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De-risking at a Lower Price

Two-line chart comparing expected return frequency for the standard 60-40 portfolio and 50-50 portfolio. Table below shows average annualized return, volatility, and return/volatility. Chart subtitle: Expanding allocations to fixed income may provide some stability in the face of uncertainty and market risks. Chart source: Marquette Associates Asset Allocation Software as of December 31, 2022. The 10-year return assumptions are simulated capital market returns. It is important to note that these values are present output from the software simulations, and not deterministic views of future capital market performance. Chart visual description: Y-axis is labeled “Outcome Frequency” and ranges from 0 to 18. X-axis ranges from -10% to +16%, representing return. 60-40 portfolio line is plotted in blue, 50-50 in green, and Target Return of 7.0% is plotted vertically with a dashed grey line. Chart data description:. Benefitting from today’s elevated yields and lower volatility inherent to fixed income, the 50-50 portfolio projects a greater concentration of outcomes centered around the 7% target rate of return with less volatility than the 60-40 baseline portfolio. Although the expected return decreased slightly, portfolio risk decreased by roughly 1.5 percentage points, creating a more favorable risk-adjusted return. Table description: First row: Avg. Annualized 10 Yr. Return: 60-40 Portfolio is 6.47%, 50-50 is 6.26%. Second row: Avg. Annualized 10 Yr. Volatility: 60-40 is 9.93% and 50-50 is 8.38%. Third row: Avg. Return/Avg. Volatility: 60-40 is 0.65, 50-50 is 0.75. End chart description. See disclosures at end of document.
Posted on March 1, 2023 Full size 1433 × 775

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