ASSET ALLOCATION

The basic investment choices for the capitalist are stocks, bonds, and real estate. Stocks represent equity, or an ownership interest, in large, publicly traded corporations. Bonds represent debt, or lending money to those same corporations, as well as to municipalities and governments. Real estate is the buildings occupied by the corporations, municipalities, governments and their employees. Asset allocation is the decision about how to split up your investable assets between the three investment choices based on the investor’s risk tolerance, investment objective and time horizon, as well as upon market fundamentals and economic conditions.

Note: Stock investing involves risk, including loss of principal. Bonds are subject to market and interest rate risk if not held to maturity. Bond values will decline as interest rates rise, and are subject to availabilty and change in price. Investing in Real Estate Investment Trusts (REITs) involves special risks such as liquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Asset allocation does not ensure a profit or protect against a loss. 

asset allocation and diversification.png
historical risk return stocks bonds.png

Stocks* S&P 500, 1971-2012. Yahoo Finance;
Robert Schiller, “Irrational Exuberance”.
Bonds**Long-term Government bonds, Ibbotson SBBI 1971-2012. Real Estate*** FTSE NAREIT US Real Estate Index, 1971-2012.

The S&P 500® Index is a commonly recognized, market capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance The FTSE NAREIT All Equity REITs Index contains all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property that also meet minimum size and liquidity criteria. 10-year US Treasury Note: A debt obligation issued by the United States government that matures in 10 years. A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturity. The Total Return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and rents. This contrasts with the growth, which takes into account only the capital gain on an investment. Standard Deviation: A statistical measure of the dispersion or spread of returns of an asset over a period of time. A higher standard deviation indicates higher volatility (risk) because actual returns vary over a larger range than assets with lower standard deviations.

Note All indices are unmanaged and cannot be invested into directly. Past performance is no guarantee of future results. This is for illustration purposes only and is not representative of any specific situation. Your results will vary. The rates of return used do not reflect the deduction of fees and charges inherent to investing.