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September | Bubble Bath
Addresses the benefits and risks involved with investing in commodities and how commodities could play a role in diversifying a portfolio. The graph illustrates the duration and magnitude of the cyclical movement of an all-commodities portfolio and a diversified portfolio consisting of 45% stocks, 45%bonds, and 10% commodities.
October | Chasing Rainbows
The Average investor experience may differ greatly when compared to a fund's stated return. Investors often endure poor timing and planning as they chase past performance. They get into funds that are performing well and initiate a selling spree following a decline. This behavior could prove costly as investors who try to time the market might be at risk of missing exceptional returns. The graph illustrates the investor return relative to the market return for a given fund.
Investors need to select a healthy blend of asset classes in order to maintain portfolio income, lower risk, and outpace inflation. Fixed-income securities, considered lower risk investments, can be used to stabilize a stock heavy portfolio and provide income and diversification benefits. Further, investing in bond funds may offer more liquidity than individual fixed-income securities. Illustrates the range of returns for different bond fund categories for the past ten years.
Over time, market forces can alter the composition of a portfolio resulting in an increase in risk or decrease in returns. Volatile asset classes like equities, tend to have higher returns and therefore increase in weight with time. Periodic rebalancing is one way to manage risk and keep a portfolio on track.
