Fundamental Investing
Strategies for the long term
THE ADVANTAGES OF KEEPING A DIVERSIFIED PORTFOLIO
A simple, effective strategy to work toward balancing risk and potential return
Whether your financial goals are to build wealth, retire, send a child to college, or provide for your family,
allocating your assets across the major asset classes — stocks, bonds, international securities, and cash
— may help you pursue the best possible return on your investments according to your tolerance for risk
and time horizon.
How you diversify within each asset class can be equally important to your investment success
over time. Spreading your holdings among different industries, geographies, companies, and
investment styles may be the best way to reduce your exposure to the downside risks of individual
portfolio holdings.
Consider this tale of three investors
Each hypothetical investor followed a different strategy for investing $1,000 each year
over a 20-year period ($20,000 total from 1/1/97 through 12/31/16).
While not always easy,
staying goal focused,
well diversified, and
committed to your
plan are all keys to
working toward
successful long-term
investing.
Chased performance
$38,765
Went for the rebound
$34,869
Practiced ADR
$40,804
Source: SPAR
ypothetical examples are for
H
illustrative purposes only and are
not intended to represent
the future performance of
any MFS® product.
ast performance is no
P
guarantee of future results.
Investor #1
Each year, he invested in the
previous year’s best-performing
market segment.
Investor #2
Each year, she invested in the
previous year’s worst-performing
market segment, hoping for a
rebound the next year.
Investor #3
She remained invested in eight
different asset classes each year.
She also rebalanced her portfolio’s
assets each quarter so that they
stayed equally distributed among
the eight asset classes.
For purposes of this comparison, we have divided the overall market into the following eight indices — the Bloomberg Barclays U.S.
Aggregate Bond Index measures the U.S. bond market. The MSCI EAFE Index measures the non-U.S. stock market. The Russell
1000® Growth Index measures large-cap U.S. growth stocks. The Russell 1000® Value Index measures large-cap U.S. value stocks.
The Russell 2500 Index measures U.S. small- and mid-cap stocks. The FTSE NAREIT All REITs Total Return Index tracks the performance of commercial real estate across the U.S. economy. The JPMorgan Global Government Bond Index (Unhedged) measures
government bond markets around the world. The Bloomberg Commodity Index is composed of futures contracts on physical commodities. Index performance does not reflect the deduction of any investment-related fees and expenses. It is not possible to invest directly
in an index.
See the reverse side for other important information.
Plan to pursue success
Because of the inevitable volatile markets investors encounter when pursuing long‑term financial
goals, having a portfolio of well-diversified holdings may start you on the right track toward keeping
those goals intact.
Working together, you and your financial advisor can create a diversified portfolio and follow
a disciplined plan that puts you in position to
•pursue the highest potential return for a certain level of risk over a certain amount of time
•aim to reduce exposure to the downside risks of individual holdings
•stay on track through market cycles and over time
Also, remember that as markets rise and fall, the percentages you have allocated to specific asset
classes can shift, making your portfolio riskier or more conservative than you intend it to be. Make
sure to review your portfolio periodically with your financial advisor and rebalance your holdings
when necessary to maintain your desired allocation.
THE VALUE OF ADVICE
An experienced financial advisor — who knows your goals, temperament for risk, time
horizon, and total holdings — could be your most valuable asset in any market environment
and over time. He or she can help you determine your overall comfort level with risk,
allocate and diversify your assets accordingly, and draw up a plan for pursuing your
long‑term financial goals.
Keep in mind that no investment strategy, including diversification, can guarantee a profit or protect
against a loss. Also, all investments carry a certain amount of risk including the possible loss of
the principal amount invested.
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