Re-balancing with new funds, October edition

I’m trying to get into the habit of adjusting where my 401(k) money goes each month since my 401(k) company allows me to do this easily online. My options are:

  1. Vanguard Retirement Savings Trust (stable value)
  2. Vanguard 500 Index Fund Investor Shares
  3. Vanguard Total International Stock Index Fund Investor Shares

My employer match goes into something that I just count in my allocation to US Stocks.

My first priority is the ratio between fixed income investments and stocks, with the ratio between US and international stocks being second.

So far this year:

  • In July, since I had made such a huge addition to stocks by buying the Total International Admiral shares fund in my taxable account, I ended up putting 100% of my 401(k) contribution to the stable value fund. This put the split at 24%/31.5%/44.5% (Stable value/US Stocks/International stocks).
  • In August, there was a bit of a stock market gain, so I ended up putting 49% of my 401(k) contribution to the stable value fund and the rest to the S&P 500 fund. The split was now 24%/32.2%/43.8%, so a slight improvement over last month.
  • In September, I saw a lot of stock dividends post to my investment accounts, which threw off the distribution a bit. I re-did the calculation and determined that I should put 47% of my 401(k) contribution to the stable value fund and the rest to the S&P 500 fund, so I just left the contribution split from August since it was so close. The split was now 24%/32.7%/43.3%.
  • In October, my stocks went down a bit. I re-did the calculation again and it suggested I put only 28% of my 401(k) contribution into the stable value fund this month and the remaining 72% into the S&P 500 fund. I updated it this time around since that was quite a difference from August’s calculation. The split was now 24.3%/33.2%/42.5% (it looks like I updated my spreadsheet since I updated my 401(k) contribution allocation with Vanguard…), so we’re definitely trending towards the target of 24%/38%/38%.

I understand that this isn’t an exact science, but I generally try to do the calculation in the last few days of the month so that it’s as close to my contribution posting as possible.

You might also wonder why I’m adjusting with new money each month instead of flat out exchanging some shares of Total International for S&P 500 in my 401(k) since it’s so far off target. Well, my investment policy statement says to only re-balance with new money, ever. I implemented that policy so that I wouldn’t be tempted to try new strategies or different things by rearranging my money into different funds and it’s working quite well so far. Other than moving my employer match funds into the S&P 500 index fund, I haven’t exchanged any funds since December of 2011 and I think it’s much better this way. I need to protect myself from my fidgeting mind!


11 thoughts on “Re-balancing with new funds, October edition

  1. That sounds complicated! :) I set mine on automatic rebalance. I’m not particularly interested in various investment strategies, so I educated myself as much as I had to, picked a allocation, and stuck with it. I probably should re-evaluate, since it has been a few years.

    • I don’t have any automatic rebalance options unless I use target date funds and I want a higher international stock allocation than what those use. I would be more likely to use those if I didn’t have investments outside of tax-advantaged accounts.

      It’s actually not that complicated since I have a spreadsheet template, grab the numbers from the one page at Vanguard (all of my investments are there), put them in the spreadsheet, and then update my 401(k) contribution allocation based on what the formulas say. But yes, I guess it is a bit complicated.

  2. My allocation is a bit of a mess. I have investments in Fidelity, Ing, Etrade, and Vanguard. Eventually I want to move all the Ing to Fidelity and all the Etrade to Vanguard… but Ing has repeatedly resisted moving my stuff over, and I’ve been waiting for the stock market to settle down before moving large sums of money from one place to the next with the etrade. I don’t like 1 ppt swings when I’m selling and buying.

    The Vanguard is in Target-date funds. The Ing and Fidelity automatically re-balance. I use the Etrade for the things Fidelity doesn’t sell cheap.

    I rebalance the entire thing once a year when I add money to the IRAs.

    • If you move all of the e-trade to Vanguard, what will you buy there? Are you buying stuff with e-trade that you can’t buy with Vanguard?

      • No, our etrade stuff is all ETFs and Vanguard index funds. We started it in 2002 before we knew Vanguard existed. (It used to be in etrade indexes, but they stopped offering those)
        Everytime they mess something up I want to switch, but they haven’t messed anything up in a while.

  3. Warren Buffett always said his greatest triumph was getting one good idea a year, milking it, and then not doing much. I think chilling out is a really great strategy.

    If you get too antsy, however, have you ever considered allotting yourself a few grand to try playing the market? Success in dividend investing can be extremely satisfying. This has helped me ‘chill’ and maintain an otherwise extremely low risk profile.

    • Oh dear, no, I don’t want to play the market. Not letting myself re-balance with existing funds is a good solution for my fidgeting though. I’m a perfectionist, lol, which can be terrible with the stock market. I think individual stocks would be far too stressful for me.

    • Actually, I think that for some people, not staying on top of their accounts is a good thing since then they don’t see the market drops and want to sell. I don’t think that knowing how they’re doing on more frequent than a monthly basis is valuable insight.

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