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You also need to be sure your allocation is one your stomach is strong enough to handle.
The reason you include bonds in your allocation is to counter the times when the stock market is down (remember, I said high-quality bonds).
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Keep that dollar cost average strategy going and make sure to continue to have that semi-annual meeting and quarterly call with your advisor to be sure your asset allocation is appropriate for your age and risk tolerance.
Once your asset allocation is set, your next goal should be to buy and hold onto your assets as cheaply as possible.
For example, if your target allocation is 40% bonds and your bond allocation varies outside the 30% to 50% range, then rebalancing is in order.
It's always smart to review and rebalance your portfolio at year-end to make sure your asset allocation is still on target.
For example, if your target allocation is 60percentt stocks, 20percentt bonds and 20percentt cash, and the stock market has performed particularly well over the past year, your allocation may now have shifted to 70percentt stocks, 10percentt bonds and 20percentt cash.
For example, if your target asset allocation is 45% U.S. stocks, 15% international stocks and 40% U.S. bonds then, unless something happens to cause you to change your target asset allocation, you should rebalance back to these weights periodically.
For instance, if your current equity allocation is 40percentt, you may choose to underweight or overweight by a small percentage, depending on the markets.
But before you rebalance, ask yourself if your old allocation was well considered and, if so, whether you're still comfortable with it.
Asset allocation is another way of describing your overall investment strategy.
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