Asset Allocation Model Details | Capital Group

Retirement Planning

Asset Allocation Model Details

Take a closer look at our asset allocation models, including best, worst and median results over different periods.

Asset Allocation Models

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Model A (20+ Years to Retirement)

infographic-asset-allocation-a

 

  • Has historically provided the highest long-term returns and the most risk of the four models.
  • Growth and growth-and-income funds, the asset types with the highest typical returns and volatility, make up 75% of the portfolio.

Results Based on Annual Investments of $2,400 Over Various Periods

Time Period

Total Amount

Invested

Best Results

Worst Results

Median Results

5 years

$12,000

$24,044
24.13% a year
(7/31/1982–7/31/1987)

$7,955
–13.39% a year
(2/29/2004–02/28/2009)

$16,861
11.55% a year
(4/30/1985–4/30/1990)

10 years

$24,000

$69,911
18.83% a year
(8/31/1977–8/31/1987)

$17,800
0.00% a year
(2/28/1999–2/28/2009)

$44,147
10.84% a year
(7/31/2009–7/31/2019)

30 years

$72,000

$588,162
11.51% a year
(5/31/1977–5/31/2007)

$257,424
7.31% a year
(2/28/1979–2/28/2009)

$320,292
8.44% a year
(7/31/1980–7/31/2010)

Model B (5–20 Years to Retirement)

infographic-asset-allocation-b

 

  • Designed to provide growth potential along with some stability.
  • Equity-income/balanced and bond fund segments can help temper the volatility of growth and growth-and-income funds, which still account for 55% of the portfolio.

Results Based on Annual Investments of $2,400 Over Various Periods

Time Period

Total Amount

Invested

Best Results

Worst Results

Median Results

5 years

$12,000

$22,837
22.27% a year
(7/31/1982–7/31/1987)

$9,096
–9.09% a year
(2/29/2004–2/28/2009)

$16,294
10.37% a year
(7/31/2010–7/31/2015)

10 years

$24,000

$65,384
17.67% a year
(3/31/1977–3/31/1987)

$20,792
–2.62% a year
(2/28/1999–2/28/2009)

$39,712
8.98% a year
(2/28/2009–2/28/2019)

30 years

$72,000

$530,580
11.00% a year
(2/29/1976–2/28/2006)

$249,022
7.13% a year
(12/31/1988–12/31/2018)

$313,549
8.33% a year
(12/31/1984–12/31/2014)

Model C (5 Years or Less to Retirement)

infographic-asset-allocation-c

 

  • Aims to reduce risk while also providing some growth.
  • Largest fund category is made up of bond funds (35%), usually the least volatile of the four investment types found in the models. 

Results Based on Annual Investments of $2,400 Over Various Periods

Time Period

Total Amount

Invested

Best Results

Worst Results

Median Results

5 years

$12,000

$22,202
21.25% a year
(7/31/1982–7/31/1987)

$9,694
–7.03% a year
(2/29/2004–2/28/2009)

$15,973
9.68% a year
(9/30/2008–9/30/2013)

10 years

$24,000

$63,327
17.11% a year
(2/28/1977–2/28/1987)

$22,280
–1.36% a year
(2/28/1999–2/28/2009)

$38,290
8.34% a year
(5/31/1992–5/31/2002)

30 years

$72,000

$501,223
10.71% a year
(2/29/1976–2/28/2006)

$237,797
6.89% a year
(12/31/1988–12/31/2018)

$307,147
8.23% a year
(4/30/1983–4/30/2013)

Model D (First 10 Years of Retirement)

infographic-asset-allocation-d

 

  • Has provided the most stability of the four models.
  • Most income-oriented model, with 50% in bond funds and no growth funds.
  • A 20% growth-and-income fund allocation provides a measure of growth potential in retirement.

Results Based on Annual Investments of $2,400 Over Various Periods

Time Period

Total Amount

Invested

Best Results

Worst Results

Median Results

5 years

$12,000

$22,083
21.06% a year
(8/31/1981–8/31/1986)

$10,930
–3.10% a year
(2/29/2004–2/28/2009)

$15,318
8.25% a year
(2/28/1990–2/28/1995)

10 years

$24,000

$59,754
16.11% a year
(2/28/1977–2/28/1987)

$25,424
1.04% a year
(2/28/1999–2/28/2009)

$36,367
7.43% a year
(8/31/1992–8/31/2002)

30 years

$72,000

$451,453
10.19% a year
(2/29/1976–2/28/2006)

$217,585
6.42% a year
(12/31/1988–12/31/2018)

$297,669
8.06% a year
(4/30/1983–4/30/2013)

These tables are for illustrative purposes only and are not intended to provide investment advice or portray actual investment results. Individual results will vary. Hypothetical average annual returns are calculated from 1976 to 2019 and reflect weighted averages of the results of unmanaged indexes used to represent each fund category. The fund categories are represented by the following indexes: Lipper Growth Fund Index (growth), Lipper Growth and Income Fund Index (growth-and-income); a blend of the S&P 500 with the Bloomberg Barclays U.S. Aggregate Index weighted by their cumulative total returns at 60% and 40% respectively; this assumes the blend is rebalanced monthly (equity-income/balanced); and Bloomberg Barclays U.S. Aggregate Index (bond).

These models emphasize an investor’s time horizon and take into account the historic returns of different asset classes (growth, growth-and-income, equity-income/balanced and bond funds). Specifically, the models seek to balance total return and stability over time. They are designed to take on more risk (in hopes of higher returns) the further an investor is from retirement and less risk (to help preserve capital) as an investor approaches retirement. The models seek to give investors ample equity exposure as they get closer to retirement in an effort to help them outpace inflation over an expected distribution period of 20 years or more.

When evaluating particular asset allocation models for your individual situation, you should consider your risk tolerance, as well as other assets, income and investments (e.g., home equity, Social Security benefits, savings accounts, and interests in other qualified and nonqualified plans) in addition to any investments in your plan(s) or IRA(s).

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings.

Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds.

Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility. These risks may be heightened in connection with investments in developing countries.

Fund shares of U.S. Government Securities Fund are not guaranteed by the U.S. government.

Allocations may not achieve investment objectives. The portfolios' risks are directly related to the risks of the underlying funds. 

Small-company stocks entail additional risks, and they can fluctuate in price more than larger company stocks.

Income from municipal bonds may be subject to state or local income taxes and/or the federal alternative minimum tax (except for The Tax-Exempt Bond Fund of America). Certain other income, as well as capital gain distributions, may be taxable.

Certain market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index. Results for Lipper indexes/averages do not reflect sales charges. Lipper categories are dynamic and averages may have few funds, especially over longer periods. Lipper indexes track the largest mutual funds (no more than 30), represented by one share class per fund, in the corresponding Lipper category. Lipper averages reflect the current composition of all eligible mutual funds (all share classes) within a given category. To see the number of funds included in the Lipper category for each fund’s lifetime, please see the quarterly statistical update, available on our website. 

All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.

American Funds Distributors, Inc., member FINRA.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

Use of this website is intended for U.S. residents only.

Regular investing does not ensure a profit or protect against loss. Investors should consider their willingness to keep investing when share prices are declining.

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