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Why balance in your portfolio matters over the long term

Learn more about the importance of stocks, bonds and cash in a balanced portfolio.

Cash can provide protection and liquidity during volatile markets — especially as part of a well-planned, diversified investment program. Yet, as the chart below shows, investing in cash alone for a long period would have generated disappointing returns that were eroded by inflation.

Why balance matters over the long-term

All results calculated for the period December 31, 1983, through December 31, 2013.

Dollar figures are before inflation. Past results are not predictive of results in future periods.

Source: Ibbotson — cash (U.S. Treasury Bills Index); bonds (Long-Term Corporate Bonds Index); stocks (Large Company Stocks Index). The market indexes are unmanaged and, therefore, have no expenses.

Over the long haul, stocks and bonds have generated attractive long-term returns relative to cash, and have outpaced inflation. However, stocks have been more volatile than bonds, and both have been more volatile than cash. That’s why maintaining a balanced portfolio matters over the long term — a variety of different investments can better prepare you for market volatility. If investments in stocks struggle and fall in value, for example, bond investments and cash holdings may help cushion the blow.

Talk to your financial adviser to determine the right mix of stocks, bonds and cash for you.

Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds. The return of principal for bond funds and funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Investing outside the United States involves additional risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.