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Sample Asset Allocation Strategies

"Don't put all your eggs in one basket." It's good advice. When it comes to investing, diversification – putting your money into a variety of investments that have different return potentials and risk levels – means not putting all your eggs into one investment basket. Since market cycles vary, diversification may allow you to offset possible losses in one investment type with potential gains in another and, as a result, may help you reduce your overall exposure to risk. To illustrate how asset allocation can work for you, here are five model portfolios with their particular risk and return levels. Keep in mind, these are for illustrative purposes only.

  • Stocks – May be volatile in the short-term, but offer the best long-term growth potential.
  • Bonds – Are generally less volatile than stocks and generally provide more income than stable instruments or stocks, but provide less long-term return potential than stocks.
  • Cash/Stable assets – Provide income with little or no volatility of principal, but offer very limited growth opportunity long-term.

Most Conservative

Cash: 100%

Very Conservative

Stocks: 20% Bonds: 40% Cash: 40%

Conservative

Stocks: 40% Bonds: 35% Cash: 25%

Moderate

Stocks: 60% Bonds: 25% Cash: 15%

Aggressive

Stocks: 80% Bonds: 15% Cash: 5%

Very Aggressive

Stocks: 90% Bonds: 5% Cash: 5%

Most Aggressive

Stocks: 100%

The more aggressive approaches are generally more appropriate for investors who can "afford" the greater risks involved, either because they have sufficient assets to weather short-term volatility, or because they have a long time horizon that allows them to look past occasional downturns.

When comparing asset allocation strategies to your personal financial situation, you should consider your time frame and all of your personal investments in addition to your retirement assets and risk tolerance level.

Stock funds should only be considered for long-term goals as values fluctuate in response to the activities of individual companies and general market and economic conditions. Bond fund values fluctuate in response to the financial condition of individual issuers, changes in interest rates, and general market and economic conditions. Some funds, including non-diversified funds and funds investing in international securities, high yield bonds, small- and mid-cap stocks and/or more volatile segments of the economy, entail additional risk and may not be appropriate for all investors. Consult a Fund's prospectus for additional information on these and other risks.

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