Those who manage their own account are typically following one of three methods:

• Traditional Asset Allocation/Rebalancing (Formulaic Asset Allocation, or FAA)
• "Follow-the-Money", or
• Buy & Hold.

The returns produced by these methods are not likely to produce high enough average annual returns (AARs) to assure the required growth in your Retirement Plan to reach the Retirement Plan Goal, and are subject to high risk due to the timing of rebalancing or reallocation.

Asset Allocation/Rebalancing

Asset allocation is an investment technique that diversifies a portfolio among different types of assets (stocks, bonds, cash equivalents, etc.) based on certain parameters (age, income level, risk tolerance, etc.). The problem is that at any given time a portion of your investments will be losing money. The theory is that money lost in one asset class will be offset by the money gained in another and that, over time, there will be a net positive return.

Follow-the-Money

Have you ever invested in a great performing fund that seemed to start under performing right after you bought it? This often recommended Retirement Plan management approach based on recent performance is called "follow the money." It is very rare that a fund will make the top performers list more than one year in a row.

Buy & Hold

Buy and Hold is an investment strategy in which investments are made and then held for a long period, regardless of their fluctuations. The buy and hold approach rests upon the assumption that in the very long term (10-20 years or more) prices will go up. Historical data from the past 50 years supports this claim. The idea is that over time the economy will keep expanding, so asset prices will increase as a result. There may be short term fluctuations, due to business cycles or rising inflation, but in the long term these will be smoothed out and the market as a whole will rise.