A-Better-Balanced-Benchmark

A Better Balanced Benchmark Craig L. Israelsen, Ph.D. March 2009 It’s time for a better benchmark for “Balanced” funds. Way back when, there were two dominant investment assets: US stock and US bonds. These two assets became the mainstay ingredients in balanced funds, with the typical ratio being a 60% allocation to large US stocks and a 40% allocation to bonds. News flash…it’s not 1940 anymore. Today, there are multiple mainstream asset classes that should be considered when building a diversified balanced benchmark. Shown below are 12 asset classes that stshould be included in a 21 century balanced fund. The 12 ingredients that belong in a balanced fund fall within 7 core asset groups: US equity, Non-US equity, Real Estate, Resources, US Bonds, Non-US Bonds, and Cash. Within the 7 core asset groups are 12 specific sub-assets (see “Balanced Remix”). Balanced Remix Approximately 65% of the Portfolio Allocation Approximately 35% of the Portfolio in Equity and Diversifying Assets Allocation in Bonds and Cash US Non-US Real US Non-US Resources Cash Equity Equity Estate Bonds Bonds Large Developed Global Natural US Aggregate International US Money Companies Markets Real Estate Resources Bonds Bonds Market Inflation Medium-sized Emerging Commodities Protected Companies Markets Bonds (TIPS) Small Companies Balanced funds meet the requirements of a qualified default investment alternative (QDIA) under the ...