Winterize Your Retirement Portfolio

Winterize Your Retirement Portfolio

January 11, 2024

To Help Avoid Icy Conditions, Rebalance Your Investment Allocation on a Regular Basis

Over time, frosty market flurries and chilly economic winds (or simply just the passage of time) can cause your investment allocation to drift a bit. This can leave you in a more conservative target investment allocation than what you originally selected and are comfortable with. Because your portfolio is exposed to the elements, it’s a good idea to rebalance your investments on a regular basis.

Taking the Temperature: An Example

Let’s say that last quarter there was a stock market downswing and your original investment allocation of 60% in stock funds has now decreased to 50%. Meanwhile, your intended investment allocation to bond and money market funds has now increased. The current overall investment allocation no longer matches your original strategy.

What You Need To Do

If you’re invested in a target date fund, the fund manager automatically rebalances your investment allocations for you. If not, you’ll have to take an active role in rebalancing your investments. In the previous example, that means going into your account and selling off 5% each of your bond and money market fund investments and reallocating those funds back into your stock fund investments so they are aligned again with your chosen percentages. You can easily do this via your online account through your recordkeeper, or ask a customer service representative to assist you. In addition, many 401(k) recordkeepers offer an automatic rebalancing service (with a selection of timing options available, such as quarterly, semiannually or annually).

And in the case of an extended increase in stock fund prices, you might find that your portfolio is riskier than you intended (such as a greater percentage of your portfolio is now weighted in stock funds). To get back to your target allocation, you would need to sell off part of your stock fund investments and reallocate appropriately to your bond and money market fund investments.

Raise Your Savings Temperature

One way you might save money to add to your retirement plan is to ask your local electric or gas utility for a free or low-cost home energy audit. The audit may reveal inexpensive ways to reduce home heating and cooling costs by hundreds of dollars a year. Keep in mind that a payback period of less than three years, or even five years, can save you lots of money in the long term.

We are happy to help provide additional insight, feel free to reach out to me at joe@diversifiedfa.com´╗┐ or 800.307.0376.

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Disclosure: This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. Investment Advice and 3(38) Investment Fiduciary services offered through Diversified Financial Advisors, LLC, a Registered Investment Advisor. 3(16) Administrative Fiduciary Services provided by PISTL Service Corporation. Discretionary Trustee services provided by Printing Industries 401k Trustees. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

RP-875-1123 Tracking #507310 (Exp. 11/24)