401k purchase frequency

[RuralEngineer]

I'm struggling to minimize fees in my 401k. Trades are $12 and although I've managed to get stocks and cash in no-fee funds, I'm stuck paying for at least a gold ETF and perhaps LTT's as well.

I was thinking about doing a 30/30/30/10 with the 10% in cash and letting my contributions go to cash. This should allow me to rebalance once or twice a year rather than every couple months. Is there any reason not to do this I'm not seeing?

[Pointedstick]

A gold ETF is always going to be a pain in the neck in terms of fees. Heck, bullion itself is annoying what with the wide spreads. But is there any way you can buy LTTs directly? Lots of brokerages don't charge any fees for that.

I follow the buy-the-lagging-asset strategy in my 401k, so there's only a 25% chance (over the long haul) on any given month that I'll have to buy gold and pay the commission fee. If you have lots of fees, it might be more efficient not to buy a bit of everything each month.

[flyingpylon]

For what it's worth, I started with a 4x25 and I let my contributions go to cash.  It's been almost a year and I haven't hit a rebalancing band yet.  How often you have to rebalance will depend on the total size of your account and the size of your contributions.  Personally, I felt like it made more sense to follow the 4x25 guidelines right off the bat and worry about rebalancing when I got to that point.  With the way the different assets move up or down through the year, you never really know when rebalancing will be needed.  Letting cash accumulate just seems less complicated to me, and that was an important factor.

[Pointedstick]

For what it's worth, I started with a 4x25 and I let my contributions go to cash.  It's been almost a year and I haven't hit a rebalancing band yet.  How often you have to rebalance will depend on the total size of your account and the size of your contributions.  Personally, I felt like it made more sense to follow the 4x25 guidelines right off the bat and worry about rebalancing when I got to that point.  With the way the different assets move up or down through the year, you never really know when rebalancing will be needed.  Letting cash accumulate just seems less complicated to me, and that was an important factor.

I have to say, the wisdom of this approach is growing on me. I have a relatively small 401k balance, so it's not always so easy to keep things in balance, especially with large contributions. I bought too many treasuries when they were down, for example, and now they're my largest asset even though they're the ones that have done the worst compared to the others. I'm supposed to be overweight on the overperforming assets, not the underperforming ones!

[Tortoise]

Not sure what the rebalancing bands for a 30/30/30/10 PP would be. But if you want to stick to Harry Browne's prescribed bands while simultaneously minimizing the frequency of rebalancing, you could initially set up 28/28/28/15 and rebalance back to that every time cash hits its 35% band.

Keep in mind, as your 401(k) balance grows over time, these relatively infrequent trading commissions--which are fixed--will matter less and less, whereas your overall expense ratio--a percentage of your assets--will matter more and more.

Three $12 trades a year for a portfolio of $25,000 is equivalent to a mere 0.14% ER contribution. And it only goes down from there as your balance grows. So don't stress about it too much.

[sophie]

If stocks and cash are commission-free, why not just set up your 25x4 PP, set new contributions to be 25% stocks, 75% cash, and then buy the gold & LTTs either on a fixed schedule like every 3 months or when you hit a rebalancing band? 

Diddling with the percentages now will only delay the inevitable.  Also, you'll get some benefit from the "dollar-cost averaging" into stocks this way, and give you one less asset to worry about - as stocks will only rarely be the lagging asset under this scenario.

[notsheigetz]

I'm struggling to minimize fees in my 401k. Trades are $12 and although I've managed to get stocks and cash in no-fee funds, I'm stuck paying for at least a gold ETF and perhaps LTT's as well.

I was thinking about doing a 30/30/30/10 with the 10% in cash and letting my contributions go to cash. This should allow me to rebalance once or twice a year rather than every couple months. Is there any reason not to do this I'm not seeing?

Is this a company 401k or a self-directed IRA of some kind? I have never encountered trading fees in a company 401k plan before but maybe I have led a sheltered life. I do recall running into some kind of penalty for trading too often in a 401k but never a charge for trades.

[RuralEngineer]

My company directed 401k only had a choice of risk based portfolios (moderately aggressive, etc.). I opened a self directed brokerage account so I could implement a PP. It has many free mutual funds, but all ETFs have a $12 trading fee. The best free stock fund I could find is PREIX. I'll have to eat the fees on IAU.