Re: Frequent Allocatiion of 401k funds

From: "L. Chen" <am302@freenet.buffalo.edu>
Subject: Re: Frequent Allocatiion of 401k funds
Date: Thu, 13 May 1999 20:29:10 -0400 (EDT)

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> My questions is if you were to frequently change your account allocation to
> play the market or even to pull out of a losing fund and move it to
> something else, is there are long term problem with this approach.  They say
> it is better to leave it as it is - but some of my funds are losing like -10
> to -30%. Will I gain anything by moving in and out or will I lose ? Right
> now I have put it in money market for everything is losing BTW my 401K is
> tied to Minnesota Mutual. 

What is the time horizon for your "10-30%" loss?  One quarter?  One year?
Three years?

I would not reallocate "to play the market".  The whole idea of asset
allocation is to spread your risk among different categories to reduce the
volatality(sp?) of your *overall* portfolio.

But that doesn't mean you should not get out of investments that are poor
performers.  In term of funds, you also have to judge those performance with
respect to other funds in the same category.  e.g. small cap funds have been
poor performers for the past few years.  But if your funds in the same
category have been among the bottom performers, you might consider getting out
of them.  

Note the word "consider" -- because that is only one factor.  You
really need to determine the reason for the poor performance.  Were they
always poor?  Almost every fund has its bad years.  Has there been a change in
the portfolio manager?  etc.




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