The market cyclicality of asset classes Asset class performance is cyclical in nature—which means that no one asset class is consistently more favorable than any other. Since each asset class can potentially outperform or underperform the market in any given period, diversification continues to play a key role in investing.
Taking turns at the top: Asset class performance is cyclical in nature 3
Annual Returns (2012–2021)
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
U.S. Bonds
18.22% 38.82% 13.69% 3.30% 21.31% 37.28% 1.28% 31.49% 19.96% 28.71%
Municipal Bonds
17.44% 34.76% 13.22% 1.38% 17.13% 25.03% 0.01% 30.54% 18.40% 22.58%
Foreign Bonds
17.32% 32.39% 10.60% 1.18% 13.80% 21.83% -2.08% 25.52% 18.31% 16.61%
Alternatives
17.28% 22.78% 9.05% 1.05% 11.96% 18.52% -2.62% 22.38% 17.10% 14.82%
Blended Return
16.35% 18.63% 7.43% 0.55% 11.19% 14.65% -3.49% 22.01% 14.04% 11.26%
High-Yield Bonds
16.00% 8.64% 5.97% -0.81% 10.15% 14.51% -4.26% 18.44% 7.82% 9.82%
Small Stocks
15.81% 7.44% 4.89% -2.44% 8.24% 10.26% -4.38% 15.04% 7.51% 5.28%
Large Stocks
11.28% -2.02% 3.04% -3.66% 2.65% 7.50% -9.06% 14.32% 7.11% 1.52%
Midcap Stocks
6.82% -2.55% 2.45% -4.41% 2.31% 5.45% -11.01% 8.72% 5.26% -1.54%
Foreign Stocks Emerging Market Stocks
6.78% -2.60% -2.19% -4.47% 1.00% 3.54% -13.79% 7.54% 5.21% -1.80%
4.21% -5.25% -4.90% -14.92% 0.25% 2.70% -14.58% 7.42% -2.58% -2.54%
Investing in multiple mutual funds enables you to create a customized portfolio of well-diversified investments suitable for helping you meet your personal investment objectives and attaining your financial goals. This approach could reduce overall investment costs and provide better risk management than if you purchased the securities individually. To illustrate this point, below is a sampling of hypothetical portfolios displaying varying levels of risk.
Investment portfolios: Hypothetical examples based on risk level 3
Conservative 50% Stocks, 40% Bonds, 10% Alternatives
Moderate 65% Stocks, 25% Bonds, 10% Alternatives
Growth 80% Stocks, 10% Bonds, 10% Alternatives
10%
10%
10%
2%
3%
5%
5%
3%
5%
35%
45%
55%
18%
25%
34%
15%
20%
U.S. Stocks
Foreign Stocks
U.S. Bonds
Foreign Bonds
Money Market
Alternatives
3. Source: Morningstar, 12/31/21. Large stocks are represented by the S&P 500 ® Index. Midcap stocks are represented by the Russell Midcap Index. Small stocks are represented by the Russell 2000 Index. Foreign stocks are represented by the MSCI EAFE ® Index. Emerging market stocks are represented by the MSCI Emerging Markets Index. Blended return is represented by a 60%/40% split of the S&P 500 Index and Bloomberg U.S. Aggregate Bond Index. U.S. Bonds are represented by the Bloomberg U.S. Aggregate Bond Index. High-yield bonds are represented by the Bloomberg U.S. Corporate High Yield Bond Index. Municipal bonds are represented by the Bloomberg Municipal Bond Index. Foreign bonds are represented by the JPM EMBI Global Diversified Bond Index. Alternatives are represented by the Morningstar Diversified Alternative Total Return Index. Past performance is no guarantee of future results, which will vary. An investment cannot be made directly into an index. Index definitions can be found at the end of this brochure.
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