Spring Cleaning for your 401(k) Investments - Rebalancing
With the end of April quickly approaching, many of you have already taken part in your own version of spring cleaning. Whether it’s finally reorganizing that garage, getting the yard work done or just freshening up the house, this time of year represents a time of rejuvenation and fresh beginnings. What better time than now to discuss the often-overlooked importance of cleaning and reorganizing your 401(k) investments?
The investments you pick and the amount you invest in each depends greatly on you as an individual – specifically, your risk tolerance
and personal goals for retirement. Once you’ve established the appropriate mix of investments for your nest egg, it may seem fine to just kick back and sail away toward retirement. Taking the sailing analogy one step further, winds will always shift from time to time, which may either speed you up or slow you down. It’s important to adjust your course regularly in order to stay on a steady path toward your destination.
These are all points you hear us stress again and again, but one topic that is vital to your investment success and may sometimes be forgotten is rebalancing. While you may do a great job of adjusting the amount you contribute to each fund in your portfolio a few times every year, it’s also important to make sure that the overall look and feel of your total group of investments hasn’t gotten off course.
Some investments, like stocks, may grow faster than other investments. This means that in a period of strong performance, a portion of your overall portfolio may grow, while your other investments may become smaller pieces of the pie. Because this moves you away from your intended strategy, you’ll want to rebalance.
Making sure to rebalance your investments at least 2-4 times per year will help keep you on a consistent path and ensure that your long-term strategy stays intact.
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is a web-based investment advisory service providing unbiased recommendations to help people invest in employer-sponsored retirement plans. Smart401k provides service to nearly 11,000 clients who collectively have more than $2 billion in assets. Plan participants receive personalized, fund-specific investment recommendations and the support of professional investment advisers available to discuss all investment questions. Based in Overland Park, KS, Smart401k is online at www.Smart401k.com.