You are told to rebalance your 401(k) on a schedule.
Sell what’s gone up.
Buy what’s gone down.
That keeps everything in your 401(k) “balanced.”
It feels logical because it’s rooted in a clear idea.
But the investment performance gap shows up.
When rebalancing theory meets stock market reality.
401(k) mutual funds move in the same direction.
For the last several years.
Because they own the same stocks.
Large Cap Technology stocks.
You know the names.
You have no idea how much of your 401(k) mutual funds.
Invests in those same names.
And that is the point.
Rebalancing your 401(k) does not work.
If your 401(k) mutual funds own the same stocks.
For years, the financial media treats rebalancing.
As a hard-fast rule instead of a decision.
Makes no sense to 401(k) mutual fund holdings.
Rebalancing in the general sense is not helpful to your 401(k).
Instead focus on the quality of the mutual funds available.
Underperforming mutual funds don’t deserve.
More of your 401(k) money.
So, step back from the concept of 401(k) rebalancing.
Start asking yourself: “Do I own the best mutuals available?”
Want to know if rebalancing still makes sense in your 401(k)?
Let’s connect on LinkedIn and I can provide the update.
P.S. Rebalancing should not replace common sense in your 401(k).
