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CIO Blog

By Paul Hrabal, Chief Investment Officer of One Fund

October 14, 2009

It's All In The Mix

Let's focus less on what individual stocks, bonds or mutual funds to buy and instead discuss various investment categories.

More than 80% of your investment return could be determined by how much you put into stocks versus bonds and what categories within each of these that you choose.¹

Putting more in stocks (average return 10.4% per year²) than bonds (average return 5.7% per year²) has the potential to produce higher returns than putting most of your savings in bonds and very little in stocks.

Going further, within the stock category how much you invest in large U.S. companies (average return 10.2%²) vs. how much you invest in small U.S. companies (average return 12.2%²) may also affect your final results.

Notice here that we are not discussing individual stocks, bonds or mutual funds. We're focused on the mix of investment categories first and foremost.

The mix also affects the risk you take on.

Stocks tend to go up and down more drastically than bonds and have potentially higher risk. Among stocks, large company stocks tend to be more stable than small company stocks.

Below is a menu of various stock and bond categories that an individual might choose from:

- U.S. Government Bonds
- U.S. Company Bonds
- U.S. Large Company Stocks
- U.S. Small Company Stocks
- International Stocks
- International Bonds

In our Keep It Simple Guide To Investing we discuss possible mixes of these categories in an investment portfolio based on an individual's financial needs.

There is no single mix that fits everyone. But we believe a broadly diversified mix is a key consideration for any investment portfolio.

¹Roger G. Ibbotson and Paul D. Kaplan, Does Asset Allocation Policy Explain 40%, 90%, or 100% of Performance?, The Financial Analysts Journal, January/February 2000.

² Source: Stocks, bonds, cash: Ibbotson Associates, historical data 1926-2008. Stocks are 80/20 split of U.S. large and small companies, bonds are intermediate term U.S. government bonds.

Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus. Please read the prospectus carefully before you invest.

An investment in the Fund is subject to risk, including the possible loss of principal amount invested. Other Fund risks include asset allocation risk, foreign securities and currency risk, emerging markets risk, small-cap, mid-cap and large-cap risk, trading risk, and turnover risk that can increase Fund expenses and may decrease Fund performance. The Fund is, also, subject to the risks, which can result in higher volatility, associated with the underlying ETFs that comprise this “fund of funds”. Newly organized, actively managed Funds have no trading history and there can be no assurance that active trading markets will be developed or maintained. Brokerage costs will reduce returns. When the Fund invests in Underlying ETFs, in addition to directly bearing the expenses associated with its own operations, it will bear a pro rata portion of the Underlying ETFs’ expenses (including operating costs and management fees). Consequently, an investment in the Fund entails more direct and indirect expenses than a direct investment in the Underlying ETF.

Distributed by Foreside Fund Services, LLC.