When to rebalance?

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Topic Author
Muldoon
Posts: 22
Joined: Mon Mar 26, 2007 8:25 pm

When to rebalance?

Post by Muldoon » Sun Nov 02, 2008 11:45 pm

Hi guys,

Well as this year is coming to a close and with where the market is currently sitting, I'm now wondering if I should rebalance in November rather than waiting for the New Year.

My target allocation was established the beginning of 2006:

40/30/10/20 US Eq/Intl Eq/REIT/Bonds (still wondering if I should change it to 35/35/10/20

To give you an idea, this is where I am currently sitting:

Taxable Account
VTSMX - Total Stock Mkt Index - 19.62%
VTMGX - Tax-Managed Intl - 14.78%
VEIEX - Emerging Mkts - 8.61%

Roth IRA
VGSIX - REIT Index Fund - 13.32%
VEXMX - Extended Mkt Index Fund - 2.62%

Traditional IRA (Non-deductible) - roll back to Roth in 2010
VGSIX - REIT Index Fund - 1.84%

Thrift Savings Plan (TSP)/401k
G Fund (Bonds) - 29.99%
Fidelity US Eq Index Commingled - 9.22%

Current U.S. Eq/Intl Eq/REIT/Bond allocation is: 31.46/23.4/15.16/29.99

This year of 2008, I have been flooding my entire 401k with the Fid Us Eq Index fund and I funded my roth contribution with the Extended Mkt Index Fund. Hoping to help keep my allocation in line with the downturn in the market. However, you can see my bond allocation has still grown from just over 20 percent to 30 percent where it is sitting currently.

So my question is, should I consider transferring some money from my G Fund (Bonds) into the C Fund and/or I Fund? When to do this (now, December/January, etc? And since this is in the TSP, I take it there will be no tax consequences whatsoever, correct?

Also, next year for 2009, I will still continue to allocate my entire 401k contribution into the Fidelity US Equity Index fund. I guess if this is the case, maybe if I do rebalance from the G Fund, the majority should go into the I Fund?

Any thoughts would be greatly appreciated.

Thank you,
Muldoon

User avatar
PiperWarrior
Posts: 4068
Joined: Fri Dec 21, 2007 4:55 am
Location: right on course

Post by PiperWarrior » Mon Nov 03, 2008 2:03 am

Muldoon wrote:So my question is, should I consider transferring some money from my G Fund (Bonds) into the C Fund and/or I Fund?
Maybe, maybe not. Do you have enough new money to restore your asset allocation? If you are putting new money soon into your taxable account, you might consider rebalancing at that time. Otherwise, you might be buying TSP C/I only to sell them just a few weeks later or something. You can do that if you wanted to, but that sounds like busy work.
Muldoon wrote:When to do this (now, December/January, etc?
You can do a calendar-based method. You could consider a band-based method or rebalance with new money. Whatever works for you.
Muldoon wrote:And since this is in the TSP, I take it there will be no tax consequences whatsoever, correct?
Correct.
Muldoon wrote:Also, next year for 2009, I will still continue to allocate my entire 401k contribution into the Fidelity US Equity Index fund. I guess if this is the case, maybe if I do rebalance from the G Fund, the majority should go into the I Fund?
It's tough to answer that without knowing how much you are planning to contribute to each account.

Topic Author
Muldoon
Posts: 22
Joined: Mon Mar 26, 2007 8:25 pm

Post by Muldoon » Thu Nov 06, 2008 8:42 pm

Piper thanks for the comments.

I will continue to wait...right now I will continue to contribute to my 401k and am saving a little more each month that is just going into my money market (emergency fund). Will just have to decide which way I want to do on this one: transfer within the TSP, or just contribute over the long-term to my taxable account for my intl allocation.

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