Alcoa: Retirement and Investing: Savings Plan: Plan Basics: Rebalancing

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Rebalancing: Keeping Your Investment Mix on Track

Every retirement investor should have an asset allocation plan – the percent of your account that you want to put into cash, bonds, and stocks. Then within those broad categories, you have investment elections – a percentage that is going into the individual funds you selected.

As time passes, certain investments will outperform others. For example, in the late 1990s, technology stocks were returning double- and even triple-digit returns. Investors began to think that the boom would last forever and continued to invest in tech stocks even though the prices were incredibly high. When the market corrected itself for overpriced stocks (which is part of natural market cycles) returns fell dramatically. Many people saw their account values drop significantly.

Instead of getting caught up in the drama of past performance, a smarter approach is to routinely rebalance your account back to your original percentages. Rebalancing helps you capture your gains by selling investments that have increased in value and forces you to buy low by purchasing investments that have dropped in value. This will keep your account diversified and position you to purchase “bargains” that are currently low but have the potential to increase.

Rebalancing your account on a regular basis will help your investments stay diversified to minimize the impact of stock market ups and downs. But you needn’t be an expert to keep your investments on track. You can take advantage of the Automatic Rebalancing feature to help you diversify your Alcoa Savings Plan investments and manage risk.

With Automatic Rebalancing, the balance in your account is automatically reallocated every 90 days across your current investment elections in the Alcoa Savings Plan. This strategy can help to lower your investment risk and may provide a better opportunity for your account balance to grow over time. Consider using this feature to help keep track of your investment mix.

To take advantage of the Automatic Rebalancing feature, go online or call 1-888-ALCOA123.

Why would someone want to use the Automatic Rebalancing feature?

An example: Al wishes to maintain an allocation of 50% in bonds and 50% in large cap equity. He could set his investment elections as follows:

50% Vanguard Total Bond Index Fund (Bonds)
50% Investment Company of America Fund (Large Cap Equities)

If he elects to automatically rebalance, then every 90 days the system would rebalance his account according to his investment elections. If he had a balance of $4,000 in bonds and $6,000 in large cap equities after 90 days, the system would realign Al’s balance, so that he had $5,000 in both bonds and large cap equities.