I’m trying to figure out what most people do when they only have bonds in 401k and there is a large lump sum investment in taxable.
Let’s say for example my AA is 50/30/20, US/Int/Bonds. Currently no portion of my AA is off by more than 1% from target. In the next month or so I’ll be investing a large lump sum into total US stock and total international stock in my taxable account. By doing this it will result in AA being approximately 52/31/17.
Would you immediately rebalance in 401k by selling stock and buying bonds to get back to 50/30/20 on the same day as taxable lump sum investment or wait till bonds went down to 15%?
Rebalance to bonds in 401k (timing)
Re: Rebalance to bonds in 401k (timing)
I don't know about most people, but I don't sweat 2% difference in my target AA. I check quarterly, and if it is off by a lot I'll adjust. Even when I adjust, I don't worry about getting it perfect, because I know after the next market day. it won't be perfect anymore.
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Re: Rebalance to bonds in 401k (timing)
Yes. When contributing a large lump sum to stock funds in the taxable account I would immediately rebalance to the desired asset allocationJermbo wrote: ↑Sat Oct 13, 2018 8:03 am I’m trying to figure out what most people do when they only have bonds in 401k and there is a large lump sum investment in taxable.
Let’s say for example my AA is 50/30/20, US/Int/Bonds. Currently no portion of my AA is off by more than 1% from target. In the next month or so I’ll be investing a large lump sum into total US stock and total international stock in my taxable account. By doing this it will result in AA being approximately 52/31/17.
Would you immediately rebalance in 401k by selling stock and buying bonds to get back to 50/30/20 on the same day as taxable lump sum investment or wait till bonds went down to 15%?
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
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Re: Rebalance to bonds in 401k (timing)
I re-balance if things are off by more than 5%. Anything less than that doesn't seem statistically significant, if you will. I doubt even 10% variations make a huge difference in the behavior of a portfolio all that much. New money will go into the area that is short, of course, but I make no special effort below 5%.
70% Global Stocks / 30% Bonds