just once per year, or monthly, or when your asset allocation slips outside your desired bands.
There's not much place for timing in this strategy, except when it comes to factors that don't involve predictions of which way the market might go (like tax considerations).
If you're 100% in anything and want to shift a significant portion of that to something else, you can divide the sales and purchases over a period of time, dollar cost averaging, which reduces the odds a momentary blip in the market will distort what you did. But it probably doesn't matter.
I only own low-cost no-transaction-fee bond index funds, and I-bonds through treasurydirect.gov. I don't feel the need to get more complicated than that. Since my taxable accounts are a tiny fraction compared to my tax deferred and exempt accounts, I haven't really concerned myself with the tax-efficiency of different types of bonds. (I-bonds, though not in a tax advantaged account, are by their nature tax-deferred already, and state-tax exempt.)
I don't own individual stocks, because I don't think I know anything the market doesn't.
Vanguard has had low cost index funds for a long time, and most people point to them as probably the best option available. Lately some of the Schwab ETFs have the lowest fees out there. (Excepting TSP which is only available to federal workers and military.)
Of course, the best predictor of investment growth is savings rate, which has nothing to do with specific stock or bond choices. As a group, doctors seem to invest poorly not so much because they choose IBM or Apple vs Treasuries or munis, but because they choose BMW. (I too have been guilty of this, but you've got to live your life, too.)
