New Money

[EM2]

I'm in the process of setting up my PP, and I'm looking ahead and wondering how people go about putting in new money before a re-balancing event. My situation is this:  I get paid twice a year, April and October.  Right now, I'm using investments and cash savings that I already have as well as the new April money, but I'm not sure what I should do in October.

Should I just hold the new savings in cash until I re-balance either in April or when the bands are exceeded?  If I put in new money in October (my preference), should it be divided equally among the four asset classes or should I rebalance at that time?

All advice is very welcome.

[AdamA]

Should I just hold the new savings in cash until I re-balance either in April or when the bands are exceeded? 

Waiting until the bands are exceeded is the equivalent of adding only to the cash portion of your portfolio. 

I would try to divy things up pretty evenly each time you get paid if you can do so without incurring huge fees/expenses. 

[Lone Wolf]

It sounds like either approach will work well for you.

Your personal preference (which seems to be to add money throughout the Portfolio in April and October) would just mean buying lagging assets to bring things as close to 4x25 as possible.  Let's say that when pay day hits, you treat your new money as part of the "cash" allocation.  You find that stocks and cash are each >25% in the PP and LT bonds and gold are <25%.  I would buy lagging assets with just enough money to bring cash back down to 25%.  I would try to bring LT bonds and gold as close to 25% as possible (via purchases.)

However, I would typically not sell stocks at this time unless they were very close to a rebalance band.  The reason is that selling comes with tax consequences.  I'd prefer to just buy up other assets to the appropriate levels and take it from there.

What I generally do is just add new money to my cash allocation as it rolls in (mostly into short-term US Treasury notes.)  When I get to 35%, I rebalance everything by trading in those Treasury Notes for stocks, gold, or LT bonds as needed to get back to a clean 4x25.  However, your way (buying in April and October) will also work quite well.  Just go with whichever you like.

[EM2]

Adam and LW, thanks.  I think I can add without incurring a lot of expenses if I stick with Vanguard / Treasury Direct as much as possible.  Also, very good to have the warning about selling stocks.  I'm hoping I won't have to sell anything, just bring up the lagging parts of the portfolio.

[MediumTex]

I tend to add new money to cash until cash hits about 27% (no significance to that, it's just what I do), and then I buy the lagging asset back up to 25%.

This isn't exactly what HB recommended, but it's an approach I am comfortable with.

It probably doesn't make a big difference how you do it as long as you stay within the bands one way or another.

[EM2]

Thanks, WT, that's good to know.