Rebalancing with Account Restrictions

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Carbonate24
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Joined: Sun Mar 12, 2017 8:19 pm

Rebalancing with Account Restrictions

Post by Carbonate24 » Wed Aug 09, 2017 9:05 pm

Almost all of my non-401(k) assets are equities. Almost all of the bonds I own are in my 401k. When it comes time to rebalance equities/bonds per my chosen AA percentage, that will almost always require a 401k transaction. The problem is my 401k only allows 2 transactions per month - no exceptions.

Only having recently adopted an IPS, AA, etc, I don't have a good feel for how often rebalancing is done. I suspect there won't often be periods where I need more than 2 rebalances per month. But if my AA did require more than two 401k rebalances in a given month, I don't have a sophisticated approach considering the account restrictions. Thoughts?

My plan so for is to rebalance my 401k when my AA tells me to, and just wait until the beginning of the next month, potentially considering opening a taxable or muni bond fund outside of my 401k if I can meet the minimum.

acanthurus
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Joined: Sun Aug 04, 2013 8:02 am

Re: Rebalancing with Account Restrictions

Post by acanthurus » Wed Aug 09, 2017 9:08 pm

Removed
Last edited by acanthurus on Tue Oct 31, 2017 6:25 pm, edited 1 time in total.

venkman
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Joined: Tue Mar 14, 2017 10:33 pm

Re: Rebalancing with Account Restrictions

Post by venkman » Wed Aug 09, 2017 9:14 pm

The wiki has everything you need to know about rebalancing. :happy

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

livesoft
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Re: Rebalancing with Account Restrictions

Post by livesoft » Wed Aug 09, 2017 9:25 pm

Better start some IRAs so you can rebalance in them in the future.
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grabiner
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Re: Rebalancing with Account Restrictions

Post by grabiner » Thu Aug 10, 2017 10:24 pm

If you use a 5% rebalancing threshold, you still won't have to rebalance that often. A 5% threshold means that you rebalance when your portfolio is 5% off from its target. For example, if you have a 60% stock allocation, you might initially have $60K in stock and $40K in bonds. To drop that to 55%, you would need the stock to fall from $60K to $49K, which is an 18% market decline. Even if you check your portfolio frequently, you won't have too many 18% declines in a short time.
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Carbonate24
Posts: 51
Joined: Sun Mar 12, 2017 8:19 pm

Re: Rebalancing with Account Restrictions

Post by Carbonate24 » Fri Aug 11, 2017 9:16 pm

Thanks all....helpful. Seems as though transaction frequency restrictions I've got + IRA balancing will keep me in check most of time.

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