Asset allocation across accounts

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One of the major goals of portfolio analysis is to have the "right" balance of stocks and bonds. More stocks increase growth and volatility; more bonds provide some safety but less growth.

You need to consider this from the perspective of your total portfolio. Consider the amounts you currently have as well as what you are buying.

You might evaluate your portfolio based on estimated after-tax amounts. Roth IRA is tax free; after-tax investments are subject to capital gains and tax deferred investments (401k, IRA) are treated as ordinary income.

Frank

If you don't treat it as one, then you often end up with assets placed inefficiently for tax purposes. It's difficult to evaluate any particular situation without a thorough review of all the facts. That would include things like the relative balance of the taxable vs. tax-advantaged accounts, and choices in 401(k) plans.

529 plans generally have a different objective and timeframe than retirement plans, so a separate allocation there can be reasonable idea.

Brian

Treat them as one large portfolio to make managing the accounts easier.

Roth and Traditional IRAs allow the purchase of individual stocks or funds.

I would recommend using ETFs instead of traditional funds to enhance liquidity.

I don't think that you have much of a limitation. There are usually funds that match the S&P 500 even in a 401K.

-- Ron

Good questions.

My suggestion is for retirement you have "one allocation". Might be

80% stocks-20% bonds, might be something more complex (with REIT- commodities-foreign stocks and other investments). How you implement this depends on the relative sizes of each account. In my opinion if account balances are lopsided, try your best to implement the same allocation in every portfolio.

In my case, my account balances are about 4X the size of my wife's. And my Rollover IRA and 401k are about 2X the size of my Roth. The forces you mention (contribution limits) drive much of this lopsided account balance. Each of these accounts is invested with 35% large cap-15% mid cap-15% small cap-15% international large cap and 10% international small cap or emerging markets and 10% bonds.

I do this so when I rebalance one account, I do not need to retrieve the other 5 account balances and start selling fund X in account A to buy fund X' in account B as part of my rebalance. Part of my own issue is that my 401k has decent funds, but they are institutional funds specific to my employer. I cannot xray them, I cannot examine all their holdings "real time" or enter a 5 letter ticker symbol into any portfolio tracking tool to measure their progress. And this account is a significant amount of my retirement monies.

In summary, all retirement accounts create 1 retirement allocation. How you slice and dice the accounts (all accounts have same allocation or fund A in account 1 and fund B in account 2 and fund C in account

3) is a function of how you want to manage things.

With lopsided account balances, it is my opinion that its best for each account to have the same allocation which makes rebalancing any account easy. I can offer more insight into this, if interested (I have other things I do to make sure the 6 accounts I have (Roth, Rollover and 401k for each spouse) are working in complimentary fashion.

As for 529, that money has a different purpose, with a much shorter and finite timeframe. With our retirement, I am highly aggressive (80%

• equities), with our 529, I am much much much more conservative (50% equities, 50% bonds; removed all foreign and small cap equities). I have further opinions on why a 529 should be more conservative, if you want them, please ask.