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Asset Class Adjustments

Asset Class Adjustments

Some asset classes tend to be more volatile than others. By lowering your exposure to these asset classes, you can theoretically lower your overall risk. In the example below, US small caps and international stocks are reduced in favor of more US “Blue Chip” exposure, while high yield and global bonds are lowered in favor of more US investment grade bonds and cash / CDs.

  Base 60 Defensive 60
Stocks: 60%    
US Large Growth 5.5% 4.5%
US Large Blend 11% 14%
US Large Value 11% 15%
US Small Blend 6% 4%
US Small Value 6% 4%
Real Assets 8% 9%
International Core Equity 9.5% 8%
Emerging Markets 3% 1.5%
Alternatives: 5%    
Hybrids 3% 1.5%
Precious Metals 2% 3.5%
Bonds: 35%    
US Investment Grade 24% 26%
High Yield 2% 0%
Inflation Protection 4% 5%
Global 4% 2%
Cash/CDs 1% 2%

The allocation is still diversified and well-balanced, but it’s positioned more defensively. The adjustments can be made portfolio-wide, as in the example above, or simply within a few asset classes.