Passive or "strategic" asset allocation is the diversification of your investments across a broad range of different types of investments, or asset classes. It is also sometimes called the "Actively Manage", or the "Buy and Hold" approach to managing your money.

Important Considerations
Academic studies have shown that a portfolio's return is based primarily on the asset mix of the portfolio. We know that over time, equities (stocks or stock mutual funds) outperform fixed income investments. Therefore, the most critical factor is the amount of your portfolio allocated to equities.

It is also important to diversify your portfolio across the asset classes (large cap, small cap, growth and value). Spreading your investments among several asset classes has been proven to reduce your risk over long periods of time.

Ultimately there are three major factors that will determine your probability of achieving a successful retirement:

• How old you are and how much time you have left for your money to grow,
• How much you have saved and how much more you should save each year,
• How you invest your retirement savings.

401k Toolbox will help you answer these critical retirement planning questions!

A "Buy and Hold" Approach
A Passive Asset Allocation approach will appeal to you if you want to invest properly, but generally like to "leave it alone." Remember, even if you use a Buy and Hold approach, you will still need to check in every 6 to 12 months to re-balance your portfolio for several reasons.

• As you get closer to retirement, your comfort level with risk generally changes, and you may want to re-position your investments.
• Based on market activity, it is possible for your portfolio to become overweighted in some asset classes and underweighted in others. For example, if stocks perform very well in one year, they may represent a larger portion of your investments than you originally intended.
• It may be necessary to replace an investment choice in your retirement plan as funds sometimes change their objective. Also, your company may add new investment options to your retirement plan and you may want to consider investing in these funds to further diversify your investments.

Other Investment Approaches:
You should consider the Actively Manage Approach section of this website if you enjoy watching your portfolio on a regular basis, and you enjoy taking a more active approach to managing your money. For the Actively Manage investor, we also provide a current portfolio recommendation and fund rankings, so you can adjust your portfolio as market conditions change.