Re: Rebalance 401k Investments?

"HW "Skip" Weldon" <skip5700removethis@[EMAIL PROTECTED]
> wrote
> My opinion is that the idea that everyone
> should occasionally rebalance is hogwash.
snip for brevity
> (Caveat: The above assumes the investor is diversified to 
> the extent
> he/she is comfortable and has adequate cash reserves.)

So to clarify: If an investor is invested only in mutual 
funds, has an allocation plan consistent with her/his risk 
tolerance where the desired split is say 50-50 stocks and 
bonds, and the allocation rises to 61-39 due to market 
changes, what would you advise? I cannot call advice to 
rebalance in this very common instance, "hogwash."

In particular with mutual funds, I think rebalancing when 
the allocation falls some 10 percentage points off is very 
much appropriate. It ensures the investor is still within 
his/her risk tolerance. Studies do tend to suggest that 
rebalancing in this way is best.

A recent article on the subject that seems thoughtful, since 
it does not say rebalancing is right in all cases all the 
time: 
http://www.marketwatch.com/news/story/new-research-finds-****tfolio-rebalancing/story.aspx?guid={5A754C68-C018-4A67-B916-CC0D2A2DB073}&dist=TNMKTW

I agree that stocks require more analysis and should not 
simply be sold based on a high price. E.g. if P/E and other 
fundamentals remain low, and prospects look good, of course 
hold the stock, even if it's much higher than at purchase. 

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