As this hypothetical chart shows, investing in a portfolio diversified across the 10 asset classes represented below (investing 10% in each) could have provided your clients with an excess return of more than 47% of the return potential of the 3-month US Treasury Bill).
Source: Morningstar. Diversified Portfolio is comprised of investing 10% in each index below. Cash investments involve less risk than equity and fixed income investments. Treasury bills are guaranteed by the U.S. Government and, if held to maturity, offer a fixed rate of return and fixed principal value.
US large-cap stocks are represented by the S&P 500 – The S&P 500 Index is the Standard & Poor’s 500 Composite Index of 500 stocks, an unmanaged index of common stock prices.
US large-cap value stocks are represented by the Russell 1000 Value – The Russell 1000 Value Index is an unmanaged market capitalization weighted index of the 1000 largest U.S. companies with lower-price-to-book ratios and lower forecasted growth values.
US large-cap growth stocks are represented by the Russell 1000 Growth – The Russell 1000 Growth Index is an unmanaged market capitalization weighted index of the 1000 largest U.S. companies with higher price-to-book ratios and higher forecasted growth values.
US small-cap value stocks are represented by the Russell 2000 Value – The Russell 2000 Value Index is an unmanaged index of common stock prices that measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.
US small-cap growth stocks are represented by the Russell 2000 Growth – The Russell 2000 Growth Index measures the performance of the small-cap growth stocks of the U.S. equity universe.
US mid-cap value stocks are represented by the Russell Midcap Value – The Russell Midcap Value Index is an unmanaged index of common stock prices that measures the performance of those Russell Midcap companies with lower price-tobook ratios and lower forecasted growth values.
US mid-cap growth stocks are represented by the Russell Midcap Growth – The Russell Midcap Growth Index is an unmanaged index that measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values.
International stocks are represented by the MSCI EAFE – The unmanaged MSCI EAFE Index (unhedged) is a market capitalization weighted composite of securities in 21 developed markets.
REITs are represented by the Dow Jones/Wilshire Real Estate Securities – The Dow Jones Wilshire Real Estate Securities Index is an unmanaged index of publicly traded REITs and real estate operating companies.
Bonds are represented by the Barclays Capital Aggregate Bond – The Barclays Capital Aggregate Bond Index represents an unmanaged diversified portfolio of fixed income securities, including U.S. Treasuries, investment-grade corporate bonds, and mortgage-backed and asset-backed securities.
It is not possible to invest directly in an unmanaged index.
Diversification does not protect against market risks, and does not assume a profit.
Investors cannot invest directly in indices.
The indices are unmanaged and the figures for the Index reflect the reinvestment of dividends, but do not include any deduction for fees, expenses or taxes. All indices are market capitalization weighted, except for the Wilshire REIT index and the Barclays Capital Aggregate Bond Index. It is not possible to invest directly in an unmanaged index. The figures for the index reflect the reinvestment of dividends but do not reflect the deduction of any taxes, fees or expenses which would reduce returns. Past performance does not guarantee future results.
Non-U.S. securities may be more volatile than U.S. securities, and small-capitalization stocks may be more volatile than stocks with larger capitalizations.