Asset Allocation

What is asset allocation, and why do people recommend starting it and re-balancing to maintain it?
-- Rachel

Assuming you are referring to your 401K that you see on net benefits. Asset Allocation, - is a technique by which you spread your investments among various asset classes with varying degrees of risk. These perform differently over time and provide you with better risk adjusted returns. You also want to rebalance every so often as you want to keep up with what is going on economically in the world, for example you would not want to have an IPhone 3 in 2015, because of how different the world is, it is a good device but there are changes in society that make it not run the best for you. Same with Rebalancing, you want to keep up with how the market has changed. Now referring to your 401K, you want to make sure you choose assets as companies will invest it for you if you don’t choose. They normally invest into a QDIA(Qualified Default Investment Account ) which is usually a balanced portfolio. This may not be the best for your situation.

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