401(k) Investment Rebalancing Time

By Scot Herrick | Personal Finance

Dec 28

If you’re like me, you don’t chase stocks and bonds (lots of people are very much into investing. This post isn’t about that type of person). Instead, you figure out the percentage allocation of your investments into broader categories and then invest in ETF’s or Mutual Funds to match your percentage allocation. For example, my allocations are between large cap, mid cap, small cap, bonds and international stocks.

Once a year, I re-evaluate my percentage allocation and balance back my portfolio. If I want 30% of my funds to be in international stocks and I currently have 35% invested, I sell 5% of the balance and move that into another area.

There is lots of stock advice out there, but this helps me ensure that I am mostly selling high and buying mostly low. And I don’t go crazy watching the stock prices move; instead, I balance the portfolio once a year.

And that’s the point of this post: now is the time of year that I re-balance my portfolio. I do all of my selling Thursday and Friday and all of my buying the first week of January to get my portfolio balanced again for another year.

I do this for my IRA, taxable account, and 401(k) and balance the entire set of investments to hit my allocation percentages.

So dig out those portfolio statements and take a look at your investment allocation. If you’re a Cubicle Warrior, is it time to re-balance your portfolio?

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About the Author

Scot Herrick is the author of “I’ve Landed My Dream Job–Now What???” and owner of Cube Rules, LLC. Scot has a long history of management and individual contribution in multiple Fortune 100 corporations.