Market Fluctuations Can Cause Allocation Drift

Chart of the Week for October 19-25, 2001

Investors seeking the benefits of diversification usually allocate their holdings across stocks, bonds, and cash, according to their time horizon and risk tolerance. Doing so reduces volatility and helps stabilize returns. However, over time, market fluctuations cause allocations to drift, overweighting one asset class while underweighting another. In the short run, this may not be significant, but, in the long run, it can cause the portfolio’s risk level to become mismatched with the investor’s objective. It’s a good idea for investors to review their portfolios for allocation drift at least annually (more frequently in volatile markets), and make adjustments if necessary.

Investing in lifestyle funds is a great way to ensure a proper allocation. The Vantagepoint Model Portfolio Funds offer the convenience of predetermined allocations for the most conservative to the most aggressive investor with the benefit of regular rebalancing. Please see the Investing for Your Retirement guide in our Charting Your Course series to learn more about the role asset allocation and the Vantagepoint Model Portfolio Funds can play in your retirement plan.

This illustration was compiled by information from outside sources. These companies are not affiliated with ICMA-RC. This information is being provided for educational purposes and is not intended to be construed as or relied upon as investment advice. ICMA-RC does not offer specific tax or legal advice. Individuals are advised to consider any new investment strategies carefully prior to implementing.

Please consult both the current applicable prospectus and MAKING SOUND INVESTMENT DECISIONS: A Retirement Investment Guide carefully for a complete summary of all fees, expenses, charges, financial highlights, investment objectives, risks and performance information. Investing in mutual funds and other investment vehicles involves risk, including possible loss of the amount invested. Investors should consider the Fund's investment objectives, risks, charges and expenses before investing or sending money. The prospectus contains this and other information about the investment company. Please read the prospectus carefully before investing. All Vantagepoint Funds invested through 401 or 457 plans are held through VantageTrust. Vantagepoint Funds are distributed by ICMA-RC Services LLC, a wholly owned broker-dealer subsidiary of ICMA-RC and member FINRA/SIPC. For a current prospectus, contact ICMA-RC Services, LLC.

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