Re: Rebalance 401k Investments?

On Mar 10, 4:21 am, Tony Sivori <TonySiv...@[EMAIL PROTECTED]
> wrote:

>
> I guess I am somewhat suspicious of all people and companies that want
to
> sell me something. Obviously, they will put their own benefit before
mine.
> So it seems to me that siphoning off from the best investments and
> subsidizing the least successful ones may just be a way of keeping the
> casual investor like myself from seeing how bad the worst ones are
doing.

They are not trying to "sell you something". There is a good
possibility they don't even charge you for this. It is not uncommon
for a 401k to allow movement between funds without commissions
charges.

Rebalancing is a useful concept sup****ted by most (I hate to say
"all") asset allocation investors. To reiterate jIM's post, retaining
your original risk tolerance is the most im****tant feature. Suppose
you have a ****tfolio made of only two funds ABC and XYZ. They are both
$100 a share and your risk tolerance says you should own equal shares
of each (we'll suppose 10 of each). If, after a year, ABC doubles in
price ($200/shr) and XYZ halves ($50/shr) your asset allocation has
changed from 50% of each to 80/20. You are now too heavily invested in
ABC (which now makes up 80% of your entire ****tfolio) even though you
didn't buy any additional shares.

Rebalancing too frequently can have the unintended consequence of
trading on insignificant market fluctuations. The most commonly used
interval is annually.

--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators
strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond.  For all of the other tips and suggestions, see "FROM
THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on
the
Newsgroup.