Can you help me understanding rebalancing better?

[Wisconsin Beth]

My 457B offers 6 funds. I have 20% invested every paycheck. Total amount is a bit over $89K. I haven't rebalanced in at least a couple of years and probably closer to 4. Do I need to?

I'm invested in 3 of the 6 funds offered. The last time I rebalanced, I went for 33%; 33% and 34% on the theory that 3rds of the high performers was a good idea...

This is the current breakdown:

Actively Managed Equity Account 783.6510 36.8431 $ 28,872.14 32.38 %
Passively Managed International Equity Account 696.5929 44.2794 $ 30,844.72 34.60 %
Passively Managed US Equity Account 843.7674 34.8944 $ 29,442.72 33.02 %

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In case anyone cares, the fund choices are the following: Actively Managed Equity Account; Actively Managed Income Account; Passively Managed International Equity Account; Passively Managed US Equity Account; Socially Balanced Account and a Stable Value Fund.

My DH and I have talked about rebalancing and he's leaving it up to me, since it's my account.

I guess my real question is When do you do decide to rebalance? The percentages in my account have pretty much stayed around 32-34% more or less and I haven't really worried about it a whole lot, even though I know I'm supposed to rebalance every so often.

[Wisconsin Beth]

Sunrnr, thank you for answering. I guess I'm failing to see what those questions have to do with when to rebalancing a 457 though.

1. I'll be 41 this summer.
2. In an ideal retirement, DH and I will have a paid off house and vacation house, travel some and be able to afford to do stuff that interests us.
3. I'd like to leave something to the kids but if we don't, that's ok. At minimum, I don't want to have to worry about paying for medical bills or buying food for the month.
3. No clue.

[kman]

Beth, I review every quarter, and I may or may not rebalance. This is an event driven market. Big Cap dividend stocks and agra business is where you should be at this time. Keep reading MT for further updates.

[verrip1]

Beth:

Rebalancing is done to make sure that you don't overweight one asset class that performs better than the others.

If you look only at your 457 account, everything you have is in stocks. No bonds, no cash, no commodities, no REITs, no currencies. There is nothing for you to rebalance because you are 100% in stocks.

For rebalancing, it makes sense to me to look at ALL your investment holdings as a whole, including hubby's retirement accounts and joint accounts. For example, you may just have some cash somewhere for an emergency fund. Maybe hubby has a REIT fund in his retirement account. Gold coins in your safe? Look at the whole picture and see what you have in what asset class, then set yourselves a goal for where you want the percentages to be now, in 5 years, 10 years, etc., until retirement. Then adjust your amounts and contributions accordingly.

[Wisconsin Beth]

I want to keep investing in these funds because of the options I have, they have the best returns and they've been sustaining decent returns over the last 10 years or so overall.

kamn, So I need to determine the actual funds and then check those funds to see what's their holdings are, right? For example, the Passive Manged International Equity, as of 6/30/08, was Vanguard Pacific Stock Index Fund; Institutional 25%; Vanguard Emerging Market Stock Index Fund; Institutional 21% and Vanguard European Stock Index Fund; Institutional 54%.

[Wisconsin Beth]

deleted duplicate post.

[Wisconsin Beth]

Mar 23, 2011 15:37:10 GMT -5 verrip1 said:

Beth:

Rebalancing is done to make sure that you don't overweight one asset class that performs better than the others.

If you look only at your 457 account, everything you have is in stocks. No bonds, no cash, no commodities, no REITs, no currencies. There is nothing for you to rebalance because you are 100% in stocks.

For rebalancing, it makes sense to me to look at ALL your investment holdings as a whole, including hubby's retirement accounts and joint accounts. For example, you may just have some cash somewhere for an emergency fund. Maybe hubby has a REIT fund in his retirement account. Gold coins in your safe? Look at the whole picture and see what you have in what asset class, then set yourselves a goal for where you want the percentages to be now, in 5 years, 10 years, etc., until retirement. Then adjust your amounts and contributions accordingly.

Ok that makes sense. I don't know what's in DH's IRA/401K but I would bet it's all stocks too. My IRA is currently in a CD that matures in August and we have some cash banked as an efund/property tax and insurance place. No gold but DH was wondering about buying silver.

I should get a pension, if that matters any.

[verrip1]

I'm not one, but investment advisers always seem to define the asset allocation first, then select the instruments to get there second. I really can't see how to do it otherwise.

[Wisconsin Beth]

I never thought of the Investing Basics and Beyond Board. Thank you all for the help.

I relayed the answers I saw yesterday to DH. He didn't realize I was all in stocks in my 457 and immediately said we need to change that. The thing is, I don't think there's a cash fund/REIT option. I think the closest thing is the Stable Value, which may be bonds. I'll have to go look.

Frank, thank you. The little amount of thought I've given to my 457 is pretty much "buy; hold and assume the end result will be more than I put in it"

[Wisconsin Beth]

Mar 24, 2011 9:10:50 GMT -5 @wxyz said:

If you have been doing well in your account for the past ten years why are you suddenly going to have to do something about being all in stocks? You are only 41 and have perhaps 20 or more years till retirement.

Why are you suddenly on this rebalance kick? Something you read or something someone said or something on this board?

I am not disputing the good advice you got on this board above. But, in my mind in general (not you) way too many people these days call it rebalencing when they are just chasing the next fad or chasing returns. If your funds are working out well and producing a good return and are in about the percentages you would like for your risk appetite, why change anything? These days too many people are so too caught up in the short term and too caught up in having a diverse portfolio as well as too caught up in the balance thing.

Looking at your funds you have about the same amount of money in each, you continue to put about 1/3 into each. I see nothing to even remotely consider rebalencing if you are satisfied with your return. I personally would not look at it any more than once per year, if that.

It looks like two of your funds are index funds and one is managed. I assume your index funds are based on some broad index so you have lots of diversity in theory.

The standard advice I've seen is to rebalance yearly. I haven't rebalanced in several years and figured I was overdue. But then when I look at the percentages I opted for vs. the percentages actually IN the funds I wondered "Why rebalance when the numbers are so close? Is 1% difference from the ideal number that I blindly picked to where I am now a bad thing?"

[bimetalaupt]

Mar 24, 2011 10:02:09 GMT -5 @wxyz said:

There is a lot of "standard advice"out there that is worthless. A lot of it represents nothing more that the flavour of the month, just the current fad. If your funds are performing adequately considering the current economic conditions and are within your risk tolerance and seem to be generating a total return of about where they should be for the type of funds they are, than if it was me I would not even remotely consider changing anything.

some rules of investing:
Do not make it more complicated than it needs to be.
Keep it simple.
Do not swing for the fences.
Use the power of time and compounding to build wealth.
etc
etc

IN MY OPINION, (simply an opinion, not advice to you) there is nothing for you to rebalance.

As to being all in stocks. I doubt that you are all in stocks. Do you have non retirement savings, do you own a home, do you have other investments, does your husband have his retirement invested in something, do you own other assets of any type other than stocks in or outside of retirement? If so you are probably not anywhere near being all in stocks when you consider ALL YOUR ASSETS.

In any event with a horizon of 20+ years where else are you going to invest, cash, bonds? Going into bonds right now, in my opinion for anyone is a recipe for disaster when the rates head back up, as they will.

SEE DISCLAIMER ABOVE: I AM NOT GIVING YOU ADVICE SINCE I KNOW NOTHING ABOUT YOUR FINANCIAL SITUATION.

Beth,
Sorry, But you are totally out of balance.. Fixed value asset will not give you the bounce T-Bonds will.. what are your goals .. 50/50 rebalance system or 80/20 Barbell or 60/40 Efficient frontier. The 50/50 as an aggressive trading system.. You buy stocks when everyone else is selling.. Like March 2009... It is all about guts.. If you have to ask then thihk about this.. Buy when the Stop loss orders are creaming the market..

It is all about increasing return.. by the way for the last 10 years 2000 through 2010 Bonds out preformed Stocks.. We got near 10% return.. Bonds can be used as backing for shorting stocks.. It is not a game of the light hearted..

I agree with Frank but I have confused too many new investors in the last 10 years on Fed-Watch..Frank is a lot easer to follow.. I use too many tools to max return...

Bi Metal Au Pt..
Always swing for the fence with 10% of your risk capital except Bar-Bell when the system calls for 20% swing for the fence IE your total Risk capital.. That is a tough system to use.. Too much time and risk for me. Bonds are not risk free but the counter weight of stocks reduces the total risk.. Esp Inflation risk!!!

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