Quote:
Originally posted by pwd72s
.also, asset allocation should change as you get closer and closer to retirement age. There is always the possibility of unforseen major events that can wreak havoc in the markets and the economy...
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thats right and allocation changes w/ age and financial condition, re-balanceing does what Joe suggested " buy low , sell high"
If your target allocation was say 70/30 last 1/1, and if you re-balanced in July you likely had something like 60/40 because of the May correction, so you sell 5% of the bonds and buy stock low to get back to 70/30. Now in Dec. stocks have had a good run, time to re-balance, sell 5% of the stock and buy bonds to get back to 70/30, this completes the virtuous cycle by selling high.
good luck