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  • Follow the Yellow Brick Road to Asset Allocation and Diversification

    October 1, 2015

    It is impossible to predict which asset class will be the best or worst in any given year. The performance of any given asset class can have drastic periodic changes. The image below illustrates the annual performance of various asset classes in relation to one another. In times when one asset class dominates all others, as was the case for international stocks from 2004 to 2007, it is easy to lose sight of the fact that historical data shows it is impossible to predict the winners for any given year. Diversification does not eliminate the risk of experiencing investment losses. However, as shown by the yellow path, investing a portion of a portfolio in a number of different asset classes, portfolio volatility may be reduced.

     

    Asset-Class Winners and Losers 1995-2014

    Here are four "investment help" options for you to consider when choosing your asset allocation and diversifying your fund selections in your 401(k) account.

    • Morningstar Retirement Manager assesses your current situation and provides free online advice for asset allocation and fund selection from the investment funds in Tiers I – III. You can access this from the My Investments tab at mylife.jhrps.com (Click on Get Advice in the View/Change Investments drop down menu.)

    • OnTarget is a "managed account" option that determines a contribution rate and investment mix from Tiers I - III that's right for you, increases your contribution rate annually (up to 15%) and periodically adjusts your investment mix. Fees range from 0.20% to 0.50% – half a penny or less for each dollar invested – depending on your account balance. This fee-for-service option is available from the My Investments tab at mylife.jhrps.com.

    • Automatic Rebalance option may be appropriate if you make your own fund selections from Tier II and/or Tier III. This feature allows you to make a single election (free and revocable) to have your investment mix rebalanced every three, six or 12 months. Rebalancing brings your investments back to your initial allocation but will not get more conservative as time passes, so you should periodically assess your asset allocation. Learn more from the My Investments tab. (View/Change Investments item in drop down menu.)

    • Vanguard Target Retirement Trusts have an age-appropriate asset allocation and gradually get more conservative over time. See fund fact sheets available from the My Investments tab. (Click on "Change Current" and then on any fund name from the View/Change Investments item in drop down menu.)