Monday, February 03, 2014

Automatic Asset Allocation for 401K Plan

Automatic Asset Allocation

That's what the green button says on my 401K plan with Nationwide...And I have been staring it at for quite a while over the past few weeks. All the financial gurus out there recommend rebalancing your stock/bond portfolio at least twice (2) a year, either automatically or manually.

I knew I wanted to rebalance my portfolio because over the last two years, the small cap and mid cap stocks in my portfolio have skyrocketed to nearly 30% of the portfolio. They had been doing very well, indeed. That fell out of congruence with the initial mixture that consists of 10% small cap and 10% mid cap stocks...big time. The portfolio had drifted away from the initial mixture by nearly 10% in each category while large cap stocks and international stocks fell slightly behind by 5% to 10%.

I knew I needed to rebalance badly! However, I just had not pressed that automatic rebalancing feature (free with nationwide plan) because it's hard to sell off well-performing stocks to buy lagging ones. But I DID it! On 1/31/2014, I finally rebalanced an 8 year old account with a future quarterly rebalancing schedule.

According to, as a rule of thumb, when your assets drift 5% or more away from your allocation, you should re-balance. It proposed considering the alternative...which is what happened to people during the tech stock boom of the late 1990s. The technology stocks grew out of proportion withi many people buying more and more of the tech stocks and not enough of the other stock categories. When the market crashed in March of 2000, the largely disproportionate percentage of their portfolio had nothing to fall back on. That consideration mainly prompted me to finally hit that Automatic Asset Alloation button. Finally.

Then, of course, today, the markets tanked. What is it with me and timing, lol? Hopefully, this was a good move in the long run.

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