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Subject:  Re: 401k Adjustments Date:  8/8/1997  4:27 PM
Author:  londo Number:  170 of 88033

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,

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