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Message
Rebalancing portfolio while contributing $$
Posted on 2/22/16 at 4:24 pm
Posted on 2/22/16 at 4:24 pm
Ideally, I think I'd prefer to rebalance around every 13 months, in order to avoid short term gains.
However, how do you avoid rebalancing when depositing more money into your portfolio? Do you simply distribute to each fund based on the current portfolio % makeup at the time?
For example:
Allocation plan:
75% stocks
15% bonds
10% REIT
Current allocation after market fluctuations:
72% stocks
18% bonds
10% REIT
When contributing an amount such as $10k in a lump sum, would you parse that money out based on the current allocation?
However, how do you avoid rebalancing when depositing more money into your portfolio? Do you simply distribute to each fund based on the current portfolio % makeup at the time?
For example:
Allocation plan:
75% stocks
15% bonds
10% REIT
Current allocation after market fluctuations:
72% stocks
18% bonds
10% REIT
When contributing an amount such as $10k in a lump sum, would you parse that money out based on the current allocation?
3
Posted on 2/22/16 at 5:10 pm to Books
quote:
Allocation plan:
75% stocks
15% bonds
10% REIT
If this is my plan, I contribute to keep those percentages no matter what.
Posted on 2/22/16 at 6:29 pm to Books
quote:
When contributing an amount such as $10k in a lump sum, would you parse that money out based on the current allocation?
yes, but I also factor in how much each get in direct reinvestment over the course of my time frame.
Posted on 2/22/16 at 8:48 pm to Books
I use new contributions to my 401k and taxable account to buy whatever is underweight in my portfolio. It sounds like you're worried about a taxable account and not a 401k. If that's the case, I would definitely not sell anything to re-balance to avoid capital gain taxes completely. The exception would be for tax loss harvesting.
My allocation is 20% bonds. With the recent decline, I sold half of my bonds to buy the dip. I've adjusted my 401k contributions going forward to be 50% bonds and the other 50% spread among large/mid/small cap and international. I probably won't get back to 20% bond this year, but I'm fine with being a bit stock heavy.
You're only a couple percentage points off your target, which isn't that a big of a deal imo. Just divy up your new money according to your target %. Check back in 6 months or a year. If you're off target 5% or more, then adjust to add more to whatever is underweight.
If it really bothers you, adjust your new contributions every month or whatever. By using new money to buy, you have that flexibility as it doesn't have any tax implications.
My allocation is 20% bonds. With the recent decline, I sold half of my bonds to buy the dip. I've adjusted my 401k contributions going forward to be 50% bonds and the other 50% spread among large/mid/small cap and international. I probably won't get back to 20% bond this year, but I'm fine with being a bit stock heavy.
You're only a couple percentage points off your target, which isn't that a big of a deal imo. Just divy up your new money according to your target %. Check back in 6 months or a year. If you're off target 5% or more, then adjust to add more to whatever is underweight.
If it really bothers you, adjust your new contributions every month or whatever. By using new money to buy, you have that flexibility as it doesn't have any tax implications.
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