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10-25-2008, 04:05 PM
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#1 |
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Registered User
Join Date: Jan 2008
Posts: 2
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401k - Reblance or ride out
I am 47 years old. My 401k is in a very aggresive protfolio.
(20% S&P, 15% Large Cap, 25% small cap, 25% International funds & some bonds) Given I have seen a 40 -45% decrease in my 401k balance since the start of the year, do I go in now and rebalance or ride it out. I have gone from almost 600k to around 360k this year! If I rebalance now (into the money market fund) am I scraficing a payoff down the road? HELP! |
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10-25-2008, 05:06 PM
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#2 |
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Registered User
Join Date: Oct 2001
Posts: 1,586
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Mdmale35,
Rebalancing is when you adjust your allocation from your current (20% S&P, 15% Large Cap, 25% small cap, 25% International funds & some bonds) changing the percentage you have in the various categories. We all have a starting allocation across several categories that we would like to maintain. We do this to reduce our risk. During the trading periods, some categories perform better than others and things get out of balance. It sounds like you are considering a drastic shift in your allocation. When would you get back to a more aggressive portfolio? In the 12 months following the last 10 bear markets, the S&P500 has gained an average of about 24%. You want to be invested to enjoy that ride. |
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10-27-2008, 06:10 PM
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#3 |
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Registered User
Join Date: Mar 2007
Location: Ohio
Posts: 324
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Your target percentages are 20-15-25-25-15
Your current percentages are what? Rebalancing implies you move your current back to target If you are changing the target- that is a new allocation, not a rebalance. Market performance should not determine your risk tolerance. I am down 40% ytd as well (200k became 120k). BUY MORE now, and then when market moves up, consider taking some of the profits and moving them to a bond fund or REIT fund to reduce risk.
__________________
Light is faster than sound. That is why some people appear bright until you hear them speak. |
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10-28-2008, 06:08 PM
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#4 |
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Registered User
Join Date: May 2007
Posts: 124
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As ClydeWolf and jIM suggests, rebalancing means you would be buying into the risky investments right now, rather than selling out of them.
If you sell the risky stuff now and buy money market shares, you'll be selling low. I personally think rebalancing is a great idea right now. I say that because I think the market is lower now than it will be one year from now. Is it lower now than it will be 4 months from now? I have no idea. Ask EMTrendadvisors.com. Or better yet, shake your magic 8-ball and see what it says! |
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