Asset allocation A balancing act.

Transcription

1 Asset allocation A balancing act V (3/16) RiverSource Life Insurance Company and RiverSource Life Insurance Co. of New York

2 Smart Strategies for Investing If you are like most investors, you probably find it difficult to know when and how to make changes to your investments. Unfortunately, when it comes to investing, there is no way to know what asset classes will perform well from year to year. In any given year, some asset classes may perform well while others may not. Many investors let their emotions get the best of them selling out of poor performing investments and chasing after the latest hot fund. Asset allocation or diversifying your investments among different kinds of asset classes is a disciplined strategy that can help remove emotions from the equation. While asset allocation does not assure a profit or protect you against a loss, a diversified portfolio can help you weather the market s ups and downs and potentially reduce the level of volatility in your investment portfolio.

3 Hypothetical Asset Allocation Portfolios These reflect historical performance for five hypothetical portfolios with asset allocation strategies that vary based on a risk profile. Your financial professional can work with you to design an asset allocation strategy that is right for your timeframe and tolerance for risk. More Conservative 20% Equities/ 80% Fixed Income n Domestic Large Cap Stocks/S&P % n Domestic Mid Cap Stocks/Russell Midcap 3% n Domestic Small Cap Stocks/Russell % n International Stocks/MSCI EAFE 6% n Bonds/Barclays Capital Aggregate Bond Index 60% n Cash Equivalents/3-Month T-Bill 20% 35% Equities/ 65% Fixed Income n Domestic Large Cap Stocks/S&P % n Domestic Mid Cap Stocks/Russell Midcap 5% n Domestic Small Cap Stocks/Russell % n International Stocks/MSCI EAFE 10% n Bonds/ Barclays Capital Aggregate Bond Index 55% n Cash Equivalents/3-Month T-Bill 10% 50% Equities/ 50% Fixed Income n Domestic Large Cap Stocks/S&P % n Domestic Mid Cap Stocks/Russell Midcap 7% n Domestic Small Cap Stocks/Russell % n International Stocks/MSCI EAFE 15% n Bonds/ Barclays Capital Aggregate Bond Index 45% n Cash Equivalents/3-Month T-Bill 5% 65% Equities/ 35% Fixed Income n Domestic Large Cap Stocks/S&P % n Domestic Mid Cap Stocks/Russell Midcap 9% n Domestic Small Cap Stocks/Russell % n International Stocks/MSCI EAFE 19% n Bonds/ Barclays Capital Aggregate Bond Index 30% n Cash Equivalents/3-Month T-Bill 5% More Aggressive 80% Equities/ 20% Fixed Income n Domestic Large Cap Stocks/S&P % n Domestic Mid Cap Stocks/Russell Midcap 11% n Domestic Small Cap Stocks/Russell % n International Stocks/MSCI EAFE 24% n Bonds/ Barclays Capital Aggregate Bond Index 20% n Cash Equivalents/3-Month T-Bill 0% Methodology for allocations to the hypothetical portfolios: Equity allocation: The equity portion is split into 30% international and 70% domestic. The domestic equity portion follows similar allocations as the Russell 3000 Index, which is 70% large cap, 20% mid cap, and 10% small cap. Fixed income allocation: The fixed income portion is allocated to bonds and cash equivalents. Cash equivalents increase as a percentage of the portfolio as the portfolios become more conservative. Quarterly rebalancing to maintain alignment with original allocations. Indices are unmanaged and do not incur management fees or other expenses. You cannot invest directly in an index.

4 Historical returns for the hypothetical portfolios. 20-year historical annual returns. 20% Equities 80% Fixed Income 35% Equities 65% Fixed Income 50% Equities 50% Fixed Income 65% Equities 35% Fixed Income Annual returns represent the weighted average performance using the indices and the percentages shown in the pie charts. All returns are year-end. This is a hypothetical illustration and does not refer to any future performance. Nor does it imply any guaranteed earnings, contributions, actual rate of return or tax bracket. Standard deviation is a statistical measure of variability. It measures how far a value is from the average. 80% Equities 20% Fixed Income Year Annual Return Year Annual Return Year Annual Return Year Annual Return Year Annual Return % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % Standard Deviation 3.69% Standard Deviation 5.67% Standard Deviation 7. 83% Standard Deviation 10.05% Standard Deviation 12.35% annualized return 5.50% annualized return 6.27% annualized return 6.79% annualized return 7.09% annualized return 7.44% Index definitions Citigroup 3-Month T-Bill Index (3-Month T-Bill): Calculated by taking the average weekly auction rates for 90-day U.S. Treasury Bills during the month. Barclays Capital Aggregate Bond Index: Composed of the Barclays Capital Govt/Credit Index, the Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. Morgan Stanley Capital International EAFE Index (MSCI EAFE): This Europe, Australasia and Far East index is a market capitalizationweighted index composed of 21 non-u.s. industrialized country indices. Russell 2000 Index (Russell 2000): Consists of the smallest 2000 companies in the Russell 3000 Index, representing approximately 10% of the Russell 3000 Index s total market capitalization. Russell Midcap Index: Measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 31% of the total market capitalization of the Russell 1000 Index. Standard & Poor s Stock Market Index (S&P 500): A market capitalization-weighted index of 500 widely held stocks, often used as a proxy for the U.S. stock market.

5 Hypothetical annualized trailing returns. 20% Equities 80% Fixed Income 35% Equities 65% Fixed Income 50% Equities 50% Fixed Income 65% Equities 35% Fixed Income 80% Equities 20% Fixed Income 1 year 0.45% 0.47% 0.36% 0.27% 0.16% 3 year 3.28% 5.04% 6.61% 8.22% 9.81% 5 year 4.04% 5.44% 6.53% 7.52% 8.55% 10 year 4.49% 5.25% 5.72% 5.97% 6.28% 15 year 4.67% 5.22% 5.53% 5.55% 5.66% 5.50% 6.27% 6.79% 7.09% 7.44% Returns represent the weighted average performance using the indices and the percentages shown in the pie charts. This is a hypothetical illustration and does not refer to any future performance. Nor does it imply any guaranteed earnings, contributions, actual rate of return or tax bracket.

6 The RiverSource Story Life has many twists and turns and we understand the importance of balancing the need to protect what is important to you while you invest toward your financial goals. RiverSource creates innovative products designed with you and your life in mind. Through a balance of asset and risk management and built on a heritage of more than 1s, we work with you and your financial advisor to help grow your assets, manage your income and protect what matters most today and tomorrow. The returns shown do not include expenses or charges that, if reflected, could reduce the figures shown. Past performance is no guarantee of future results. There is no guarantee that investment objectives will be satisfied or that return expectations will be met. Bonds There are risks associated with an investment in a bond fund, including the impact of interest rates, credit and inflation. These and other risk considerations are discussed in the fund s prospectus. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. High-Yield Bond OR High-Yield Fixed Income: Yield refers to the performance of the underlying variable product fund, not bond credit quality rating. Higher yield corporate junk bond prices may fluctuate more broadly than prices of higher quality bonds. Risk of principal and income also is greater than with higher quality securities. RiverSource Life Insurance Company 9549 Ameriprise Financial Center Minneapolis, MN RiverSource Life Insurance Co. of New York 20 Madison Avenue Extension P.O. Box 5144, Albany, NY Domestic Stock Mid Cap: Stocks of medium-sized companies are subject to more abrupt or erratic price movements than stocks of larger companies. Small Cap: Stocks of small-sized companies are subject to more abrupt or erratic price movements than stocks of larger companies. Some of these companies have fewer financial resources. International There are special risk considerations associated with international investing related to market, currency, economic, political and other factors including foreign accounting practices and variations in foreign regulations. RiverSource Distributors, Inc. (Distributor), Member FINRA. Insurance and annuity products are issued by RiverSource Life Insurance Company and in New York, by RiverSource Life Insurance Co. of New York, Albany, New York. Only RiverSource Life Insurance Co. of New York is authorized to sell insurance and annuities in New York RiverSource Life Insurance Company. All rights reserved V (3/16)