You might also check with Fidelity.They have a great retirement calculator. In short, you are selling those stocks or indexes which have appreciated the most and replacing them with stocks or indexes which underperformed. In closing, there is no way to absolutely bombproof your retirement. The stock market saw its worst decline since the Great Depression. Over a long period of 50 years, yes stocks have returned about 9%, however as seen by the last decade, the return of stocks have been close to 0%. Of course there is also the matter of determining which mixture of stocks is appropriate. The key to surviving and prospering is hiring great people. Depending on your outlook on asset allocation theory, some argue to rebalance every 6 months. There is no mathematical formula or anyone who can absolutely guarantee you will receive a 10% return by investing in stocks. A planner will take into account your lifestyle, accumulated savings, risk tolerance, health and other factors to determine how you should be invested. In fact, those 100% invested in the S&P 500 (the standard benchmarks of the US stock market) have seen returns of .9% including dividends. As with all storms, the darkness has dissipated (at least for now) and some sectors made tremendous gains. If you started out properly allocated, chances are your portfolio is now out of synch. However if you have non correlated investments such as US stocks, emerging market stocks, gold, bonds and investments in overseas currency, chances are your portfolio may outperform a single indice such as the S&P 500 or the Dow Jones Industrial Average. Gold and metal stocks tend to do well when there is economic uncertainly. If you are invested in 10 different market categories and they are all correlated, chances are you will suffer right along with the general market. A 20 year old who has a 40 year time horizon before retiring will be allocated differently than a 55 year old with just 5-10 years from retirement. The value of the various assets within your portfolio will change, affecting the weighting of each asset class. However, you probably didn’t have a crystal ball.

There is always a way to make money in whatever economic condition you are presented. Don’t take enough risk in your portfolio and your investments will be ravaged by inflation. Happy investing! Well, at least that’s what I’d be doing. There will be recessions, perhaps a depression, political unrest, a terrorism event either here or abroad which will rattle the markets and affect your personal financial well being. Each of the above market sectors will outperform the other sometime during the economic cycle. Take too much risk and you could suffer huge losses (2008-2009) which you may never recover. If you were fully invested in 2009, you saw gut wrenching drops only to be followed by many indices making new multi year highs. Some financial pundits and economists were calling for the Dow Jones Industrial average to reach as low as 5000. The tricky part though is trying to find YOUR proper allocation. Others were calling for a modest recovery off the lows of 6500.

Credit: Marcus Lam

After the last couple of years, you should know your risk tolerance when it comes to investing. Failure to reallocate and make adjustments will result in a portfolio that is volatile and will not serve your retirement needs. Will you chose to allocate money to small cap emerging market stocks or Large cap US Growth stocks? The housing market collapsed. It is extremely difficult to guess what type of market you are in while it is happening. Think smart, invest wisely, keep your cool and drown out the unwanted noise. We have been through some of the volatile markets in decades in 2009. If you invested 100% in stocks, you lost to inflation and would have seen better returns by investing in boring government bonds. There is a very good chance you didn’t call a 4000 point rally in the Dow in March. Get 50 economists in a room and chances are you will have 50 different answers on where the stock market will reach in a 12 month period. This is not an endorsement, just a disclosure. Emerging markets have seen gains of 75% or more. As you can see, simply dividing your money among a two to three market sectors will not achieve proper diversification. Special note:I have investments with IFA. As we’ve seen by this decade alone, your investments will be prone to outside forces you have no control over. This is where an experienced financial planner will help tremendously. Although past performance does not guarantee future success, proper asset allocation has been incredibly effective. Should you suffer a 50% decline in your portfolio, your returns will have to DOUBLE just to break even. After all, there are some investors who purchased Citibank at .97 and Apple at $30.

Further information is good for read:

1. It's Time To Rebalance Your Portfolio Get 50 economists in a room and is probably 50 different answers on the exchange, where it will come within...
2. Asset Allocation and Diversification Asset allocation refers to how much money you have invested in each of the major asset classes such as stocks,...
3. Advantages of Mutual Funds and Their Benefits As the economy begins to take more and more begin to act to achieve a better return on their money....
4. The Easiest Way to Diversify It phrase you hear repeatedly "diversify, fidelity investments stock, portfolio, but this means someone with support financial little or not?...
5. Investing for Retirement – The New Way One of the biggest myths of the investment funds in your retirement portfolio, the investor should stick to the bulk...