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http://boards.fool.com/thanks-pixy-for-the-reply-yes-im-talking-about-10019406.aspx
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| Subject: Re: 401k Adjustments | Date: 8/8/1997 4:27 PM | |
| Author: londo | Number: 170 of 85302 | |
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Thanks, Pixy, for the reply. Yes I'm talking about asset allocation. Perhaps I can better explain what I was getting at with a concrete example. To keep it simple, suppose a mix of 80% stocks, 20% money market. Naturally I would expect the value of the stocks to grow faster. Say I start with $8000 and $2000. Suppose the stock doubles, while the MM fund rises 10%. I now have $16000 and $2200. Adjusting back to 80-20, or roughly $14500 and $3700, seems kind of self-defeating; the original strategy counts on the 80% growing faster, and by putting some of those profits back into MM, you lose some of the compounding effects you were hoping for all along. But of course by NOT making the adjustment, you are in a potentially more precarious position. Seems paradoxical, hence my confusion. Is that any clearer? Many thanks for your thoughts, Londo |
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