AUTO-REBALANCING & LIFESTYLE FUNDS

THE PROBLEMS:

Auto-Rebalancing doesn't go far enough. With Auto Rebalancing, a 401(k) plan participant is given the option of having their account balance periodically realigned to match their most recent investment allocation designation.Realignment is done by selling shares in a fund (or funds) that has grown larger in proportion to the participant's intended designation and using the proceeds to bring other investment options back up to their intended proportions. This puts the overall account allocation back in line with the participant's intended mix.

Many plans are now offering one-touch management solutions such as auto-rebalancing programs. While this is about as close as you can get to personal service, it still falls short for many reasons. The deficiency in a simple rebalancing program is that it does not consider variables like interest rate changes, world events and market changes that have a profound effect on how portfolios should be properly allocated. At times, rebalancing may not occur at the most prudent time. Rebalancing also doesn’t take into account ancillary information that may alter your risk profile on an ongoing basis. This may lead to a portfolio that is too aggressive or too conservative.

Lifestyle Funds are a popular "default investment", but they too have a variety of shortcomings. Lifestyle funds lack flexibility because they typically have been created within a single fund family. As a result, underperformance of one of the lifestyle fund components makes replacement difficult. Lifestyle funds are also not actively managed. Every quarter or every year, the mutual funds are mechanically rebalanced based on a preset asset-allocation ratio, with little concern for market conditions.

THE SOLUTION:

Pro(k)—StraightLine's Managed Retirement Account Service
At StraightLine, our research team continually reviews market conditions, world events, and other factors that affect the value of the retirement plan. This allows us to actively manage your 401(k), 403(b) or 457 account to ensure that you maintain the proper balance of investment choices at all times.

You can offer this much-needed service to your employees at no cost to your company. Call StraightLine today to find out how you can help your employees get the most out of your retirement plan.

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