Allocating new money: Snowball vs. AA method?

[Urchina]

Just curious as to how folks on this forum allocated new money when they were starting out in their accumulation phase. In the reading I've been doing there seem to be two schools of thought, and I can see advantages/disadvantages to both. I'm wondering what others think and do.

School 1: Snowball method. An investor selects an AA, then prioritizes the positions in it, setting arbitrary $$ amounts in each position as a goal. Then, all new money is channeled to the first position -- when the goal there is reached, new money is channeled to the second position, etc. Benefits: a more rapid buildup of assets in a given asset class, and quicker goal achievement for those who are goal-oriented. May save on brokerage fees since you'll only be buying one asset class at a time (assuming you use funds and not individual equities / bonds). Disadvantage: During the time you're building up assets in a class, you're missing out on diversification, and if you set a high goal in asset classes you miss out on diversification for an extended period of time.

School 2: Set your AA percentages, and then divide new money to each asset class accordingly. Advantages: you get the benefits of diversification as you go. Disadvantages: potentially higher brokerage fees, depending on number of asset classes; slower goal achievement (for those who need short-term goals to stay focused).

We're using a hybrid of this model, channeling new money to asset classes that are lagging according to our AA (how we currently rebalance) and then sending new money in accordance with our AA once our AA is back in shape. It's working so far, but we're still fleshing out our AA and streamlining our investments.