Investment Strategies
When it comes to investing, you have a lot of choices. How can you match your choices with your financial goals? Figuring out how to allocate your funds takes time and thoughtful consideration. You may also benefit from consulting with a financial professional for help and guidance along the way. The following educational information is offered as a reference to begin thinking about what investment strategy may be right for you.

Asset Allocation
Asset allocation is a personal plan that can help you develop a diversified portfolio that combines different assets in various proportions. Your plan may change over the years, but its goal should remain the same: to help you reach your financial goals while maintaining a comfortable level of risk.

Asset allocation works by ensuring you own a variety of investment options to help minimize the effects of market fluctuations. Your personal allocation plan should consider the appropriate mix of investments to match your financial goals, time horizon, and risk tolerance.

Factors to Consider
As you start to evaluate your investment strategy and determine how to allocate your assets, it may be helpful to think about each of the following:

• Time Horizon – How many years do you have before retirement or before you will be withdrawing money out of your investments? Over how many years do you expect to receive income from your investments? If you are 30 years away from retirement, you have a much longer timeline for long-term growth than if you plan to retire within the next 5-10 years.
• Inflation – By keeping pace with inflation, investors can maintain the purchasing power of their money over time. This means that your money will be able to purchase the same basket of goods year after year, even though prices have increased. Generally, higher returns can only be achieved by accepting greater risk. How much risk are you willing to assume in order to outpace inflation?
• Range of Returns – Because economic markets fluctuate, a portfolio will have its ups and downs. Are you more comfortable with a smaller range of returns (involving potentially less risk and a lower rate of return) or a larger range of returns (involving potentially more risk and a higher rate of return)?
• Staying the Course – Markets have experienced large price swings and extended price drops throughout history. How comfortable would you be if your investments lost 20 percent of their value in three months and you were still 20 years away from retirement? Can you tolerate this kind of drop and stay the course with your long-term investment?
• Market Volatility & Short-Term Loss – Investors must be comfortable with the amount of risk associated with short periods (e.g., one year), even if they have a long investment horizon. How comfortable are you riding out market fluctuations over short timeframes?
• Risk vs. Return – Investment decisions are generally determined by a risk-return tradeoff. Risk is any possibility of loss to the value of your portfolio. Return is the amount earned or profit on an investment. Is protecting your portfolio from loss more important than achieving high returns?
• Portfolio Volatility – The degree to which the value of a portfolio rises and falls is called volatility. Generally, assets that exhibit higher volatility also have higher returns. Investments are risky, however, because there is no guarantee that the upturns in your portfolio will be greater than the downturns. What amount of portfolio volatility are you willing to accept?

Investment Styles
It is important to understand different investment styles and how you might describe yourself. As a beginning reference point, the table below summarizes various investment styles, their financial objectives, and risk tolerance levels.

Investment Options
Your investment style will ultimately help you decide what asset allocations to include in your portfolio. Below are some general educational descriptions of different investment options and recommendations from Ibbotson Associates, a leading authority on asset allocation. For additional information and personal guidance on how to determine your investment style and specific asset allocations for your investment portfolio, please consult with your financial professional and/or tax advisor.

Aggressive
Aggressive investments emphasize greater potential growth and therefore carry greater potential risk, including loss of principal. They may include smaller company and more speculative domestic and/or international stocks with higher volatility and potential loss of principal. International stocks have special risks including currency fluctuations; political, economic, and social instability; and different regulatory systems.

For an aggressive portfolio, consider:

• 90% equity weighting
• 10% fixed income weighting

Moderately Aggressive
Moderately aggressive investments emphasize equities believed to have greater growth potential with higher volatility and risk of loss of principal. Value investments emphasize equities believed by the portfolio manager to be undervalued by the market. The objective may not be met.

For a moderately aggressive portfolio, consider:

• 69% equity weighting
• 31% fixed income weighting

Moderate
Moderate investments seek long-term capital growth, current income, and/or growth of income consistent with moderate investment risk. The objective may not be met.

For a moderate portfolio, consider:

• 60% equity weighting
• 40% fixed income weighting

Moderately Conservative
Moderately conservative investments help outpace inflation and include equity portfolios. However, to potentially lessen volatility, more conservative investments make up the majority of the portfolio.

For a moderately conservative portfolio, consider:

• 59% fixed income weighting
• 41% equity weighting

Conservative
Conservative investments focus on increases in current income rather than growth. Income investments are comprised of bonds and other fixed-income securities. The value will vary based on interest rates, and it is possible to lose money if redeemed prior to maturity.

For a conservative portfolio, consider:

• 78% fixed income weighting
• 22% equity weighting

Note: The above information is not intended or written to be used as investing, legal, or tax advice. It was written solely to support the sale of annuity products. As a taxpayer, you cannot use it for the purposes of avoiding penalties that may be imposed under the tax laws. You should seek advice on investing, legal, or tax questions based on your particular circumstances from an independent financial professional, attorney, or tax advisor.

Print this page