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Author: Crazylegs883 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: Coffeehouse Portfolio Rebalancing Date: 11/25/2003 10:19 PM
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Hi there.. I'm new to this board, but I ran a search and noticed that at least a few people here are familiar with the Coffeehouse Portfolio. My retirement fund is based on the Coffeehouse model (not exactly as of yet, but close enough), but I have a situation that's been perplexing me a bit.

Essentially I converted my 401(k) to a Roth back in March/April. However, due to circumstances, the asset allocation percentages were skewed - with the REIT portion being severely underrepresented. Since then, the REIT fund has outperformed to narrow this gap a bit. I'm looking to start the yearly rebalance process - which forces you to sell high performing funds and buy under performing funds. However, if I want to truly follow the Coffeehouse Portfolio, the REIT should be 10% of the portfolio - not the 6% or so it is now. So, technically, I should buy more REIT, which is contrary to the reallocation theory since this was the highest performing fund. Because of this, I'm thinking of leaving the REIT fund out of the reallocation process for this year and waiting until it 'comes back to earth'.

I guess my question is.. am I making too big a deal out of this? I suppose I could throw next year's annual contribution entirely into REIT to help narrow the gap, but again, I'd be buying high, not low. Other suggestions?

Mark
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