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Asset allocation models Show all models

  • Model A (20+ years to retirement)

    Model A Growth 40%
    Growth-and-income 35%
    Equity-income/Balanced 20%
    Bond 5%
    • 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 $21,984
    20.91%/year
    (1995-1999)    		 $9,322
    -8.30%/year
    (2004-2008)    		 $17,401
    12.66%/year
    (1980-1984)
    10 years $24,000 $63,712
    17.23%/year
    (1990-1999)    		 $20,581
    -2.81%/year
    (1999-2008)    		 $48,704
    12.56%/year
    (1981-1990)
    30 years $72,000 $574,740
    11.40%/year
    (1976-2005)    		 $306,367
    8.22%/year
    (1982-2011)    		 $345,068
    8.83%/year
    (1981-2010)

  • Model B (5-20 years to retirement)

    Model B Growth 20%
    Growth-and-income 35%
    Equity-income/Balanced 20%
    Bond 25%
    • 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 $20,264
    18.01%/year
    (1982-1986)    		 $10,514
    -4.38%/year
    (2004-2008)    		 $17,357
    12.57%/year
    (1989-1993)
    10 years $24,000 $57,904
    15.57%/year
    (1977-1986)    		 $23,813
    -0.14%/year
    (1999-2008)    		 $48,808
    12.60%/year
    (1986-1995)
    30 years $72,000 $525,115
    10.95%/year
    (1976-2005)    		 $310,740
    8.29%/year
    (1983-2012)    		 $348,877
    8.89%/year
    (1981-2010)

  • Model C (5 years or less to retirement)

    Model C Growth 15%
    Growth-and-income 30%
    Equity-income/Balanced 20%
    Bond 35%
    • 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 $20,253
    17.99%/year
    (1982-1986)    		 $11,060
    -2.71%/year
    (2004-2008)    		 $16,824
    11.48%/year
    (2009-2013)
    10 years $24,000 $56,934
    15.28%/year
    (1977-1986)    		 $25,238
    0.91%/year
    (1999-2008)    		 $47,062
    11.96%/year
    (1991-2000)
    30 years $72,000 $496,435
    10.67%/year
    (1976-2005)    		 $307,030
    8.23%/year
    (1983-2012)    		 $344,556
    8.82%/year
    (1981-2010)

  • Model D (First 10 years of retirement)

    Model D Growth 0%
    Growth-and-income 20%
    Equity-income/Balanced 30%
    Bond 50%
    • 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 $20,340
    18.14%/year
    (1982-1986)    		 $12,093
    0.26%/year
    (2004-2008)    		 $15,726
    9.15%/year
    (1996-2000)
    10 years $24,000 $55,165
    14.73%/year
    (1977-1986)    		 $27,973
    2.77%/year
    (1999-2008)    		 $43,430
    10.56%/year
    (1991-2000)
    30 years $72,000 $447,922
    10.16%/year
    (1976-2005)    		 $292,598
    7.98%/year
    (1984-2013)    		 $336,197
    8.70%/year
    (1979-2008)

These investment models were developed by American Funds investment professionals. 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.

This table is for illustrative purposes only and is not intended to provide investment advice or portray actual investment results. Individual results will vary. Past results are not predictive of future results. Hypothetical average annual returns are calculated from 1976 to 2013 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). The market indexes are unmanaged and, therefore, have no expenses. Results do not reflect sales charges. A program of regular investing does not ensure a profit or protect against loss.

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 your plan’s financial professional or downloaded and should be read carefully before investing.

Investment allocations may not achieve fund objectives. There are expenses associated with the underlying funds in addition to fund of funds expenses. The funds’ risks are directly related to the risks of the underlying funds as described below.

Investing outside the United States involves risks such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries. Small-company stocks entail additional risks, and they can fluctuate in price more than larger company stocks.

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.

Income from municipal bonds may be subject to state or local income taxes and/or the federal alternative minimum tax. Certain other income, as well as capital gain distributions, may be taxable. Fund shares of the U.S. Government Securities Fund are not guaranteed by the U.S. government.