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First time re-balancing

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  • First time re-balancing

    New attending, approx $100k saved all in tax protected accounts (401,457,roth) . . . In general want to mirror the VG 2050 retirement fund distribution without paying the fee they charge for doing it for you (currently all in VG total stock, international stock, total bond, international bond).  Given good year in stocks currently have higher percentage in stocks than I want thus have to rebalance.  Am I correct that it does not matter if I do this at the end of 2017 vs. beginning of 2018 because all money is in tax protected accounts?

    Thank you!

  • #2
    Makes zero difference. Rebalance away!


    • #3
      you can also change your contributions to buy more of what you need each pay period.

      the only issue ive run into is some plans limit how often you can transact (like vanguard). it has never mattered however as i re-balance once per year.


      • #4
        Don’t sell to rebalance, buy more of what you need. No need to take a tax hit during the accumulation phase.


        • #5

          Don’t sell to rebalance, buy more of what you need. No need to take a tax hit during the accumulation phase.
          Click to expand...

          Seems like all of his/her accumulated assets are in tax protected accounts so no worrries there.


          • #6
            WCICON24 EarlyBird
            Re-balancing a portfolio during asset accumulation.  The two basic approaches are:

            a. Big bang- On a given date, you sell some of x and buy some of y to bring your portfolio to your desired asset allocation.

            Pro's- The portfolio is actually at the target asset allocation (at least for one day).

            Con's-  No one is particularly thrilled to sell a 'winner' and buying a 'loser'

            b. Gradual approach- Change your ongoing contribution % to contribute more to the fund(s) in which the asset allocation is below target.

            Pro's- You dollar cost average (probably) over time.

            Con's-  The 'market' will likely not comply with your expectations and you may not reach your targeted asset allocation within a year.

            The approach that is used will IMO somewhat depend upon a couple of factors including; 1. the dollar gap with your asset allocation and 2. the amount of employee/employer contributions made.  For example, if on a dollar approach you are say $1,500 off the target asset allocation and you contribute $50k/year, a bit of math and a gradual approach would likely be appropriate.  For someone building towards FI with already significant retirement/ assets (i.e. $2 Million) a 1% difference with the target asset allocation is substantial number (20k) and the Big Bang approach would likely be more appropriate.