| Diversified allocation | 4Q23 return (%) |
3Q23 return (%) |
YTD return (%) |
YOY return (%) |
3-year return (%, annualized) |
|---|---|---|---|---|---|
| Moderate income liquid | 7.99 | -2.86 | 10.57 | 10.57 | 0.00 |
| Moderate growth and income liquid | 8.94 | -2.86 | 13.72 | 13.72 | 2.26 |
| Moderate growth liquid | 9.90 | -3.13 | 16.46 | 16.46 | 3.76 |
| 60% MSCI ACWI/40% Bloomberg Multiverse | 9.33 | -3.40 | 12.57 | 12.57 | -0.68 |
| 60% S&P 500 Index/40% Bloomberg U.S. Aggregate Bond Index | 9.74 | -3.26 | 17.71 | 17.71 | 4.70 |
Risks
Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns.
Investing in stocks involves risk and their returns and risk levels can vary depending on prevailing market and economic conditions. Small- and mid-cap stocks are generally more volatile, subject to greater risks and are less liquid than large company stocks. Foreign investing has additional risks including currency, transaction, volatility and political and regulatory uncertainty. These risks are heightened in emerging markets. Bonds are subject to market, interest rate, price, credit/default, liquidity, inflation and other risks. Prices tend to be inversely affected by changes in interest rates. High-yield fixed-income securities are considered speculative, involve greater risk of default, and tend to be more volatile than investment-grade fixed-income securities. Investing in commodities is not appropriate for all investors and may subject an investment to greater share price volatility than an investment in traditional equity or debt securities.
Definitions
Allocation compositions
- Moderate Income: 2% Bloomberg U.S. Treasury Bills (1–3 Month) Index, 60% Bloomberg U.S. Aggregate Bond Index, 4% Bloomberg U.S. Corporate High Yield Bond Index, 5% JPM EMBI Global Index, 16% S&P 500 Index, 5% Russell Midcap Index, 2% Russell 2000 Index, 4% MSCI EAFE Index, 2% Bloomberg Commodity Index.
- Moderate Growth and Income: 2% Bloomberg U.S. Treasury Bills (1–3 Month) Index, 30% Bloomberg U.S. Aggregate Bond Index, 6% Bloomberg U.S. Corporate High Yield Bond Index, 5% JPM EMBI Global Index, 24% S&P 500 Index, 10% Russell Midcap Index, 6% Russell 2000 Index, 8% MSCI EAFE Index, 5% MSCI Emerging Markets Index, 4% Bloomberg Commodity Index.
- Moderate Growth: 2% Bloomberg U.S. Treasury Bills (1–3 Month) Index, 8% Bloomberg U.S. Aggregate Bond Index, 3% Bloomberg U.S. Corporate High Yield Bond Index, 31% S&P 500 Index, 14% Russell Midcap Index, 10% Russell 2000 Index, 15% MSCI EAFE Index, 12% MSCI Emerging Markets Index, 5% Bloomberg Commodity Index.
Definitions
Bloomberg Multiverse Index provides a broad-based measure of the global fixed-income bond market. The index represents the union of the Global Aggregate Index and the Global High-Yield Index and captures investment grade and high yield securities in all eligible currencies.
Bloomberg U.S. Treasury Bills (1-3M) Index is representative of money markets.
Bloomberg U.S. Aggregate Bond Index is composed of the Bloomberg U.S. Government/Credit Index and the Bloomberg U.S. Mortgage-Backed Securities Index and includes Treasury issues, agency issues, corporate bond issues, and mortgage-backed securities.
Bloomberg U.S. Corporate High Yield Bond Index covers the U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market.
Bloomberg Commodity Index is calculated on an excess return basis and reflects commodity futures price movements.
JPMorgan EMBI Global Index (USD) is a U.S. dollar-denominated, investible, market cap-weighted index representing a broad universe of emerging market sovereign and quasi-sovereign debt.
MSCI All Country World Index (ACWI) is a market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world. It consists of 46 country indexes comprising 23 developed and 23 emerging market countries.
MSCI EAFE (DM) and MSCI Emerging Markets (EM) indexes are equity indexes which capture large and mid cap representation across DM countries (excluding Canada and the U.S.) and EM countries around the world.
Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represent approximately 25% of the total market capitalization of the Russell 1000® Index.
Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.
S&P 500 Index is a market capitalization-weighted index composed of 500 stocks generally considered representative of the U.S. stock market.
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.
Sources: © 2023 – Morningstar Direct, All Rights Reserved1, and Wells Fargo Investment Institute, as of December 31, 2023. YTD = year to date. YOY = year over year.
Performance results for Moderate Income, Moderate Growth and Income, Moderate Growth, and the 60/40 blends are calculated using blended index returns and are for illustrative purposes only. Moderate Income, Moderate Growth & Income, and Moderate Growth allocations are dynamic and change as needed with adjustments to the strategic allocations. Index returns do not represent investment performance or the results of actual trading. Index returns reflect general market results; assume the reinvestment of dividends and other distributions; and do not reflect deductions for fees, expenses, or taxes applicable to an actual investment. An index is unmanaged and not available for direct investment. Past performance does not guarantee future results. See “Index Definitions and Asset Class Risk Disclosures” link above for blended index compositions of the Moderate Income, Moderate Growth and Income, Moderate Growth Liquid, and 60/40 blends, risks and index definitions.
Diversification strategies do not guarantee investment returns or eliminate the risk of loss.
1. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
Key Takeaways
- Our analysis shows a diversified allocation has typically helped smooth out returns over time.
- Adding diversifiers, like Commodities and, where appropriate, Hedge Funds, can help enhance return potential and mitigate risk in a traditional portfolio consisting of stocks and bonds.