Rebalancing and Risk

Chart of the Week for March 24-30, 2006

As last week’s chart mentioned, it’s difficult to time market changes correctly and it’s important to stay diversified. When markets move up and down, the returns from different asset classes can cause a portfolio to be out of balance from the initial allocation. Many retirement savers forget to think about sticking to an asset allocation once they set one up to meet their goals. The danger here is that as allocations vary, failing to rebalance can change your risk profile without your knowledge.

The first chart above shows an allocation that was kept with periodic rebalancing over the three-year period ending last December— the percentage of funds in each asset class hasn’t changed much. The second chart shows how the allocation has swung without rebalancing. This portfolio now has much more higher-risk emerging market stock than it did three years ago. Check your portfolio periodically to make sure the asset allocations are still intact and rebalance your portfolio, if needed, to reflect the proper weights.

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.

Investment information can change rapidly and the changes can be significant particularly in volatile markets. For this reason “as of”’ dates are provided for specific data where applicable. The information should not be considered current after the dates provided.

Please read 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 carefully 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. All Vantagepoint Funds invested through 401 or 457 plans are held through VantageTrust. The 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.

The performance data quoted represents past performance. Past performance is no guarantee of future results. Investment returns and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data illustrated. For performance data current to the most recent month end, contact ICMA-RC Services, LLC by calling 800-669-7400 or by writing to 777 North Capitol Street, NE, Washington, DC 20002-4240. Para asistencia en Español llame al 800-669-8216. Performance data current to the most recent quarter end is available by visiting www.icmarc.org.