Slide 10 of 19
In this hypothetical example, an aggressive portfolio allocated 80% of its assets to stocks, 10% to cash, and 10% to bonds. The hypothetical conservative portfolio had 20% in stocks, 20% in bonds, and 60% in cash. For the 20 years ended December 31, 2015, the aggressive portfolio was more volatile. In its best year, it returned 28.9%; in its worst it lost 32.9%. Overall, it averaged 8.9% annual rate of return for the period. In its best year, the conservative portfolio returned 12.6%; in its worst, it lost 11.1%. And for the 20 years, it averaged 5.0% annual rate of return. The difference between an 8.9% return and a 5.0% return can add up over time. Remember, past performance does not guarantee future results. Actual results will vary. Bonds have different maturities, and are subject to interest-rate, credit and inflation risk. When interest rates increase, bond prices generally will fall, which may affect a bond or a bond funds performance. Bond redeemed before maturity may be worth more or less than their original cost. Market conditions will affect the return and principal value of bonds and bond funds. Individual stocks will fluctuate in value and when sold, they may be worth more or less than the initial purchase price. Stocks are represented by the S&P 500 Composite index (total return), an unmanaged index that is generally considered representative of the U.S. stock market. Bonds are represented by the Citigroup Corporate Bond Composite Index, an unmanaged index that is generally considered representative of the U.S. bond market. Cash is represented by the Citigroup 3-Month Treasury-Bill index, an unmanaged index that is generally considered representative of short-term cash alternatives. U.S. Treasury bills are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury bill prior to maturity, it could be worth more or less that the original price paid. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index.
Source: Thomson Reuters, 2016. For the period December 31, 1995, to December 31, 2015.