NT and I both have 401(k)s through our jobs. For both of them, after watching the Frontline documentary on retirement plan costs, I went in and switched from a target-date fund to a customized mix of the lowest-cost options.
NT's job doesn't offer any really cheap options; the best prices are in the .9% to 1.1% range. I picked from each type of investment and did 20% in each of five options. Mine, when I initially switched a year or two ago, actually had three Vanguard funds available, so I did something like a 40%-40%-20% blend.
When you have your own mix, of course, there's no automatic rebalancing. I hadn't really thought much about going in and rebalancing myself, until the guy from our 401(k) provider did a talk in our office. Most of what he said was either nonsense or stuff I already knew, but he did bring up the fact that rebalancing is a way to follow the common wisdom of selling high and buying low.
Well, I'd been mulling that off and on for the past couple weeks, and finally I decided to see if I could figure out how to rebalance our portfolios myself.
When I went into mine, I was pleased to see we now have FIVE Vanguard funds available. So first I changed my future contributions to divide more evenly among five funds vs. three. I did smaller amounts to the two that had grown the least over the past 10 years and larger amounts to the three better-performing ones.
Then I discovered that there's a button you can press to have them move funds around to make your current holdings match your allocations. Sweet!
Then I discovered ANOTHER function that lets you enroll in automatic quarterly rebalancing even if you don't have a target-date fund. Even sweeter!
So now I have greater diversity in my work 401(k) AND I have automatic rebalancing set up so I can sell high and buy low without even doing anything.
I'm working on NT's now. He still doesn't have any cheap options, and I discovered he still had about $6 in a target-date fund which prevented me from rebalancing. But I set up a transfer of the remaining funds out of that target-date fund, and as soon as that's done I should be able to rebalance his, and maybe even set it up for automatic rebalancing in the future!
Tinkering with 401(k)s
October 21st, 2015 at 04:16 pm
October 21st, 2015 at 05:17 pm 1445447854
In your shoes, I would decide on an allocation and then use the Vanguard funds to achieve that allocation. Any holes in your portfolio can then be addressed by your IRA selections.
October 21st, 2015 at 05:21 pm 1445448116
October 21st, 2015 at 08:03 pm 1445457812
October 22nd, 2015 at 01:02 am 1445475750