How Reallocating Your Own Stock Portfolio Can Save You Thousands
Conventional wisdom tells us that one of the most important things to do as an investor is to adjust your portfolio as you age and get near retirement. Ideally, your investments will become more conservative with time. In your younger years, the focus should be on growing your money with stocks. It may come with more risk, but the rewards are often worth it -- and likely necessary.
As you get closer to retirement, you don't want to stop trying to grow your money altogether, but you do want to shift your focus to preserving the money you've made up to that point. This means lessening your stake in stocks and upping your stake in bonds and cash. You don't want too much of your savings in stocks too close to retirement because you don't have as much time to rebound from down periods in the market.
For some people, the last thing they want to do is reallocate their investments by themselves. That's where target date funds come into play. Target date funds are based on your projected retirement and automatically reallocate to become more conservative as you get closer to retirement. And while taking this hands-off approach may sound ideal, it comes with a hefty price tag.
Source Fool.com
