Depressing

you do, it's kind of a rip off.

I had assumed you have to pay some sort of fee for every transaction. Are you trying to say you shouldn't have to pay fees for transactions, or that you shouldn't have to pay for rebalancing? If it's the latter, what do you have to do, notify the company that you want to rebalance and ask that they not charge you a fee?

When I had a 401k, there were no fees for transactions that took place within that account.

Funds within a 401(k) ideally have no fees to buy or sell. My 401(k) has a brokerage option, in which one can trade individual stocks if they wish. $10 fee to buy or sell. Easy way to build a portfolio of low cost ETFs, and just pay the fee to rebalance each year if deposits during the year aren't enough to stay balanced.

On Nov 4, 1:43 pm, iarwain wrote:.

if you are still actively saving, rebalancing doesnt mean having to sell anything. Just point your new purchases are the underweight assets.

that account.

Okay I see. That may be the case. It doesn't look like I'm too far out of balance anyway. Things are down pretty much across the board.

So what do you think I should do now? Given that the one move I made in ten years was apparently a wrong one, should I just hold on to what I have and hope things get better in the next five years? Or should I make a move? And if I do make a move, doesn't that lock in my losses?

Um, it depends.

Again, it depends.

The key is not making a move just for the sake of making a move. You need a plan. You need a system. And, assuming it's a good one, you need to (a) move your portfolio to be in line with the plan -- which may be done immediately or may be done gradually; and (b) you need to periodically make sure your plan is still a good one; and (c) you need to periodically tweak things to keep yourself inline on that plan's path.

Now, coming up with that plan may be very easy or may not be. Are you talking about just your collective retirement accounts? How are they invested? What's your current asset allocation?

And then, what's your risk tolerance? Time horizon? Investment options?

It doesn't have to be complicated - a good plan is usually a simple one. But simple doesn't necessarily mean easy, either.

Without knowing a lot more about your sitution, it's impossible to make specific recommendations. And anyone who makes specific recommendations with as little information as you've presented is doing you a disservice.

Take a look at the numbers I posted the other day with returns from different asset allocations (I did 100% bonds, 100% stocks, and also 60/40 and 40/60). Volatilies of those ultra-simple portfolios are different - the all-bond one is much lower volatility than the all stock one. And long-term expected returns are also different - long-term expected returns from a

Last year we were told that, if big banks default, the whole economy could suffer. Now we are being told that, if Greece defaults or Italy defaults, the whole financial system in Europe and maybe the USA could come tumbling down. I am getting the message that investing in anything, including traditionally super-safe investments like US treasury bonds, is risky, because some small nation somewhere might default on its debts and the whole financial system could collapse. I wonder how putting cash under the mattress would work out. Well, at least I have assets in real estate, which hopefully will not tumble down for a while.

I hear you. With the current global economy, it seems like anytime there's any bad news anywhere in the world, the whole market tumbles several hundred points. The West doesn't have the economic power it used to hold for so long. It's frustrating.

I would have been so much better off just putting my 401k money into some sort of stable fund. At least I'd be getting something back. Hindsight is 20/20

I'm just wondering if there's any light at the end of this tunnel. Is there any point to continuing to play this game?

Things did look a lot better this summer when the markets were up a little. I could still make some gains, but things are going to have to improve for that to happen.

Maybe not cash, but a few gold bars and some diamonds under the mattress might not be a bad idea. But several more tried-and-true things may still be prudent, despite current uncertainty in the financial markets. For example, pay off all debts as soon as possible. Own your own home as soon as possible. Diversify your investments; don't put all your eggs in the same basket. I would put these things ahead of rebalancing a portfolio.

My opinion: Readers should consider carefully the implications of the phrases "funds that are doing better" and "ones that aren't." With all due respect, ISTM underlying such phrases is the belief that past performance guarantees future performance. Not to beat this to death but: Not so. The fact that past performance of a fund does not guarantee the same future performance is precisely why sticking with a specific allocation plan is in my opinion the appropriate counsel for the masses and probably most of the self-described experts, too.

Sell high and buy low was one of just a few rough guidelines my dad gave me when I was in my 20s. Based on how my stock purchases and sales have done overall in the last few decades, I think it was good advice.

I believe in a simple portfolio allocation such as 60/40 stocks bonds, like Tad B has referenced a number of times in the last couple of years when he writes of Vanguard's 60/40 VBINX relatively fine performance in the last decade.

But I tend to think what David says above is true. Worse, it is hard to explain how, with interest rates at rock bottom (and AFAIC, in uncharted territory, historically speaking), investment grade (IG) bond funds will tend to see their NAVs lower as interest rates one day start to rise again. Yields will go up as NAV lowers, but one loses principal as the NAV declines.

ISTM the good and conventional wisdom is that the older one is, the more one should have in IG bonds. The thinking behind this has been to reduce risk so one's nest egg is safer. For many, "IG bonds" will mean IG bond funds. As much as I believe in buying and holding; sticking with an asset allocation plan; and staying the course, I find it very hard to tell someone today to make 40% of their portfolio an IG bond fund. Can folks chime in and explain the reasons for continuing with a high allocation in IG bond funds?

Note 1: I am not an adviser. It is more that I want to keep things straight in my mind. Granted in this odd interest rate environment there is maybe no keeping anything straight. Accepting the uncertainty (yet keeping a cool head, investing-wise) of the short-term is maybe the key.

Note 2: I have a sizable amount of Certificates of Deposit maturing in

Yes, better to say "asset classes that are doing better." Doing this kind of sell winner/buy loser rebalancing with individual actively-managed mutual funds or, god forbid, stocks, can be a recipe for disaster - as some pros put it, "fertilizing the weeds." Unlike entire asset classes, individual stocks can go to zero, and "bad" actively-managed funds can forever do poorly compared to readily-available alternatives like index funds.

-Tad

You were inefficiently allocated, no more no less. Spend 5 minutes looking at how you were allocated in the past but spend much more time with how to allocate efficiently in the future. Not everybody lost big in 2008. Those who had an efficient allocation of stocks and bonds lost much less or even made a little bit.

The comparisons you were analyzing is wasted effort. It's all about ASSET ALLOCATION and keeping your emotions out of your investment decisions.

My answer lacks details but if you want to know more, contact me. Remember, over 90% of long-term investment returns come from asset allocation and the rest from selection and timing. The media nor Wall Street talks much about that because they want you to need them 365 days per year.

iarwain spoke of giving up on a bond fund, because it was doing poorly. He shifted to an international [stock] fund, which is a very different allocation category. My take on what he was saying (as quoted in my post above) is he did not like re-balancing, because to him it meant shifting money from what he felt was a winning allocation category to a losing allocation category.

I think his approach misses the boat on the purpose of re-balancing. That is, past performance of a certain category (say, small cap value stocks) does not guarantee future performance. IOW, he should not have sold the bond fund just because bonds were not doing as well as stocks at the time.

Sorry, iarwain, don't mean to come down on you. More to clarify what the points of asset allocation and re-balancing periodically are.

Clearly, getting rid of the bond fund was my big mistake. I had it for around six years, I think, and it had done nothing. So I think it's understandable that I got rid of it, even if it wasn't the right move.

I've decided to keep the funds that I have now, and allocate future contributions accordingly:

By the way, these international funds are not emerging market funds. I have an emerging market fund in my Roth IRA and it's done quite well.

Just sharing thoughts here.

-- To me, the guideline on whether to buy or sell your international allocation should be what fraction allocation tools recommend, based on age, risk tolerance, and similar.

-- Assuming we are talking about funds with low expense ratios and no front or back loads, any data that measures performance for less than about 20 years is not meaningful, in my opinion.

-- Someone with the 60/40 allocation of stocks and bonds (well- diversified in the stocks) would not have been criticized by me when stocks were far exceeding bond performance. Instead, I would remind anyone trying to criticize a 60/40 (or similar) approach that crashes do happen. The person with the 60/40 portfolio sleeps better at night, even if s/he does not always beat the stock market in the short term.

-- I do not believe that for Joe or Jane Consumer the purpose of investing in stocks and bonds should be to make a quick buck. Rather, the goal is largely to keep up with inflation and to have Joe or Jane understand that stocks for the long run (10-20 years) generally have kept up with inflation and then some.

with inflation and then some.

Well, that was my understanding. That's why I find the fact that my

Regarding the 60/40 stocks/bonds mix, remember I have other accounts that are invested much more conservatively. Because of that, I felt it was all right to gamble more with my 401k. Unfortunately, at this point, it appears I am losing.

Try this for an alternative take on retirement investing. That's what I have been following the last few years (since 2008). I'm only in money market, TIPS, Treasuries, I-bonds, and savings accounts. The returns aren't all that great, but I sleep well at night. :)