We are halfway through the third quarter of 2023, so it was time for another quarterly rebalance of my old 401(k) account. There has been a distinctly recurring trend of moving less than 1% of this account balance each time. Therefore, I was somewhat surprised to see more than 2% of my account balance was moving during this quarterly rebalance. Predictably, it was moving money from both of my equity funds (index and active) into the other three funds. Less predictably though, the active Domestic Equity fund had risen more than the Domestic Equity Index fund. More than half of the amount moving went into my International Equity Index fund, with about 40% of the amount moving going to my Domestic Bond Index fund, and about 10% of the remainder went into my International Bond Index fund.
As indictive of this transaction, the past quarter has been very good for domestic equities. Unfortunately, the drivers have been limited to a few of the same (notorious at this point) blue chip tech stocks, such as AAPL and NVDA. As an analyst, one problem I have found in rebalancing as frequently as every quarter is that it resets the playing field each quarter, so if a strong run were continuing, it can minimize the tailwind or shorten the runway. On the other hand, if the forthcoming quarter saw a reversal (in keeping with the "buy again on Labor day" limerick), then this exchange would remove money from the strong assets before they hit a headwind.
As an investor, I am agnostic toward these analyses. The most important thing is that I funded the account when I had the opportunity, and with a gentle maintenance, I have fostered its substantial growth over the past decade and I still have more than a decade left to continue fostering more growth.
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