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Balancing Your Portfolio (Asset Allocation)

It is always important to remember that there is no one investment strategy appropriate for everyone. Each individual has specific goals and financial circumstances that must be considered before making investment decisions. Professional investment advisors generally agree that the basic rule is to diversify your assets so that they reflect your particular circumstances, such as age, income, years to retirement, and tolerance for risk.

This diversification process is known as asset allocation. Asset allocation helps to balance your investment choices among asset categories such as money markets and fixed annuities as well as investments in stocks and bonds. Such balancing may help smooth out the inevitable ups and downs of the market. Fixed annuities are included in two asset categories below because they can be used for two separate objectives: (1) stability, because principal is guaranteed by the insurance company; and (2) current income, because insurance companies invest in bonds and other fixed-income securities.

Although investing in international stock and bond funds may be an appropriate way to diversify your portfolio, specific mention is not made of them here. This is because they are included within the general category of stock and bond funds. However, many professional investment advisors think it is prudent to include international funds in portfolios.

Finally, investors must remember, that there are large differences within categories of funds. Some stock and bond funds are riskier than others because their investment objectives are different. You should always make sure you understand our investments' objectives. Request and read a prospectus and annual report.

The following section provides examples of basic allocation mixes that professional investment advisors generally consider appropriate for different age groups. Please remember that these charts are provided for illustrative purposes only. What is right for you will depend on your individual circumstances, particularly with respect to your tolerance for risk.

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