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		November 2004
	The State of Connecticut 403(b) Program

	When saving for retirement, most people have some plan or strategy that will help them accumulate a nest egg to help finance the future lifestyle they envision. That strategy usually includes diversifying their investments among different asset classes, in order to maximize the opportunities for reward and reduce exposure to risk. But sometimes, market performance, as well as other factors, can change the make-up of your portfolio without you even realizing it. In this issue of Dollar Wise we discuss what to look at when deciding if you need to rebalance your retirement savings account.
	Nancy Wyman State Comptroller

	Getting Your Asset Allocation Mix Back on Track

Although saving for retirement is a long-term process, it's a good idea to keep track of your investments on a regular basis. If you are a participant in the State's 403(b) Program, you can review the performance of your selected investment options in this newsletter.

But how often do you check the overall balance of your portfolio? When you first started investing in the State of Connecticut 403(b) Program, you made a decision about how your money would be distributed among the different types of investments available to you. Are the percentages you chose comparable to the actual composition of your portfolio today? They may not be, because over time, as the market goes through its typical cycles, your asset allocation can shift.

For example, if you started out with a mix of 65% stocks, 10% cash equivalents and 25% fixed-income, and there was a bull market for several years, your portfolio may be over-represented in the stock class. You could find yourself with a mix of 75% stocks, 5% cash equivalents and 20% fixed-income without even realizing it. That might be more risk than you intended to expose yourself to.

How Asset Values Can Change

Some investments - or one segment of a stock portfolio - may grow faster than others. For example, in the late 1990s, dot.com stocks were runaway investments, sometimes producing relatively high double-digit returns. Since the investment returns are re-invested in the same fund that generated them, if you had invested in dot.com stocks that experienced significant returns, this portion of your portfolio would grow at a faster rate than the rest of your assets. So, a larger percentage than you originally intended would be invested in this option.

In contrast, when the dot.com bubble burst in 2001, those stocks lost a lot of their value. If you had a percentage of your portfolio invested in dot.coms, the value and the portion of your portfolio represented by these investments shrank. In such a scenario, you may be left with an investment portfolio that's seriously off balance. The dot.com scenario is just one example of how market circumstances can affect your asset mix. In either case, you would need to rebalance your portfolio to get back to your original investment plan.

Other Factors

In addition to market performance, several other factors may play a role in necessitating a change in the mix of your portfolio. For instance, if you have experienced a major life change, such as getting married, divorced, or having a child head to college, your savings goals and objectives may have changed. In this case, you may want to reexamine your allocations and make sure they still make sense in terms of your current situation.

Getting the Balance Back

So how do you go about rebalancing? As strange as it seems, sometimes it means you reduce or stop contributing to an investment that's doing well, and allocate a larger percentage of your contribution to something that's currently underperforming. Why? Because if one investment is performing really well, it may become over-represented in your portfolio. So, to get back to a "balance" among investment vehicles, you need to invest more heavily in something that is undervalued. This is a generally accepted investment concept known as "buying low and selling high."

Once you get your overall asset allocation back on track, be sure to take a look at how diversified you are within each asset class. For example, if you are invested in stocks, it's best to be in a variety of industries and in companies of different sizes. If you are invested heavily in one type of company, for instance, you are leaving yourself open to an unnecessary amount of risk. By spreading your assets among classes, you are lessening the risk that any one investment will have a large negative impact on your overall portfolio.

Rebalancing can be as easy as moving 10% of your portfolio from bonds to stocks, or moving from an aggressive, high-risk stock to a stock with the objective of preserving capital. Remember, your ultimate goal is to get back to an asset allocation that you are comfortable with - one that you've created to best meet your needs and savings goals.

Comparison of Investment Options for
the Connecticut 403(b) Program

Performances and Expenses as of September 30, 2004

Asset transfer provision for transfer of assets from other carrier: none

* In accordance with the requirements of the operating provisions of the 403(b) Program, Fidelity Investments will deduct a quarterly fee to all accounts on file beginning fourth quarter 2002. The purpose of this fee is to pay expenses associated with the 403(b) Program's limited scope third party administrator.

** FMR Co. has voluntarily agreed to reimburse shareholders a portion of the funds' management fee. This agreement can be terminated at any time. Without this reimbursement, each fund's yield would have been lower.

The Fidelity Capital & Income, Mid-Cap Stock, Low-Priced Stock, Small Cap Stock and Diversified International funds may charge a short-term trading fee.

The Low-Priced Stock fund charges 1.50% on shares held less than 90 days, the Small Cap Stock fund charges 2.00% on shares held less than 90 days and the Diversified International fund charges 1.00% on shares held less than 30 days.

Although the information contained above has been carefully verified, its accuracy cannot be guaranteed. All numbers are unaudited.

Asset transfer provision for transfer of assets from other carrier: lesser of 2% or actual deferred sales charge/surrender charge

* Effective November 5, 2004, the separate account Admin./M&E fees will be reduced from 0.850% to 0.650% on all investment options during the accumulation phase.

** The Declared Rate is credited through the close of the calendar year on contributions received during the designated calendar quarter. The rate for the third quarter, 2004, is 4.00 %. For contributions received prior to January 1, 2004, the Declared Rate is 4.00%. Rates quoted are effective annual yields.

Asset transfer provision for transfer of assets from other carrier: none

No annual maintenance fee.

* As of October 2004 the M&E has been reduced to .85%.

** The Declared Rate as of October 2004 is 4.00%, expressed as an annual effective yield, and is guaranteed not to drop below 3.80% through December 31, 2004.

Asset transfer provision for transfer of assets from other carrier: none

* Premium payments will be credited with the effective interest rate established for the date each payment is received. The current rate as of September 30, 2004, is 3.10%. The effective rate reflects the effects of daily compounding of interest.

Asset transfer provision for transfer of assets from other carrier: none

* In accordance with the requirements of the operating provisions of the 403(b) Program, TIAA-CREF will assess a fee for each active account on a monthly basis beginning December 2002. The purpose of this fee is to pay expenses associated with the 403(b) Program's limited scope third party administrator.

** Rates for the TIAA Traditional Annuity are quoted after all operation charges have been deducted. These charges are very low, averaging about . of 1% of assets. New contributions applied to the TIAA Traditional Annuity under a Group Supplemental Retirement Annuity (GSRA) contract during the period from October 1, 2004 through October 31, 2004, will be credited with an interest rate of 3.00%.

*** TIAA Real Estate Account and the NCREIF Index returns are presented one quarter in arrears due to a lag in the availability of the benchmark return.

Asset transfer provision for transfer of assets from other carrier: lesser of 2% or actual deferred sales charge/surrender charge

* Interest rate varies quarterly. The rate for the third quarter of 2004 is 4.25%.

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