The Right Portfolio for You
Selecting the right portfolio requires understanding how different portfolios may change as the market goes up and down. When the market goes down you will lose money and if you are not prepared for that possibility you may sell at the bottom. Selling at the bottom is the number one reason that the average investor never sees the full potential gains that investing in the market offers. It is important, therefore, that you select a portfolio that fits you and your risk tolerance.
Below you will find five sample portfolios that span the range of risk from conservative to aggressive. Look closely and you will see that risk is managed by adjusting the mix of stocks and fixed income. The bar charts below each portfolio show the range of returns for consecutive one-, five-, and 10-year periods for each asset mix between 1926 and 2006. For example, the All-Equity mix had the worst one-year return of -67.6% from July 1931 to June 1932 and the best one-year return of 162.9% from July 1932 to June 1933. Over a longer time period such as 10 years, the All-Equity mix had the worst 10-year return of -4.9% from September 1929 to August 1939 and the best 10-year return of 21.4% from June 1949 to May 1959.
The ranges of returns shown for each sample portfolio can help you understand both the potential for returns and the risk of losses associated with different asset mixes. You can use the worst returns shown to consider how much risk you are comfortable with. The question to ask yourself is, "If my returns were that low for a period of time would I still remain fully invested or would I be tempted to sell?" If you would sell, the portfolio is too risky for you.
Review the portfolios below and find one that matches your tolerance for risk. Once you have made your selection read Implementing Your Selection
| Diversification Chart | |
|---|---|
| Sample Asset Mixes | |
 |
 |
| Risk and Return over Time 1926 - 2007 | |
 |
 |
 |
|
Source: Ibbotson Associates, Inc.
Performance figures on this page were calculated using historical returns of the Standard & Poor's 500 Index and U.S. Long-Term Government Bonds. These indexes were used as proxies for equity and fixed-income asset classes, respectively, and are not intended to predict actual future performance of the Vantagepoint Model Portfolio Funds.
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 Investor Services at 800-669-7400.