Automatic rebalancing

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mamarachel
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Joined: Wed Jun 12, 2013 1:35 pm

Automatic rebalancing

Post by mamarachel »

Is there a reason not to sign up for automatic re-balancing if my 401K plan admin allows it? I have only one account at this time, so my portfolio is setup wholly there. My contribution rates are the same as my desired asset allocation.

I just noticed that I can set the balances in % and choose quarterly, semi-annually, and yearly to re-balance.

Is there a argument in this scenario to do this manually instead?
chaz
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Re: Automatic rebalancing

Post by chaz »

Optional.
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livesoft
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Re: Automatic rebalancing

Post by livesoft »

With only one account, I don't think there is any argument to do this manually … as long as you do not forget that you have it set.
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InvestorNewb
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Re: Automatic rebalancing

Post by InvestorNewb »

Rebalancing may be overrated. Have a look at this thread: http://www.bogleheads.org/forum/viewtop ... 0&t=116876
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
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bertilak
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Re: Automatic rebalancing

Post by bertilak »

My 401(k), when I had one, had the option to maintain my designated balance between funds. In that sense it was always balanced. But, this was fund-to-fund balance, not a balance of asset classes.

I used the option. That was pre-boglehead days and I wasn't really aware of the true concept of an AA. i'm pretty sure what I was doing was a meaningless exercise!

Once I reached 59 and a half I simply put it all in a stable value fund and did periodic rollovers to an IRA that was managed by my Smith Barney rep. That too was not a useful concept!

So, if you have a good selection of funds and can isolate the major asset classes then it is probably a good idea to set it up to automatically maintain the proper AA. I'm sure there are some who would say quarterly is best (why let the AA drift at all?) and some who would say yearly (take advantage of momentum). It couldn't argue that either of those is appreciably better than the other.

If your 401(k) choices include a balanced fun that matches your desired AA you could just put it all there and not worry about a rebalancing plan.
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John3754
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Joined: Tue Mar 19, 2013 8:56 pm

Re: Automatic rebalancing

Post by John3754 »

InvestorNewb wrote:Rebalancing may be overrated. Have a look at this thread: http://www.bogleheads.org/forum/viewtop ... 0&t=116876
Rebalancing because you think it may yield "bonus" returns may be "overrated", but rebalancing in order to mitigate risk is absolutely valid.
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