My wife and I were in the process of rebalancing our 401(k) portfolio and we were pondering on the difference between
a) moving money from one portion of the portfolio to another vs.
b) adjusting future contributions to maintain the percentage which we find comfortable.
Is one method better than the other and if yes, then in which situations?
E.g. Our bonds are at a higher percentage right now than the international slice. Should we sell a portion of the bonds mutual funds and move that money to international and US shares? Or should we reduce buying as many bonds and buy more stocks - US and international.
We are 32 yrs old. --Amit , VA
In my nearly 20 years of advising individuals about their portfolios and allocation, you, my friend, are the first 30-something to ask me about rebalancing strategies. Congratulations! This tells me alot about you and I am impressed.
Since you are 32, I would suggest you not have more than 20%-30% in bonds. You've got nearly three decades before you'll probably touch this money and probably another three decades of life after retiring. My point: you can afford to be aggressive with your 401(k) portfolio.
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