Build an allocation around your circumstances
An investment mix should reflect the purpose of the money, when you expect to use it and how you might respond to losses. Consider other retirement accounts, household resources and expected spending when reviewing your workplace account.
Learn more
Diversification means spreading investments rather than relying heavily on a narrow set of holdings. Funds with different names may hold similar investments, so looking at the underlying exposures can be more informative than counting funds.
Understand what rebalancing can and cannot do
Investment values change at different rates. Over time, the resulting mix may differ from the approach you intended. Rebalancing is a way to return toward that approach, not a method for predicting the next market move.
Learn more
Review whether adjustments can be made through future contributions, exchanges among available funds or an existing plan feature. Any method must fit the plan's rules, and changes may involve costs or restrictions. Rebalancing cannot guarantee gains or protect against losses.
Use a review process rather than reacting to headlines
A written review process can identify when to revisit your allocation and what information should inform a change. A change in retirement plans, household spending or capacity for losses may be relevant even when markets have not moved substantially.
Learn more
Before trading, review investment descriptions, overlapping exposures, fund expenses and any exchange restrictions. A target-date or other managed option may already include an allocation process, so understand its approach before adding overlapping investments.
- Compare the current investment mix with your intended approach.
- Review costs and restrictions before placing trades.
- Document the reason for changes and the circumstances that would prompt another review.
Frequently asked questions
Are allocation and rebalancing the same thing?
No. Allocation is the intended mix of investment types. Rebalancing is a process for adjusting holdings when the actual mix differs from that intention.
Does diversification prevent losses?
No. Diversification can spread exposure, but diversified investments can still lose value. It does not assure a particular result or remove the need to evaluate risk.
How should I choose a rebalancing approach?
Consider your goals, plan features, investment restrictions and costs. Establish a review process suited to your circumstances rather than assuming there is a schedule or rule that works for everyone.
Can future contributions help adjust my allocation?
They may help direct new money toward investments that are below your intended mix, depending on plan rules and available choices. This may not be sufficient for the adjustment you need.
Should I add funds to a target-date investment?
Review the target-date investment's underlying mix and approach first. Additional holdings can overlap with it or change the overall exposure in ways that differ from your intention.