Karl W. Blovet & Associates
53 W. Jackson Blvd., Ste. 1628
Chicago, Illinois 60604
Telephone: (312) 435-4000
Asset Allocation and Rebalancing
Asset allocation is your target mix of stocks, bonds, and cash. Without periodic monitoring, your allocations may stray considerably from your target allocation. According to “The Vanguard Group,” if you had a mix of 60% stocks and 40% bonds in 1995, invested in broad-market index funds, and changed nothing, by the end of 1999 your mix would have shifted to 77% stocks and 23% bonds. As a result, the greater exposure to stocks would have led to larger losses during the bear market of 2000-2003.
For you to maintain your asset allocation and risk-control strategies, you should:
Check your asset class weightings semi-annually, or minimally annually.
Rebalance whenever any asset class has strayed more than 5% from your target allocation.
Time your rebalancing to coincide with a memorable date, such as a birthday or an anniversary.
It is best to rebalance tax-deferred accounts (401(k) or IRAs) first, since there are no tax consequences. Also, you should determine the amount of any related transaction costs.
