Another small value tilt question

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neon beanbag
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Another small value tilt question

Post by neon beanbag » Fri May 19, 2017 8:34 am


I am considering a 25% small value tilt in my portfolio. Right now I have a 401k and a Roth IRA that looks like this:

401k - $16,500 (75% large cap, 25% sm/mid cap, 40% international)
Roth - $13,500 (60% vanguard total stock market, 40% total international)

The Vanguard small value fund is available in my Roth (no small value fund in 401k). If I put 25% small value in my Roth, it would get out of balance with my overall allocation because money is constantly being put into my 401k. I don't put in money as often in my Roth, but could maybe start. What's the best way to approach this?


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Re: Another small value tilt question

Post by TomP10 » Fri May 19, 2017 8:52 am

You did not indicate how often you put money in your Roth..... once a year? once every 5 years? That answer might influence the responses.

If nothing else, you could initially "rebalance" so you have 30% small value in your Roth. According to what you have said, it will likely drift down over the year due to regular deposits into your 401k. So, by the end of a year small value might be 20%. At that point, either contribute to the Roth or rebalance in the Roth to bring your small value back up to 30% and prepare to drift back down over time.
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Re: Another small value tilt question

Post by livesoft » Fri May 19, 2017 8:55 am

I think the best way to approach this is to not worry about it.

One way would be to simplify your portfolio and have fewer funds used in your 401(k). For example, use a large-cap fund in your 401(k), but no sm/mid cap there. Then use SCV in Roth which is actually a small/mid-cap fund anyways. You can get your 9-box style grid the way you want it ... maybe even like TomP10's avatar.
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Re: Another small value tilt question

Post by NiceUnparticularMan » Fri May 19, 2017 11:06 am

As an aside, I agree you could maybe eliminate the 401K small/mid fund and just set your target percentages accordingly.

Anyway, in the long run it will matter less and less if you drift out of allocation a bit while waiting to contribute to your Roth. For now I would set it a bit high, then just rebalance to a bit high again the next time you contribute to your Roth. At some point you can stop bothering with any of this and just rebalance when you contribute to target.

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