Investing · Module 10 of 11
The mix that shifts
Choosing your mix of investments, rebalancing when it drifts, and all-in-one funds that do it for you.
Key terms in The mix that shifts
- Asset allocation
Asset allocation is the way an investment portfolio is divided among broad categories such as stocks, bonds, and cash. Because these categories respond differently to market conditions, the split strongly influences a portfolio's overall swings. Regulators say the right division depends on the investor's time horizon and risk tolerance.
- Rebalancing
Rebalancing is the act of returning a portfolio to its intended asset allocation after market movements have pushed it off target. It can be done by selling holdings that have grown too large, buying those that have shrunk, or directing new contributions to the underweight categories. Some investors rebalance on a calendar and others when a holding drifts past a set threshold.
- Target-date fund
A target-date fund is a fund built for people retiring around a particular year, such as one named for 2050. It holds a mix of investments and shifts that mix automatically as the date approaches. Regulators stress that it is not risk free and does not guarantee income in retirement.
- Glide path
A glide path is the planned schedule by which a target-date fund changes its investment mix over time. As the target date nears, the fund generally moves toward lower-risk holdings such as fixed income and cash. Glide paths differ considerably between fund families, including whether they reach their most conservative point at the target date or afterward.
Every term on Lever is in the money glossary.
About this module
The mix that shifts is part of Investing, one of 15 subjects in Lever. It’s a short run of 7 lessons, about 18 minutes in all, so you can finish it in one sitting.
Every lesson takes one idea at a time. You read it with the math worked out step by step, answer a question that puts it to use, then see why the right answer is right and why the others aren’t.
It’s for anyone who was never taught this, and you don’t need to know anything first. Every lesson is free. Lever works out what you already know, so you can start here or let your path bring you to it.
More in Investing
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1
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2
What risk actually is
What risk really means, why higher returns come with bigger swings, and how much ups and downs you can live with.
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3
What you can actually own
Stocks, bonds, funds and index funds explained, plus the yearly fee that never sends you a bill.
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4
Actually starting
Open the account, start small, invest a set amount on a schedule, and keep an eye on fees.
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5
The days you cannot pick
Why staying invested usually beats trying to time the market, and why the latest news is a poor guide.
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6
The account with a tax break
Retirement accounts with tax breaks, free money from an employer match, and paying tax now or later.
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7
Limits, locks and deadlines
How much you can put into tax-advantaged accounts, the cost of taking money out early, and the deadlines to know.
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8
Moving it and naming it
What happens to your retirement account when you change jobs, and accounts meant for one specific purpose.
5 lessons -
9
Spending what you saved
How much you can take out each year in retirement without running out, and why the order of good and bad years matters.
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11
Choosing where it goes
Which account to fill first, which investments to keep where, and how to do it all if you work for yourself.
6 lessons
Try this module
It’s part of Investing. Lever will bring it to you when you’re ready, or you can go straight there.