Paul,

Once again, thanks for replying. Sorry for not being very clear. I do have a portion of my assets in index funds, which amounts to 15% of my total moneys. The account is taxable. Another 8% is in my retirement accounts -- Roth IRA, tradtl IRA and 401k. The remainder is in cash (savings accounts and CDs). I've been thinking about enrolling in grad school in the next 2-4 years so most of my money has been kept in a safe place, despite the advice several financial professionals have given me to put 50+% of my money into mutual funds.

The index funds portfolio is 100% Vanguard indexes. I started the account with the intention of cashing in at least a portion towards property 6-12 years from now. My retirement accounts are in Freedom Fidelity 2040 and 2045, which right now allocate about 80/20. But I read this blog today (http://www.mymoneyblog.com/archives/2006/06/fidelity_freedo_1.html) which made me think of shuffling into Fidelity indexes, or maybe moving the funds in-kind to Vanguard and later selling and buying into a Vanguard Retirement fund with a lower expense ratio.

As for my index portfolio, here's the breakdown:

Vanguard 500 Index Fund Investor Shares - 27.30%
Vanguard Small-Cap Index Fund Investor Shares - 14.70%
Vanguard REIT Index Fund Investor Shares - 9.20%
Vanguard Short-Term Bond Index Fund Investor Shares - 16%
Vanguard Developed Markets Index Fund - 17.40%
Vanguard Intermediate-Term Bond Index Fund Investor Shares - 15.40%

According to my Vanguard portfolio analysis, 30.40% of my US equities are in financials but the bulk of that (18% of my US equities) is from REITs, so it sounds like I'm ok there.

You said "If you are rebalancing, you would be selling bonds and buying equities to keep your AA at 70/30. But if you are adding new money, do your rebalancing that way." Could you give me some more information as to what you suggest if I add new money to my portfolio? Do you think 70/30 makes sense for a 6-12 year time horizon or should I consider rebalancing to 60/40, if the market doesn't do that naturally over the next month, that is?