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If you're among the millions of Americans who have put money away in Individual Retirement Accounts or if you think you should be, here's advice that may help. There's a new way to manage an IRA to achieve the best yield while minimizing the risk.
An IRA Asset Rebalancing Service lets investors easily maintain a designated asset allocation strategy to better manage their risk exposure in their retirement accounts. With the new service, shares are exchanged among IRA mutual fund accounts each quarter so the investment mix among the various stock, bond and money market funds selected for the IRA is retained.
"It's a convenient way for IRA investors to keep their desired investment strategy intact and maintain a consistent risk profile for their retirement portfolio," said James S. Riepe, managing director and president of T. Rowe Price Investment Services, one of the nation's largest sponsors of no-load mutual funds. The service is free of charge to mutual fund IRA investors with a combined IRA balance (or a combined IRA Roll-over balance) of at least $25,000.
Riepe added that asset rebalancing can not only help an investor manage risk, but may also help improve investment performance over time. This is because occasional rebalancing, in effect, automatically shifts money from assets that have been performance leaders to those that have been laggards.
For example, if stock returns trail fixed-income returns, the investor using a rebalancing approach shifts money from bond funds and money market funds into stock funds, taking advantage of the lower prices. By the same token, after a period of rising stock prices, the investor would shift money from stock funds to bond funds or money markets.
Asset rebalancing makes particular sense after a year of strong market performance, Riepe noted, "A stock market surge like the one we've seen this past year can significantly increase the equity portion of a portfolio, even if an investor had not made any additional equity fund investments during the year. Investors may have more assets invested in stocks than they realize, giving them a higher risk profile than they had intended," he said.
To request more information about the service, please call 1-800-IRA-5000.
Investors should note that rebalancing does not guarantee profits, nor
does it assure that a shareholder will not have losses. The service is
available to T. Rowe Price fund shareholders and is not applicable to
securities held in a T. Rowe Price discount brokerage account.
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