Talking Retirement

Asset Allocation Over Market Timing for your 401(k)

Yesterday the stock market took a beating. It’s the kind of day that makes you want to figure out how to “beat the market.” Walter Updegrave from CNN/Money takes a question this week that touches on the subject, but he urges the asset allocation over trying to guess your way to riches through “tactical” stock purchases.

I think there’s a better, and simpler, way. Drop the “tactical” part and follow the good old strategy of asset allocation - that is, choosing a mix of diversified stock and bond funds that’s appropriate given your stomach for risk and the length of time your money will be invested, and then re-balance back to that mix once a year.

He goes on to say that this “simple but disciplined system is much better than trying to predict (i.e., guess) which market sector is going to outperform in the near future.” Read the article for the full story.