Company's 401(k) Plan.
01 July 2011
If you’re a Smart Investor client, your portfolio is reviewed daily to ensure that the asset allocation is within range of your stated objectives. When a portfolio is out of balance (more stocks or bonds than the stated objective) we rebalance your portfolio. You have given us the discretion to do this.
But what about your 401(k) plan at work or IRAs held elsewhere? Are they automatically rebalanced?
What is the cost of doing nothing? A portfolio that grows more on the equity (stock) side can expose you to more risk than you are prepared to accept.
Remember the 1990s, the dot-com era? Technology stocks grew and grew and grew. Alan Greenspan might have said it was irrational exuberance on steroids. Many investors found their portfolios heavily weighted in stocks, particularly technology stocks. When the tech market crashed in 2000, investors who had not rebalanced their accounts and had let the technology sector of their portfolios grow disproportionately suffered a much greater loss than they would have had they vigilantly rebalanced their portfolios.
Portfolio rebalancing is an important part of sticking to your game plan. You should look at your portfolio at least quarterly in terms of rebalancing and more frequently if you have had a significant gain or loss in any asset class.
Many company retirement plan record keepers offer automatic rebalancing, and we recommend you take advantage of this service. If you are unsure about your 401(k) plans not handled through Smart Investor, give our office a call. If you would like us to review your company 401(k) statement and assist you in making sure your allocation reflects your game plan, we’d be happy to do so.