When DH and I first started investing (1998), we didn't know anything and went all into an S&P 500 managed fund
frown
and then wised up a little and switched to an S&P index. Then I read about diversification and we started putting money into small cap and international indexes.
Ten years later
after some more reading, I got more serious about asset allocation and chose additional small % targets for DH and myself in additional classes (emerging markets, REIT, etc) (similar to the sandwich portfolio, pretty standard).
At the time, in 2008, DH didn't like the idea of moving any existing funds to re-allocate, so we just stopped adding to the existing funds and re-directed our new deposits to the areas we were short.
Well, here we are in 2010 and we're still way overweighted in S&P 500 fund (about 70% over our desired allocation) and international funds (30% over). I'd like to re-balance in one fell swoop just to finally get everything where I want it, but DH points out that in the case of, say, emerging markets, we'd be selling the 500 fund, which is down, to buy into emerging markets, which is up. Not exactly what you're typically going for with rebalancing.
Reading through the older threads, it seems as though maybe rebalancing isn't entirely critical to success, so maybe I should just leave it alone. But then I wonder if there will ever be a time to get back on track. I don't see getting there with new funds alone, although we'll continue to add where we're low.
Thoughts?
P.S. We also have some money in the TSP's G Fund standing in for our bond percentage, and conveniently that % is right where we want it. So this is only a question of what to do with the stocks.
Ten years later
At the time, in 2008, DH didn't like the idea of moving any existing funds to re-allocate, so we just stopped adding to the existing funds and re-directed our new deposits to the areas we were short.
Well, here we are in 2010 and we're still way overweighted in S&P 500 fund (about 70% over our desired allocation) and international funds (30% over). I'd like to re-balance in one fell swoop just to finally get everything where I want it, but DH points out that in the case of, say, emerging markets, we'd be selling the 500 fund, which is down, to buy into emerging markets, which is up. Not exactly what you're typically going for with rebalancing.
Reading through the older threads, it seems as though maybe rebalancing isn't entirely critical to success, so maybe I should just leave it alone. But then I wonder if there will ever be a time to get back on track. I don't see getting there with new funds alone, although we'll continue to add where we're low.
Thoughts?
P.S. We also have some money in the TSP's G Fund standing in for our bond percentage, and conveniently that % is right where we want it. So this is only a question of what to do with the stocks.