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401k Plans' Investment Allocation: Too Conservative in the Rebound
A new report on 401k plans shows that assets rebounded in 2009, though they are still below the levels of 2007. Even more worrisome, after 2007 the participants (workers) shifted to more conservative investments. As a result, they missed the jump in the stock market we've had recently.
There's nothing wrong with being conservative, but it IS wrong to shift back and forth with what the market did last year. The best approach is to determine what your risk tolerance is, then stick with an asset allocation that reflects both how long you have before your retire, and that risk tolerance. We take you through the steps in Lesson 3 or Lesson 4 of our online course, The ABCs of Your 401k. (Take Lesson 3 if you want a simple "cook book" approach; take Lesson 4 if you'd like to have a deeper undersanding.) And note that these lessons are available in text, audio or video!
The stock market has been up nicely in the last few months. How should you react? Not at all. Stick with your asset allocation.
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