Financial Resolutions - Strike Balance in Your Retirement Planning Accounts

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Long-time Financial Advisor Explains Why a Balanced (and Rebalanced) 401(k) is the Key to Financial Stability

As 2007 marches on, many Americans are still working on New Year's resolutions, many of which deal with financial issues. According to Arthur Cooper, an Irvine, Calif.-based Certified Financial Plannerâ„¢ professional, the beginning of the year is a prime opportunity to refocus on retirement planning and examine 401(k) accounts.

According to the February 2006 Federal Reserve Bulletin, nearly 35 percent of U.S. households indicate that saving for retirement is their most important savings goal. A 2005 study by the Investment Company Institute found an estimated 47 million people participate in a 401(k) plan as a means for retirement planning. "The good news," Cooper says, "is that people are taking retirement planning seriously. The not-so-good news is people often fail to maintain balance in their portfolios. According to a separate Investment Company Institute survey, only 25 percent of investors made any changes to their retirement plans after first enrolling in the plan."

Retirement money is sacred

While many people have adopted the policy that once a retirement plan is started, it should not be touched, Cooper says that resolution might be misunderstood. "People planning for retirement should not take money out of their retirement plans, that's true. Retirement plan money should be considered untouchable in the regard that it should not be spent. Think of it as sacred money that will shore up your future. It could even create a legacy for those you love. But while people should not withdraw the money in their retirement accounts, they should rebalance their portfolio to match their risk tolerance and time horizon," Cooper says.

A balanced portfolio is one that includes a mix of stocks, bonds and money market securities. According to Cooper, due to changing market conditions and fluctuating asset values, a retirement account has to periodically be rebalanced to maintain the desired asset allocation. "What many people fail to realize is that just because your portfolio is balanced today doesn't mean that it will be balanced in a year," says Cooper.

The rebalancing process ensures that you retain the desired asset allocation in your portfolio. "I recommend that a retirement portfolio be monitored on a quarterly basis and rebalanced, if necessary. That will help ensure that investors are paying attention to their retirement accounts and seeking guidance from a financial professional to not only maintain healthy diversification and growth, but also to help ensure that the current allocation is working toward meeting retirement goals," Cooper says.

Asset allocation is key

Proper asset allocation is the centerpiece of any well-performing 401(k) account. Nobel prize-winning economist Harry Markowitz was the first to prove that overall risk could be reduced by diversifying investments across a strategic combination of asset classes.

Asset allocation seeks to optimize the performance of a portfolio using diversification to help manage risk. However, using an asset allocation methodology does not guarantee greater or more consistent returns or prevent a loss in declining markets.

There are certain asset classes that react to market conditions in different ways, explains Cooper. "As an example, when stocks decline, bonds often rally. When small-cap value stocks zig, large-cap growth stocks can zag. Only by combining an educated mix of asset classes can an investor create a strong, balanced portfolio."

About Arthur Cooper

Arthur Cooper has been in the financial services industry for almost 30 years and founded Cooper McManus, an Irvine-based financial advisory and wealth management firm, in 1988. He specializes in providing comprehensive financial planning, estate planning and asset management services.

Mr. Cooper attended California State University, Fullerton and went on to fulfill the requirements to become a CERTIFIED FINANCIAL PLANNERâ„¢ professional. He has been a regional vice-president and district manager for three financial services companies, training other financial advisors and overseeing their careers, ethics, and performance. Cooper's passion is finding solutions to financial problems and further educating his clients.

Call Cooper's office at 949-788-1804 or visit to learn more.

Securities offered through Securities America, Inc. a registered Broker/Dealer. Member NASD/SIPC. Arthur Cooper CA Insurance Lic #0798385, Registered Representative. Advisory services offered through Cooper McManus, and SEC registered Investment Advisory firm. Cooper McManus and Securities America, Inc. are not affiliated.

When you need an expert to speak on complicated financial topics in an easy-to-understand and lively way, please call the professional advisors at Cooper McManus at 949-788-1804 or visit to learn more.


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Art Cooper, CFP®
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