What is Asset Allocation and Why is it Important?

Are all your Defined Contribution (DC) account dollars invested in the Stable Value Fund?

If so, that’s your "asset allocation" ... 100 percent to the Stable Value Fund. Your assets are the dollars in your DC account, and the allocation is how those dollars are split among the investment options.

Experts agree a diverse mix of assets may be the way to go when choosing your investment options.

Each type of investment has a different level of risk and return, so each will behave differently over time. Asset allocation is based on the idea that diversification – splitting your DC dollars among various investment options – could provide protection against a major loss if one investment class begins to decline.

Consider your long and short-term goals when determining your investment selections. If you don’t include enough risk in your investment selection, your return may not meet your goal. If you include too much risk in your selection, the money for your goal may not be there when it is needed.

You may want to meet with a financial advisor to help you decide whether conservative or aggressive options are the best for you based on your goals.