Rebalancing

[Thrif-t]

So if your asset allocation was off would you sell right now to get it back on target or just change your future purchases to buy into the group you need?

I kinda hate to sell low to transfer more money into the group I need. I'm thinking it may be smarter to just leave the money where it is and buy the target group.

This is for our 401k plan at work. Thoughts?

[Nutria]

I'm thinking it may be smarter to just leave the money where it is and buy the target group. ... Thoughts?

Yes. Because if you sell then you're locking in the losses.

[corn18]

Asset allocation applies to stocks vs. bonds. If stocks are down, that means your asset allocation may be biased towards bonds right now. Sell bonds (which should be flat or even higher when stocks go down) and buy stocks which are low. No reason to sell anything that is low.

For example, I target a 60/40 stock vs bond allocation. With the drop in stocks, I am closer to 58/42. I could sell some bonds and buy cheap stocks to rebalance. I don't rebalance with such a small change. I will just adjust future purchases to get things back to 60/40.

If you are rebalancing equities inside your equity allocation, then that is a different story. Just keep what you have and ride this out.

Tom

[feh]

So if your asset allocation was off would you sell right now to get it back on target or just change your future purchases to buy into the group you need?

I kinda hate to sell low to transfer more money into the group I need. I'm thinking it may be smarter to just leave the money where it is and buy the target group.

This is for our 401k plan at work. Thoughts?

Rebalance w/ contributions when possible.

However, what you write above doesn't make sense - when rebalancing, you should be selling "winners" and buying "losers".

Can you provide some specifics?

[Like2Plan]

I'm thinking it may be smarter to just leave the money where it is and buy the target group.

This is for our 401k plan at work. Thoughts?

This sounds like a good plan to me.

[BuckyBadger]

Rebalance w/ contributions when possible.

However, what you write above doesn't make sense - when rebalancing, you should be selling "winners" and buying "losers".

Can you provide some specifics?

Exactly - when you rebalance you're selling the winners and buying the losers. Perhaps you mispoke, or don't really understand what it means when you rebalance?

I maintain my AA balance with new contributions whenever I can, and for a long time I haven't had to do anything more than that. This is for two reasons:

1) My total level of investments weren't huge, so my contributions were a big enough percentage to make a difference,

and 2) the market wasn't moving around fast enough enough that I went outside of my +/- 5% bonds that I designated as my action level in my IPS.

I recently did my first real "rebalance" where I sold something to buy something else because my totals were just outside my 5% action level.

I sold about $26k of bonds in my 403b and split it between buying Total US stock and Total International stock. This brought everything back into line. I'm hopeful that I can maintain my balance with just contributions for a wile again, although with Vanguard the rebalance was super easy and took about a minute and a half.

[GrowingTheGreen]

Yes. Because if you sell then you're locking in the losses.

Proper rebalancing actually sells assets that are higher in value to by other assets that are lower in value. If you wanted a 50/50 stock/bond mix and had that split in November last year, your stock portion would be significantly lower right now. Which means you buy more stock. Stock is low right now. You're buying low.

Rebalancing should be done at a set time interval, like semi-annually or quarterly, or if your portfolio is significantly out of whack.