If you are just about to retire then you need to listen before you start swearing profusely and wondering what happened to those great returns you were just shown three years ago.
The point is those returns were unrealized. They were never realized when the markets were ideally placed. When your advisor showed you how you were doing then he simply took the the units you held and multiplied them by the current market price of the fund. It was merely an indication of what you could get out if you exited then. What if stuff.
Since then the markets have moved against you. This time you are forced to exit the retirement fund because you are now resigning from the company or retiring and your investment value has halved.
With Asset Allocation, one can realize one's investment when it counts most. Asset Allocation is about investing in the different asset classes (i.e. property, shares, bonds) as economic indicators suggest when it is best to do so. For example in times where interest rates are high, it might not make sense to invest in property or shares, but investing in bonds does. So at that point one should realize and disinvest, thereby locking in the capital growth in an asset class before the economy actually swings around in the direction the indicators suggest and against your value.
What are your views on this?
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