current asset vs paycheck asset allocation

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Pistons49
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Joined: Sun Jan 21, 2018 9:48 pm

current asset vs paycheck asset allocation

Post by Pistons49 » Sun Jan 21, 2018 9:58 pm

Hi,
new here, very new to the finance world. I have a 401k with Vanguard through my employer, with a payroll deduction. My question is in regards to the difference between current asset allocation and paycheck allocation...should these mirror each other? The site allows you to choose separately. I'm not entirely sure the difference and the impact of that difference.

thanks!

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Noobvestor
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Re: current asset vs paycheck asset allocation

Post by Noobvestor » Mon Jan 22, 2018 12:14 am

If your 401k automatically rebalances (mine does) it doesn't matter too much, and mirroring is probably fine. If it doesn't for some reason, you can use new contributions to rebalance each pay period, or periodically, by switching back and forth between funds.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

dbr
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Re: current asset vs paycheck asset allocation

Post by dbr » Mon Jan 22, 2018 10:05 am

Noobvestor wrote:
Mon Jan 22, 2018 12:14 am
If your 401k automatically rebalances (mine does) it doesn't matter too much, and mirroring is probably fine. If it doesn't for some reason, you can use new contributions to rebalance each pay period, or periodically, by switching back and forth between funds.
Yes, exactly so. The object is to maintain a targeted asset allocation. Even if you make contributions according to a set plan the invested money will drift away as market values of assets change. That can be corrected by directing contributions to restore assets to target. For larger holdings and bigger departures from target you may have to actually sell and buy things, or the plan does it for you.

See: https://www.bogleheads.org/wiki/Rebalancing

Pistons49
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Joined: Sun Jan 21, 2018 9:48 pm

Re: current asset vs paycheck asset allocation

Post by Pistons49 » Mon Jan 22, 2018 11:25 am

just what i was looking for, thanks very much!

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