6 Step Blueprint for your 401k (Part 2)
In our previous blog post we covered the first three tips you need to keep in mind when investing your 401k (for those of you that are dead-set on doing your 401k by yourself). In case you missed it, here they are: favor index funds, select the right stock to bond ratio, and diversify. And as promised, here are the final three tips:
4. Rebalance your 401k: In a nutshell, this wonderful tactic keeps your portfolio invested near the original percentages that you selected above in Step #3. Some folks do this manually, some custodians provide you with tools to help you set this up on a regular basis, and some folks hire professionals (like blooom) to do it for them. The beauty of rebalancing is that it trims from your funds that have done well and adds money to funds that haven’t. This may seem counter-intuitive but if you think about it for awhile is starts to make sense. Buy low, sell high. Buy low, sell high. Buy low, sell high…