After reading through the wiki about tax efficient fund placement, I've recognized that my funds are not placed optimally (example below with bonds in the Roth when they could be better placed in the 401k). My question is related to how to balance funds between tax advantaged accounts.
Is there any reason not to exchange bonds for small cap in my Roth and reverse that in the 401k? I was planning to execute all of the transactions on the same day. Is there a different / better way to do this?
Thank you for any and all comments on this topic. Please let me know if I need to clarify any specifics.
The overall asset allocation for the entire portfolio is generally correct
The funds that I plan to exchange between are generally equivalent between FIDO and my 401k
Funds available in 401k (other fund names omitted): WFBIX (Blackrock US Bond Index), Small / Mid fund of funds (Janus Small / Mid 25%, Lord Abbett Small/Mid 25%, Black Rock Russell 2500 Index 50%)
Funds available in Roth (other fund names omitted): FSEMX (Spartan Small / Mid Index), FBIDX (Spartan US Bond Index)
Accounts with current balances (extra information omitted):
My 401k: $10,000 Small / Mid fund
My Roth: $10,000 FBIDX
My 401k: Sell $10,000 small / mid fund and buy WFBIX Bond Index
My Roth: Sell $10,000 FBIDX and buy FSEMX
I compared the expense ratios for these funds and my 401k funds have higher ERs than FIDO. Making this exchange will reduce the ER on the small / mid fund from 0.42 to 0.07. The bond fund ratio will increase from 0.10 to 0.13 after the exchange