Asset Allocation in Action

This chart provides a summary of average annual returns of 11 different asset classes over each of the past 15 years.

Individual Asset Class

Look at the highest performing asset classes and track their movement over time. You'll see there is no consistent or predictable pattern. In some cases, the highest performing asset class one year becomes the lowest performing the next.

It is difficult to predict which individual asset class will outperform or underperform in any given year.

Diversified Portfolio

Look at the annual performance of a diversified portfolio containing a mix of asset classes displayed in blue. You'll see a narrower band of more consistent performance. That's the power of diversification and asset allocation in action.

A diversified portfolio can smooth out volatility and may improve cumulative returns over time.

For an in-depth view on how important diversification can be in fluctuating market cycles, take a look at our Periodic Table of Style Rotation


Diversification does not assure a profit nor does it protect against loss of principal.

The representative indices for each asset class are as follows:

Emerging Markets: MSCI Emerging Markets(Gross) Index
A free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

Commodities: S&P GSCI® (Goldman Sachs Commodities Index)
Commodities are raw materials or primary agricultural products that can be bought or sold on an exchange or market. Examples include grains such as corn, foods such as coffee, and metals such as copper.

Foreign Equities: MSCI EAFE Growth Index
A market capitalization-weighted index that monitors the performance of growth stocks from Europe, Australasia, and the Far East.

Small Cap Equities: Russell 2000® Index
A market-capitalization weighted index created by Frank Russell Company to measure the performance of the 2,000 smallest of the 3,000 largest publicly traded U.S. companies, based on total market capitalization.

Large Cap Equities: S&P 500® Index
A market value-weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity, and industry group representation that are considered to be leading firms in dominant industries. Each stock's weight in the index is proportionate to its market value. Created by Standard & Poor's, it is considered to be a broad measure of U.S. stock market performance.

Cash: Bloomberg Barclays U.S. 1-3 Month Treasury Bill Index
The 1-3 month component of the U.S. Treasury Bill Index. The U.S. Treasury Bill Index includes U.S. Treasury bills with a maturity from one up to (but not including) 12 months. It excludes zero coupon strips.

High Yield Bonds: Bloomberg Barclays U.S. High-Yield 2% Issuer Capped Bond Index
A component of the U.S. Corporate High-Yield Bond Index, which covers the universe of fixed-rate, non-investment grade corporate debt of issuers in non-emerging market countries. It is not market capitalization-weighted--each issuer is capped at 2% of the index.

Core Bonds: Bloomberg Barclays U.S. Aggregate Bond Index Represents securities that are taxable, registered with the Securities and Exchange Commission, and U.S. dollar-denominated. The index covers the U.S. investment-grade fixed-rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Broadly and fairly represents the equity REIT opportunity set with proper investability screens to ensure that the index is investable and replicable. The index represents approximately 85% of the US REIT universe.

Foreign Bonds: Bloomberg Barclays Global Treasury ex-U.S. Bond Index
Composed of those securities included in the Bloomberg Barclays Global Aggregate Bond Index that are Treasury securities, with the U.S. excluded.

*The diversified portfolio is an equal-weighted portfolio of all the other asset classes (i.e, 1/10th allocation to each of the other asset classes). Data as of 12/31/2012, and is updated on an annual basis.

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Source: Bloomberg Index Services Ltd