Asset allocation isn't something you
need to worry about every day. On the other hand, it isn't
something you can do just once and forget about until retirement.
As the value of your investments increases or decreases,
or your life changes, you'll probably want to modify your
initial asset allocation, or bring your actual portfolio
in line with the one you intend to own.
1.
As you
get closer to retirement, you may want to shift
some of your assets out of potentially volatile
growth investments, such as stocks, into income-producing
investments with more stable values.
2.
You may
want to rebalance your allocation in response
to major life events that have an impact on your
financial situation, such as getting married
or divorced, having children, or changing jobs.
3.
If market
performance increases or decreases the value
of one asset class so that your actual portfolio
allocation is significantly different from the
allocation you selected, you may want to realign
your holdings to get them back in balance.
Many financial advisers
suggest you review and rebalance your portfolio once
a year. Others say that you can ignore imbalances unless
the value of any class exceeds the allocation you originally
selected by 15% or more.
Professor
Roger Ibbotson, Yale University, chairman and founder
of Ibbotson Associates
Professor
Roger Ibbotson, Yale University, chairman and founder
of Ibbotson Associates 
