October 5, 2015: Core Satellite Portfolios In A 401k Account

by | Oct 6, 2015 | Asset-Allocation, Bonds, Economy, Feature, Gold, Headline, Income, Inv, Investments, IRA, Markets, Mutual-Funds, newsletter, Portfolios, Retirement | 0 comments

Re-balance Cycle Reminder All MyPlanIQ’s newsletters are archived here.

For regular SAA and TAA portfolios, the next re-balance will be on Monday, November 9, 2015. You can also find the re-balance calendar for 2015 on ‘Dashboard‘ page once you log in.

As a reminder to expert users: advanced portfolios are still re-balanced based on their original re-balance schedules and they are not the same as those used in Strategic and Tactical Asset Allocation (SAA and TAA) portfolios of a plan.

Please note that we now list the next re-balance date on every portfolio page.

Core Satellite Portfolios In A 401k Account

One of the most frequently asked questions on how to use MyPlanIQ asset allocation portfolios is that it is often hard to just implement a Tactical Asset Allocation(TAA) in such an account.  The main reason is that for many active 401k accounts, investors are still contributing (adding) new salary deduction money per pay check to the account. The inflow of the new money makes it hard to keep track of the holding periods of funds invested, thus making the rebalance of the more active TAA much harder not to violate minimum holding periods imposed by funds or the plan. 

Fortunately, there is an easy and good solution to this if you decide to implement a core satellite portfolio instead of a pure TAA portfolio in a 401k account. We regularly discussed a core satellite portfolio methodology, as most often in the recent newsletter September 14, 2015: Core Satellite Portfolios In Market Turmoil. Interested readers can refer to our core satellite section in Newsletter Collection for more background readings.

Implementation details of a core satellite portfolio in a 401k account

The best way to implement a core satellite portfolio in a 401k account is to construct an SAA (core) subportfolio that invests the newly added (salary deduction per pay check, for example) and a TAA (satellite) subportfolio that invests old money. A normal process would look like the following:

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