How does 401k portfolio rebalancing works?

I am considering moving some of my money market 401k money to stock funds under the same 401k account.

Here's my question. Just "as of what time" share prices are used, if I want to rebalance my 401k portfolio.

Example, let's say that I submit a request to sell money market shares and buy value fund shares, at 2pm on a trading day. Would the request be effected same day? What is I do the same at 5am on a trading day? Would it be using share prices for this market close?

Reply to
Ignoramus31919
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Usually you'd get the NAV for that mutual fund for that day after closing, to be effective the next day. Some mutual funds are priced at 12:00. Most are priced after closing.

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Reply to
PeterL

This is going to depend on the 401(k) provider, and perhaps on the agreement that they have with your company. Why not just call the provider and ask?

There is no need to block Google Groups articles in moderated newsgroups, such as m.i.f-p, as the moderator doesn't post any spam. If you choose to block these articles anyway, you may miss out on good information.

Dave

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Reply to
Dave Dodson

I have a very similar question. On Friday, I issued a rebalance request. The processing went down like this. Friday NAV (10/10 for all of the Sell orders. Monday NAV (10/13) used for the Buy orders. I lost thousands, as Monday was a big gain day. Is this typical? To me, it is too hard to believe that rebalancing would cause me to lose this much money. Any and all help/advice greatly appreciated. Andy

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Reply to
andyeaglesfan

Of course it's not typical. There is nothing typical about this market. The process is typical. But you got caught in a whipsaw. Here are some advice.

  1. Next time, don't issue buy/sell orders at the same time. If you are concerned about short term fluctuations, issue one order before closing on one day. Then issue the counter order just before closing the next day. That way you have some idea what you are selling and buying into.
  2. Don't worry about short term fluctuations if you are a long term investor.

  1. Trade ETF's instead of MF's. That way you have a definite idea what price you are paying.

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Reply to
PeterL

This is an interesting suggestion. However, with ETFs you pay commission to trade (probably not a big deal for long term holdings), and in some cases the expense ratio is higher than that of an equivalent mutual fund.

For example: FSMKX - 0.10%; SPY - 0.08% FSIIX - 0.10%; EFA - 0.34%

In the latter case, you're not only paying commission to trade but you end up with a 3x expense ratio! Not good unless you're doing short-term trades (because in that case the mutual fund would have charged a short-term trading fee).

Anoop

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Reply to
anoop

VEA: 0.12%

Not precisely the same, but about as close as it gets, and a bit more tax-efficient, as well.

Reply to
BreadWithSpam

It's funny to look at the differences in costs between ETFs and open-ended mutual funds on a day that some of the broad market ETFs closed 8-9% higher than their intra-day lows...meaning the mutual fund buyer, who buys shares at the end-of-day NAV, pays 8-9% more than the "best price" of the day. And on the flip side, the mutual fund sellers got 8-9% more than the "worst price" of the day for the ETFs.

Fortunately it isn't usually so volatile intra-day, otherwise these ETF vs mutual fund choices could really affect net returns just from time-of-day price differences. It does make rebalancing a bit more difficult though...at least the ETF price is known at the time of the trade, more or less.

A similar issue is in Vanguard's 529 plan where there's a two-day lag for a purchase even if you use the auto-debit from a checking account. Over the past two weeks there have been some pretty big two-day moves.

-Tad

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Reply to
Tad Borek

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