The Full Motley: 2Q 2011

I will be honest: after quitting my job last month, I haven't paid attention to what the markets have been doing this quarter.  Case in point, I drafted this article a couple weeks ago and then I forgot to update this quarter's rebalance as described below and publish the entry until today.  However, the vast majority of investors (especially those investors exclusively in their employer-sponsored plan) do not follow daily market performance either.  They are too busy living their own lives, which do not revolve around how much money they will have at retirement upwards of 30 years away.  However, I have said numerous times thorughout this blog that the most important element in personal investing is not what the markets do daily (or weekly, even annually) but how your account is allocated across the investments and your ability to maintain the percent you have earmarked previously in each investment.

For the specifics actions required for the maintenance of my 401(k) account this quarter, here is my new breakdown:

Fund # - Real / Current / Target
Fund 24 - 25% / 0% / 25%
Fund 29 - 5% / 0% / 5%
Fund 59 - 19% / +5% / 25%
Fund 84 - 10% / 0% / 10%
Fund 85 - 34% / -9% / 25%
Fund 113 - 9% / +1% / 10%

This graph may have looked slightly different in the past quarters.  In the past entries, the "current" column was used to represent the allocations of money coming into the account, but because I am not currently employed, there is no incoming money.  Therefore, the "current" column represents how much money is going to be moved in the current transaction.

Obviously, the Total Stock Market Index fund needs to have about 10% removed and it should be split (although, obviously not evenly) into the PRIMECAP Fund and Total International Stock Index.  In this instance, I split the money I moved from Fund 85 and put the majority of it to Fund 59 and the remainder into Fund 113 (in previous installments, I didn't touch Fund 59 since I was building it up completely through Dollar Cost Averaging to its target, but once you leave your employer, you cannot put new money into the account so my opportunity to build the fund is over).

Notice how the vast majority of these quarterly rebalancing transactions only affects three funds on average and the amounts moved are usually less than 10% of the overall balance.  Most professionals recommend rebalancing accounts on an annual basis, but I am reviewing it quarterly because when the markets move harshly, it happens quickly so I would rather make changes in amid that market movement, but during normal market conditions (which 2011 should exemplify nicely), reviewing your accounts annually is sufficient.

In the coming months and years, it will be interesting for me to see how well I stay abreast on the changes to my 401(k) account and my quarterly rebalancing as my studies continue and when I adopt a new job outside of the financial field.