Don’t Forget to Rebalance Your 401(k)

Recorded on August 29th, 2016

Last summer, sadly for the first time in years, I sat down with my laptop and did the adult thing where you actually log into your 401(k) account and pick some new funds to allocate the current balance to.

I knew that the “Bogleheads” forums had some smart people in them and John Bogle of Vanguard was widely regarded as a decent source of investing wisdom, especially for people who don’t know much about investing (like me). I’ve been sold on index funds for a long time. Once you realize how your yearly returns are washed away by the high expense ratios (management fees) of most other actively-managed funds, the math overwhelmingly favors index funds. People like me aren’t going to beat the market, so we should at least aim to replicate its performance.

Knowing that I wanted index funds, I looked at a bunch of articles about asset allocation and settled on the Bogleheads Three-Fund Portfolio. Of course there are surely better ways to invest, and those ways would probably all take longer to research and would invite more risk than picking three broad asset classes like I do.

Here’s what the three-fund portfolio is about:

A three-fund portfolio is a portfolio which does not slice and dice, but uses only basic asset classes — usually a domestic stock “total market” index fund, an international stock “total market” index fund and a bond “total market” index fund. It is often recommended for and by Bogleheads attracted by “the majesty of simplicity” (Bogle’s phrase), and for those who want finer control and better tax-efficiency than they would get in an all-in-one fund like a target retirement fund.

Luckily, my 401(k) offered index funds that exactly matched those described in the three-fund portfolio. I split the entire balance of the account into 34% in the S&P 500 index, 33% in an international equity index, and 33% in a U.S. bond index fund. I set the auto-rebalance to kick in every year after that and to target those same percentages. And then I didn’t touch it for a year.

Tonight I logged in again to check on the first instance of auto-rebalancing since last summer. The returns weren’t great, but they were no worse than what the rest of the equity and bond markets did as a whole, and we didn’t lose money. All this for between 0.02% and 0.09% in fees.

Depending on what articles you read about rebalancing your 401(k), you’ll find that anywhere from 2% to 19% of people don’t bother to do it. That’s awful. If you ignore your investments for years, like I did, your allocations will get way off target and you’ll take on more risk than you intended. But if you commit to tending your garden of investments, you’ll be far ahead of most of the other investors out there, and you’ll at least have the mental calm of knowing you’re in control. You’ll also most likely preserve more of your returns than if you had opted for actively-managed funds with high fees. It takes only a few minutes and is a better investment of your time than TV or Facebook.

Disclaimer: I am not a financial advisor. The content on this website references an opinion, is for information purposes only, and is not investment or tax advice. Nothing on this site constitutes a recommendation to buy, sell or hold any security, financial product or instrument. You are fully responsible for any investment decisions you make. Seek a duly licensed professional for investment advice.

Lara Hogan’s Website Performance Resources

Recorded on August 27th, 2016

I saw Lara Hogan of Etsy give her inspiring Designing for Performance talk at An Event Apart in D.C. last month. It was packed with great advice about how to measure your website’s performance, set a performance budget, chop down the data-gobbling tendencies of your pages, and get others in your organization to realize how important it is to create pages that load quickly. So good. Getting more out of fewer http requests and downloaded megabytes appeals to this industrial & systems engineer.

I finally followed the note-to-self I had written to check out the performance section of Lara’s site. You’ll find her presentation slides, links to optimization tools, how-to’s, more data and studies, and:

American Truck Simulator for Non-Gamers

Recorded on August 27th, 2016

The last game I bought for any home computer was Myst in about 1997. I played it for maybe two hours and then got bored. I’ve bought a couple of iOS games over the years, but never was tempted for anything else on the Mac platform. The internet and OS X filesystem have always seemed like enough of a game that I didn’t feel the need to simulate anything for fun. But today I tried a demo of American Truck Simulator and I totally get it.

The game puts you in the cab of an 18-wheeler with a load of cargo to deliver to a customer. I played it for a while this afternoon and got completely sucked in. I still have no idea how to steer properly, but I did eventually manage to get off and on the expressway twice. Many other vehicles in my wake were totaled in the process, but I got the truck moving. You can tweak the controls to be as simple or complicated as you like. Even with automatic transmission mode making it easier, a keyboard is a poor controller for steering, accelerating and braking. Suddenly those those gamer steering wheels don’t look so silly.

American Truck Simulator highlighted how underpowered my laptop is. If you play it on a system lacking a decent graphics card, be ready to dial the resolution down to get decent framerates. Also, stick with it long enough to experience the joy of driving at “night” and having to turn on your headlights. It feels pretty lonely out there when you can only see 75 yards in front of you and everything else is dark.