How Often Should You Mess With Your 401(k)?

WSJ discusses the advantages of portfolio rebalancing.

Rebalancing is good, but I’ve only done it to the extent that it doesn’t trigger any additional Federal income tax liability in my taxable accounts.


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Of course you can rebalance a 401k tax free if you like.

Many 401K plans used to have fixed income investments that often paid good interest sometimes guaranteed. Rising interest rates make those more attractive. And those who are risk averse find them attractive.

Frequent rebalancing is probably not worth it. But trimming winners and buying undervalued funds once a year or so can be useful.

I worked for a company that had cyclical stock prices. I would accumulate at the bottoms and then transfer to fixed income at the top. But of course the choices you have available make a difference. S&P 500 Index fund would be core for many. International fund? Fixed income? Sector funds like Tech Stocks.

Every plan is different. Its hard to generalize but something to keep an eye on.

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