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calculating re-balancing asset allocation using future investments

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  • calculating re-balancing asset allocation using future investments

    I just did my yearly check on my investments, and need to rebalance to get back to my desired asset allocation.  Since I already know what I will be putting my 401k money into this year(and my taxable plus backdoor roth desired contributions for 2018) , should I take these into account when rebalancing? For example should I base my rebalancing today on the assumption that my total portfolio already contains the amount that I will contribute in 2018?  Or just rebalance with what I have now, knowing that my future investments will throw my allocation off (bc I dont have the greatest choices in my 401k) and rebalance again at the end of the year?

     

    Thanks

  • #2
    I re-balance with my new investments as I will be contributing those today (backdoor Roth).  For 401k that I contribute throughout the year, I do NOT include those.

     

    I think it's more of a personal thing and you can do it any way that you see fit.

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    • #3
      I would use your 2018 contributions to balance to your target allocation unless you are severely out of balance.

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      • #4




        I would use your 2018 contributions to balance to your target allocation unless you are severely out of balance.
        Click to expand...


        Bc some of my allocation are in retirement systems that I've already left I cant just use all my 2018 contributions to balance out everything.  The old retirement systems have better options in them than my current 401k, so I still kept them open in order to use their selected funds for some of my target allocation (small cap, some international, some bonds) for now.  My current 401k only has one decent option, (large cap index fund) so all other allocations are with old accounts or roth iras that need rebalancing every so often.

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        • #5







          I would use your 2018 contributions to balance to your target allocation unless you are severely out of balance.
          Click to expand…


          Bc some of my allocation are in retirement systems that I’ve already left I cant just use all my 2018 contributions to balance out everything.  The old retirement systems have better options in them than my current 401k, so I still kept them open in order to use their selected funds for some of my target allocation (small cap, some international, some bonds) for now.  My current 401k only has one decent option, (large cap index fund) so all other allocations are with old accounts or roth iras that need rebalancing every so often.
          Click to expand...


          Got it.  I would rebalance using your current investments.  The reason is the market will shift in the future, so you are otherwise somewhat trying to predict what your future allocation would look like instead of rebalancing using concrete numbers.

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