[jively]

Since you are new to the plan and don't have any money in it yet, when you have your allocation, you tell the HR department, or log on the plan's web site, and choose the allocation of the funds as "future contributions." Each contribution will be split into the percentage by fund and go in correctly.

After a year or so, when you look at how much you have in each fund, it will be close, but not exactly in the correct proportion.

For example, emerging market funds have been really hot the last few years. If your target allocation for emerging markets was 8%, you might have 10% or 11% of your 401(k) in that fund after a good year. On the other hand, if your allocation to stable value is 10%, you might only have 8% in that fund now, as it didn't do as well as some of the other funds.

When your portfolio is out of balance like this, I recommend making a rebalance. You want to shift the existing money in your plan so that the allocation percentages are exactly as your target percentages. So, you are shifting money out of funds that have done well recently, and into funds that haven't done so well recently.

How exactly to do it is different based on the plan, the custodian, and their software. The best places are ones that allow you to type in the percentages, and do the whole rebalance in one step. So, you select something like "re-allocate existing funds", the list of funds show, and you can type in the 16, 16, and so on percents.

If that type of rebalance isn't available, it's probably best to actually call the custodian, speak to a representative, and tell them the percentages you want for your existing funds.

If that's not available, it can be a real pain to rebalance. You have to take your account balance, maybe in a spreadsheet, and calculate the target balance of each fund by multiplying the percent. So, if your account balance is $30,000, and you have 16% in the S&P 500 fund, your target balance is $4,800. Let's say you have only $4,600 in it now. Then you'll want to exchange $200 into that fund. Do this with the rest of your funds, and you'll end up making a bunch of small exchanges from funds to other funds.

That can be a real pain, so if that's the only way to do it on the company's web site, call a phone representative.

Hope this helps! Good luck,

-Tom