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Asset allocation is how you divide your retirement account across different classes or types of investments, including stocks, bonds and cash equivalents. Since each type of investment can vary during different economic circumstances, asset allocation can help reduce your risk and possibly increase your potential for better returns.
When you choose your asset allocation, consider the following:
It’s important that you review your investment choices at least annually. You may need to adjust your asset allocation as you get closer to retirement, or if you find that your risk tolerance has changed. Your investments may grow at different rates, so you also may need to shift your investments to realign with your original asset allocation strategy.
Depending on your plan, these tools may be available to help you: