How/where to allocate new money?

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ChinchillaWhiplash
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Location: Colorado

How/where to allocate new money?

Post by ChinchillaWhiplash » Thu Jul 12, 2018 10:08 am

If your AA is set and you don't need to currently rebalance, how do you apply new $s? For example, montly 401k contribution. What asset would you put a small amount of new money into? Is it best to just pick one class and then a different one the next month hitting each one over a period of time, repeat? Or spread it out evenly between classes each month? Or will it not make much difference? Have recently put everything into DW and EM to get AA back up where I wanted it, but now that's done unless international takes a big hit. Have all classes with percentages that I initially wanted. Just trying to figure out the most efficient way to deploy new funds in the future. If something drops over 4% then will definitely put new $s into that to get it back up, but otherwise :confused

wolf359
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Re: How/where to allocate new money?

Post by wolf359 » Thu Jul 12, 2018 10:40 am

I have been investing for a while. I've done it several different ways over my lifetime.

When I was starting out, I purchased according to my asset allocation.

I later started adjusting contributions according to whatever I needed to do to maintain my asset allocation. It's probably the most efficient choice from a math point of view, but it certainly isn't efficient from an automation point of view.

My accounts have gotten big enough now that I only put regular contributions in equities, and rebalance once a year. My contributions are too small to tilt the balance significantly one way or another, and I get a better dollar cost averaging benefit by maximizing contributions to the most volatile fund. It's also simple, and simple is best. 100% automation provides the best return, because you're less tempted to time the market or to panic.

22twain
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Re: How/where to allocate new money?

Post by 22twain » Thu Jul 12, 2018 11:02 am

I would set contributions to go in according to my target allocation, and then rebalance once a year if necessary, i.e if the % of stocks or bonds is off by more than a certain amount.

I actually set my contributions to 50/50 during all of my working career, but only started rebalancing in my late 50s after I started reading seriously about retirement investing, including this forum.
My investing princiPLEs do not include absolutely preserving princiPAL.

soccerrules
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Re: How/where to allocate new money?

Post by soccerrules » Thu Jul 12, 2018 11:07 am

if you have a Target Date fund that mirrors close to your AA --that works too.
Don't let your outflow exceed your income or your upkeep will be your downfall.

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ruralavalon
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Re: How/where to allocate new money?

Post by ruralavalon » Thu Jul 12, 2018 11:08 am

ChinchillaWhiplash wrote:
Thu Jul 12, 2018 10:08 am
If your AA is set and you don't need to currently rebalance, how do you apply new $s? For example, montly 401k contribution. What asset would you put a small amount of new money into? Is it best to just pick one class and then a different one the next month hitting each one over a period of time, repeat? Or spread it out evenly between classes each month? Or will it not make much difference? Have recently put everything into DW and EM to get AA back up where I wanted it, but now that's done unless international takes a big hit. Have all classes with percentages that I initially wanted. Just trying to figure out the most efficient way to deploy new funds in the future. If something drops over 4% then will definitely put new $s into that to get it back up, but otherwise :confused
I suggest making monthly 401k contributions to funds in proportions equal to your desired asset allocation.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

magicrat
Posts: 391
Joined: Sat Nov 29, 2014 7:04 pm

Re: How/where to allocate new money?

Post by magicrat » Thu Jul 12, 2018 11:20 am

My actual AA rarely matches my desired AA exactly. I put new money into whatever asset class is below it's target.

Frank Grimes
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Re: How/where to allocate new money?

Post by Frank Grimes » Thu Jul 12, 2018 12:51 pm

When I figure out portfolio rebalancing a couple times a year, I take into consideration what my auto contributions already are to 401k and then ballpark what future contributions to taxable will need to be in order to stay roughly on track. So for example if I knew I'd be making $20k in contributions to taxable in between rebalances, I might ballpark it determine that about $15k would need to go to domestic and $5k would need to go to international in some order.

Kencsp
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Re: How/where to allocate new money?

Post by Kencsp » Thu Jul 12, 2018 2:06 pm

magicrat wrote:
Thu Jul 12, 2018 11:20 am
My actual AA rarely matches my desired AA exactly. I put new money into whatever asset class is below it's target.
+1

I’m always tempted to put it in the asset that’s in a decline too like my EM down 18% now. That’s a discount on it and hard to pass.

I may not be correct in the BH mentality doing this tho. I’m youngish and still learning

ChinchillaWhiplash
Posts: 504
Joined: Sat Jan 20, 2018 5:40 pm
Location: Colorado

Re: How/where to allocate new money?

Post by ChinchillaWhiplash » Thu Jul 12, 2018 2:15 pm

Kencsp wrote:
Thu Jul 12, 2018 2:06 pm
magicrat wrote:
Thu Jul 12, 2018 11:20 am
My actual AA rarely matches my desired AA exactly. I put new money into whatever asset class is below it's target.
+1

I’m always tempted to put it in the asset that’s in a decline too like my EM down 18% now. That’s a discount on it and hard to pass.

I may not be correct in the BH mentality doing this tho. I’m youngish and still learning
I think that is exactly BH mentality. You would be rebalancing by putting $s into EM, which is what should be happening. Some rebalance by selling off what's above their planned AA to buy what's under. Others rebalance with new $s or a combo of the 2.

ChinchillaWhiplash
Posts: 504
Joined: Sat Jan 20, 2018 5:40 pm
Location: Colorado

Re: How/where to allocate new money?

Post by ChinchillaWhiplash » Thu Jul 12, 2018 2:23 pm

Think I will just put the $s into whichever fund is down each month. At least one should be down at any given time. Might not be down much, but will still have to be down unless it is prfectly balanced. I just ran my numbers based on current portfolio value and do have a little space left to fill in US SC and a little less in TBM. Luckily had this months funds post yesterday and got my EM and DM squared up at a discount. Talk about "market timing" :wink: that worked out in my favor, at least for now.

Kencsp
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Re: How/where to allocate new money?

Post by Kencsp » Thu Jul 12, 2018 8:37 pm

ChinchillaWhiplash wrote:
Thu Jul 12, 2018 2:23 pm
Think I will just put the $s into whichever fund is down each month. At least one should be down at any given time. Might not be down much, but will still have to be down unless it is prfectly balanced. I just ran my numbers based on current portfolio value and do have a little space left to fill in US SC and a little less in TBM. Luckily had this months funds post yesterday and got my EM and DM squared up at a discount. Talk about "market timing" :wink: that worked out in my favor, at least for now.
lol I did the same. Couldn't pass up the EM discount.

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