Asset Rebalancing - How it May Help
After you enroll in the Plan and choose your fund mix, you might be tempted to put account management out of your mind for a year or more.
But what happens if your mix of investments gets out of whack? You could end up taking on more market risk than you had intended, or not investing as aggressively as you intended.
That’s why you may want to consider using asset rebalancing.
What is asset rebalancing?
Let’s say you start with and want to maintain an investment mix of 60% stock funds, 30% bond funds, and 10% short-term investments. Over time, market conditions may favor one type of investment over some others.
After a time, you may find that your mix looks more like 50% stock fund, 40% bond funds, and 10% short-term investments. An asset rebalancing strategy is a commitment to periodically buy and sell funds in your Plan account to bring it back to your preferred mix of 60% stock funds, 30% bond funds, and 10% short-term investments. Making regular adjustments to counteract the effects of these performance differences – by selling some of your portfolio’s investments that have performed the best and investing more in areas that have fallen behind – can help keep your investment strategy on target.
Essentially, rebalancing will help you stick to your investing plan regardless of what the market does.1 As with any investing strategy, rebalancing and diversification cannot prevent you from losing money. However, these strategies may help reduce the effects of market volatility and potentially limit losses.
Can I have my account rebalanced automatically?
Many employers offer automatic asset rebalancing for the Plan, often at no extra charge to participants.
If your employer offers this feature, your Account Executive can explain your options, including how frequently your Plan account is rebalanced and what portion of your assets is to be rebalanced.
Get the help you need
Talk with an Account Executive to learn more about how to rebalance your Plan account.
1Rebalance Your Portfolio to Stay on Track, Shauna Carther, May 18, 2009