33yr old looking to rebalance my 401k

Anonymous · ‎11-09-2018

I re-balanced my 401k in April of this year and last month alone my balance was reduced by $1,600. Is this a normal fluctuation? Should I be worried? Any advice would be appreciated! Thank you!

My investments prior to April:

COMPANY STOCK DENTSPLY SIRONA INC STOCK ESOP
balance $7,003.55 shares 142.8713 price $49.02 average cost $41.48
T ROWE PRICE RETIRE 2050 TR F
balance $18,659.79 shares 914.2475 price $20.41 average cost $20.48
TRP STABLE VALUE FUND SCH E
balance $618.43 shares 618.4300 price $1.00 average cost $1.00

Current Investments since April:

T ROWE PRICE RETIRE 2050 TR

Balance: $25,725.01 Change in Bal.: -$125.25 Shares: 1,252.4345 Price: $20.54 Change in Price: -$0.10 Av. Cost: $20.64

VANGUARD TOTAL BOND INDEX ADM

Balance: $141.08 Change in Bal.: -$0.15 Shares: 13.8050 Price: $10.22 Change in Price: -$0.01 Av. Cost: $10.39

VANGUARD TTL INT STOCK IND ADM

Balance: $1,090.92 Change in Bal.: -$11.21 Share: 40.0337 Price: $27.25 Chance in Price: -$0.28 Av. Cost: $28.97

Current Asset Allocation (100% vested)

Stocks 85.9%

Anonymous · ‎11-09-2018

The value of your portfolio went down because stocks took a big tumble, as you may have heard in the news.

Stocks (especially US stocks) have been overvalued for a while. The recent market correction has been expected for some time.

One think you should definitely not do is panic and sell stocks (which is possibly what you mean when you say you are looking to rebalance) after a substantial fall in price. That is buying high and selling low, which is a bad plan.

If you find that this recent plunge is causing you great anxiety, that's a sign that your portfolio may be too heavily invested in stocks for your personal risk tolerance. Changing your contribution allocations so that you have a greater investment in cash (high interest savings) and bonds may be warranted.

But before you do that I encourage you to find the booklet IF YOU CAN by William Bernstein. It's aimed at young investors (though it is good for anyone new to investing). Read though it, focusing on the sections about risk and return as well as disciplined mental/emotional habits of good investors. Then if you are ready to move on a bit further read his book The Investor's Manifesto (written a year or two after the 2008 crash) -- with special attention to Chapter 4 ("The Enemy In The Mirror"). IF YOU CAN is free and is available online.

Anonymous · ‎11-09-2018

@Anonymous wrote:
I re-balanced my 401k in April of this year and last month alone my balance was reduced by $1,600. Is this a normal fluctuation? Should I be worried? Any advice would be appreciated! Thank you!

My investments prior to April:
COMPANY STOCK DENTSPLY SIRONA INC STOCK ESOP
balance $7,003.55 shares 142.8713 price $49.02 average cost $41.48
T ROWE PRICE RETIRE 2050 TR F
balance $18,659.79 shares 914.2475 price $20.41 average cost $20.48
TRP STABLE VALUE FUND SCH E
balance $618.43 shares 618.4300 price $1.00 average cost $1.00

Current Investments since April:
T ROWE PRICE RETIRE 2050 TR
Balance: $25,725.01 Change in Bal.: -$125.25 Shares: 1,252.4345 Price: $20.54 Change in Price: -$0.10 Av. Cost: $20.64
VANGUARD TOTAL BOND INDEX ADM
Balance: $141.08 Change in Bal.: -$0.15 Shares: 13.8050 Price: $10.22 Change in Price: -$0.01 Av. Cost: $10.39
VANGUARD TTL INT STOCK IND ADM
Balance: $1,090.92 Change in Bal.: -$11.21 Share: 40.0337 Price: $27.25 Chance in Price: -$0.28 Av. Cost: $28.97

Current Asset Allocation (100% vested)
Stocks 85.9%
Bonds 10.8%
Money Market/Stable Value 2.4%
Other 0.9%

Speaking as 1) some one some who at one time managed a 7 figure portfollio and 2) has an MBA in Finance

A) don't sweat minor market swings

B) keep as little as possible tied up in your employers stock. They probably put the match if any in their stock and require it to be there for 3 to 5 years. You already have your job with them

C) At your age keep most of your money in stock. Historically better returns. Once closer to retirement bonds and money markets

D) Don't try to outpreform the market. It is a zeroe sum game instead

1) Dow Jones 30 Industrial Index Fund "Diamonds" vangaurd has one so do several others

2) Standard and Poors 500 index Fund " Spyders" vanguard has one so several others

3) Russell 2000 Index fund not sure who has this

4) If you want to add some excitement try Berkshire Hathaway Mr Buffett I would put faith in.

Good luck

iced · ‎11-10-2018

@Anonymous wrote:
@Anonymous wrote:
I re-balanced my 401k in April of this year and last month alone my balance was reduced by $1,600. Is this a normal fluctuation? Should I be worried? Any advice would be appreciated! Thank you!

My investments prior to April:
COMPANY STOCK DENTSPLY SIRONA INC STOCK ESOP
balance $7,003.55 shares 142.8713 price $49.02 average cost $41.48
T ROWE PRICE RETIRE 2050 TR F
balance $18,659.79 shares 914.2475 price $20.41 average cost $20.48
TRP STABLE VALUE FUND SCH E
balance $618.43 shares 618.4300 price $1.00 average cost $1.00

Current Investments since April:
T ROWE PRICE RETIRE 2050 TR
Balance: $25,725.01 Change in Bal.: -$125.25 Shares: 1,252.4345 Price: $20.54 Change in Price: -$0.10 Av. Cost: $20.64
VANGUARD TOTAL BOND INDEX ADM
Balance: $141.08 Change in Bal.: -$0.15 Shares: 13.8050 Price: $10.22 Change in Price: -$0.01 Av. Cost: $10.39
VANGUARD TTL INT STOCK IND ADM
Balance: $1,090.92 Change in Bal.: -$11.21 Share: 40.0337 Price: $27.25 Chance in Price: -$0.28 Av. Cost: $28.97

Current Asset Allocation (100% vested)
Stocks 85.9%
Bonds 10.8%
Money Market/Stable Value 2.4%
Other 0.9%
Speaking as 1) some one some who at one time managed a 7 figure portfollio and 2) has an MBA in Finance

A) don't sweat minor market swings
B) keep as little as possible tied up in your employers stock. They probably put the match if any in their stock and require it to be there for 3 to 5 years. You already have your job with them
C) At your age keep most of your money in stock. Historically better returns. Once closer to retirement bonds and money markets
D) Don't try to outpreform the market. It is a zeroe sum game instead
1) Dow Jones 30 Industrial Index Fund "Diamonds" vangaurd has one so do several others
2) Standard and Poors 500 index Fund " Spyders" vanguard has one so several others
3) Russell 2000 Index fund not sure who has this
4) If you want to add some excitement try Berkshire Hathaway Mr Buffett I would put faith in.

Good luck

I'd argue point B has room for tolerance, depending on the company. If I worked for a JPM or AAPL for instance, I'm not going to avoid their stock solely on the grounds I also work for them. The key is not to let one company's holdings overwhelm and dominate your portfolio.

If the company isn't going in the right direction, then I agree that one will want to dump ESPP every vesting, take the profit, and run.

Anonymous · ‎11-10-2018

@iced wrote:
If the company isn't going in the right direction, then I agree that one will want to dump ESPP every vesting, take the profit, and run.

There's a double reason for what the other two commenters are advising. Namely, if the company goes sufficiently in the wrong direction, you could lose both your job and your equities in the company at the same time. The strategy of diversification means that, when any particular asset goes badly (and a job is a big financial asset bringing in most of your yearly wealth) it has minimal impact on your well-being.

One of the many useful lessons I learned from Bernstein is that diversification ensures that some part of your assets will always be doing badly (or less good than some other piece). This is immensely counter intuitive at first (why would I want a plan that ensures some things in a given year are doing very sub-optimally?) but it becomes ultimately very freeing, because you come to realize that the flip side will also tend to be true: my strategy ensures that as long as I stay the course I will likely have some assets that are doing well. Properly understood, diversification is Tums for your financial stomach and zolpidem/Xanax for your anxiety ridden sleepless nights.

The goal of diversification is not to ensure that you will retire rich (e.g. 10+ million dollars) but that you will avoid dying poor. A huge number of your peers (whether you are 30, 40, 50, or 60) will be poor in their retirement years. Avoiding that needs to be the central goal of any plan. One can be happy with a moderate amount of money. It's very hard to be happy when you are poor (especially when combined with the attendent problems of old age: illness, incapacity, etc.).

iced · ‎11-10-2018

@Anonymous wrote:
@iced wrote:
If the company isn't going in the right direction, then I agree that one will want to dump ESPP every vesting, take the profit, and run.
There's a double reason for what the other two commenters are advising. Namely, if the company goes sufficiently in the wrong direction, you could lose both your job and your equities in the company at the same time. The strategy of diversification means that, when any particular asset goes badly (and a job is a big financial asset bringing in most of your yearly wealth) it has minimal impact on your well-being.

One of the many useful lessons I learned from Bernstein is that diversification ensures that some part of your assets will always be doing badly (or less good than some other piece). This is immensely counter intuitive at first (why would I want a plan that ensures some things in a given year are doing very sub-optimally?) but it becomes ultimately very freeing, because you come to realize that the flip side will also tend to be true: my strategy ensures that as long as I stay the course I will likely have some assets that are doing well. Properly understood, diversification is Tums for your financial stomach and zolpidem/Xanax for your anxiety ridden sleepless nights.

The goal of diversification is not to ensure that you will retire rich (e.g. 10+ million dollars) but that you will avoid dying poor. A huge number of your peers (whether you are 30, 40, 50, or 60) will be poor in their retirement years. Avoiding that needs to be the central goal of any plan. One can be happy with a moderate amount of money. It's very hard to be happy when you are poor (especially when combined with the attendent problems of old age: illness, incapacity, etc.).

I agree with diversification - no matter how good a company is, you should diversify (and thus not let the stock overwhelm and dominate your portfolio). I'm not talking about not diversifying though, I'm saying that someone shouldn't avoid holding their own company stock simply because they work for that company. Treat your company's stock like any other - if it's something worth holding a position in, the fact you get it at a discount is a bonus.

By the age of 40, a retirement portfolio should be able to withstand a loss of job and company stock (if that company went bankrupt).

Anonymous · ‎11-10-2018

Keep it simple. Put everything in an equity index fund and leave it alone. You have a long time horizon. Get out of bonds. Rates will continue to go up and they will underperform. This is based on what I have experienced in the last almost 40 years of investing and finance. I’m not so sure even the equity markets will perform well in the next 5 or 10 years with the headwinds and valuations

Anonymous · ‎11-10-2018

Credit Guy made me think of one very old book. Benjam (sp) Graham The Intelligent Investor published around 1929

With regard to point B. In 2008 /2009 I had a friend with about $10MM in their 401K. They were in their 50's at the time. Slightly over 1/2 was in their co stock, a well respected co. So close to early retirement it was not even funny. Suddenly their firm did a power dive and took bk. All their co stock was worthless. The remainder of their 401K pushed the envelope some place i would never go. When all was said and done final 401K value late 2009 early 2010 slightly over $1MM. I have not spoken with them but suspect if they are lucky they now have $2MM. ironically they lived in a house one step away from tar paper shack and always drove beaters trying to save money

Anonymous · ‎11-12-2018

Would you consider the VANGUARD INST INDEX VINIX + 2 fund a good option?

Anonymous · ‎11-12-2018

My own belief is that all transactions (selling, buying, whatever) are a bad idea until you spend time reading a booklet like Bernstein's "IF You Can" -- and have taken time to absorb all the ideas in it. Asking strangers on the internet for tips on funds is a bad idea without taking a few months (at least) to ground yourself in the fundamentals.

That's just my take on it. Best wishes...