"A 70/30 portfolio left unattended during a strong multi-year bull run can drift toward 85/15. That is a fundamentally different risk exposure than the one the investor chose."
"Automatic rebalancing is a feature available inside most 401(k) plans. You configure the plan to rebalance either annually or whenever the portfolio deviates more than 5% from its target allocation."
"Vanguard confirms that selling assets to rebalance within a tax-advantaged account creates no capital gains liability."
Many investors set their 401(k) allocations and leave them unchanged, leading to unintended risk profiles over time. For instance, a 70/30 portfolio can drift to 85/15 during a bull market, increasing risk exposure. This shift often goes unnoticed until market corrections occur. Automatic rebalancing features in 401(k) plans can help maintain target allocations, yet many investors do not utilize this option. Rebalancing within tax-advantaged accounts does not incur capital gains taxes, making it a beneficial strategy for managing risk.
Read at 24/7 Wall St.
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