Hey everyone, I’m finally doing some long-overdue rebalancing of my portfolio, and I have a question. I’m looking at my full portfolio mix (stocks, ETFs, bonds, etc.), but I also have two Target Date Funds (TDFs). Since those are already ‘balanced,’ should I leave them out when rebalancing the rest of my portfolio?
If I do include them, would it make sense to look at the asset class breakdown within those TDFs and calculate how they fit into my overall mix? For example, if the TDF is 7% bonds and I have $100k in it, I’d count $7k as bonds in my overall portfolio.
What’s the best way to handle this? Thanks for any advice!
You should include the TDFs. Even though they’re balanced within themselves, they still affect the overall balance of your portfolio. Leaving them out would throw off your weightings across your other accounts.
@Sage
Thanks for the details! Based on those percentages, it looks like you’re light on international exposure (around 10%). You might consider bumping that up to 20%. Also, watch out for expense ratios in your money market accounts—something like SGOV might be a cheaper alternative if you don’t need immediate liquidity.
You should include the TDFs because, over time, their allocation shifts heavily toward bonds. If you don’t account for that, you might find yourself too heavily weighted in bonds as you get older. It’s fine to leave them out now if they’re a small part of your portfolio, but keep an eye on them as they grow.
Leaving TDFs out only makes sense if their asset allocation matches exactly what you want for your overall portfolio. For example, if your TDF is 60/40 but you want 100/0 overall, leaving it out will skew your total balance.
To answer your second question: yes, you can look at the TDF’s asset class breakdown and factor it into your overall portfolio mix. Just remember that the fund’s allocation will change over time, so you’ll need to adjust as it shifts.
Honestly, it’s simpler to either go all-in on TDFs or manage a static allocation across everything. Mixing strategies can get complicated.