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Asset Allocation - Does it still work?

Asset Allocation - Does it still work?

The gyrations in financial markets over the past decade have, for many, created the sense that diversification, as an investment concept is no longer useful. Had you invested $1,000,000 in a diversified basket of stocks, like the S&P 500 at the beginning of 2000 and held for the ten years ending in 2009, you would have been left with $908,832. The impact of inflation would have reduced the purchasing power to approximately $726,000, or a real decline of almost 25%. This result is further devastating to the individual who might have been trying to live off of their investment portfolio.If annual distributions of $50,000 had been taken from the original $1,000,000 invested in the S&P 500, only $377,882 would have remained by the end of the period!

This very tumultuous decade drove many to abandon the idea of diversification and securities markets altogether in exchange for low yielding “safer” alternatives like CDs and government bonds. The problem with this way of thinking is that diversification isn’t simply owning a basket of different kinds of stocks, but rather different asset classes. By incorporating different types of assets like bonds, commodities, and stocks the end result would have been much better.

For example, had you taken the same $1,000,000 and invested it equally between bonds, commodities and stocks over the ten-year period beginning in 2000 and holding through 2009, you would have ended up with $1,735,027.* After the impact of inflation, you would have had the equivalent of $1,388,021 in purchasing power or an increase of almost 40%. With annual distributions of $50,000 you would have finished the decade with $1,091,048 or $92,048 more than the original principal. Thus, even in an environment that many consider to be the worst since the Great Depression, proper diversification still proved to be a successful tool in growing your assets and protecting your portfolio against the effects of inflation.

Although many experts and advisors understand the benefits of diversification, too many are quick to abandon this and other time-tested strategies when they see the potential for higher possible returns that riskier, more concentrated investment strategies can provide. The problem with these types of higher return strategies is that they invariably have lower probabilities of success and often have tragic results when they fail. Our research also indicates that even over long periods of time, the additional risk taken may only generate small, incremental units of return.

At MutualWealth, we continue to focus on diversification as a valuable tool that can give our clients peace of mind during even the most challenging of financial environments. As always, we are appreciative of your confidence in our capabilities and look forward to serving you well into the future.

Shayne Nagy, CTFA
Senior Vice President
Trust and Investments 

* As represented by Barclays Aggregate Bond Index, Goldman Sachs Commodities Index and S&P 500.


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  • Mutualfirst Financial, Inc. Announces Agreement With Major Stockholder 

    Muncie, Indiana - February 27, 2015 – MutualFirst...

    Monday, March 2, 2015

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Proactive Steps to Take in Light of Anthem Data Breach

Chances are you are a person who has Anthem insurance coverage or you know someone who does. As a result, either you or your friend has a reason to be concerned.

A typical data breach includes a compromise of debit card numbers or partial personal identifying information. This kind of breach, though inconvenient, can typically be ‘fixed’. An initial investigation indicates that the Anthem breach includes a compromise of name, birthday and/or social security number. This kind of information is all one needs to steal someone’s identity.

According to Anthem this particular breach could affect up to 80 million people. Instead of trying to ignore this has happened or just being upset, it’s now time for you to be educated and try to protect yourself as best as you can. We have some tips that will help you accomplish that.


1. Review Your Statements


First, take a moment each month to view your eStatement or monthly statement. You can monitor your accounts throughout the month with Online Banking and the MutualBank App. Monitoring your accounts will give you the quickest opportunity to see if your accounts have been compromised. If you notice any transactions that are unfamiliar or questionable, please get in touch with your MutualBanker. Call us at 800-382-8031.


2. Be Cautious with Any Anthem Emails You Receive


Next, if you receive an email stating it is from Anthem, be cautious. Anthem’s website warns customers not to reply with information, click any links or open any attachments within the email. Anthem is not calling their customers and will not ask for information. Never give your credit card information, social security number, or other sensitive information to someone via email or over the phone.


3. Consider Freezing Your Credit


If you are a resident in Indiana, the Attorney General’s office website (http://www.in.gov/attorneygeneral/2853.htm) is offering and encouraging you to sign up for a free credit freeze with each of the three credit bureaus. A credit freeze places a hold on your credit where a new line of credit could not be obtained without you unfreezing your credit. This doesn’t affect already open credit lines like an existing credit card, yet helps to protect you against someone opening new lines of credit in your name.


4. Keep in the Know


Finally, try to keep in the loop on the Anthem Breach. The best source for current information about this breach can be found at Anthem’s Frequently Asked Questions. (http://www.anthemfacts.com/faq)

MutualBank is here to help inform you of ways to help protect against identity theft. Thank you for trusting us.

Sunday, February 15, 2015

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Asset Allocation - Does it still work?

Asset Allocation - Does it still work?

The gyrations in financial markets over the past decade have, for many, created the sense that diversification, as an investment concept is no longer useful. Had you invested $1,000,000 in a diversified basket of stocks, like the S&P 500 at the beginning of 2000 and held for the ten years ending in 2009, you would have been left with $908,832. The impact of inflation would have reduced the purchasing power to approximately $726,000, or a real decline of almost 25%. This result is further devastating to the individual who might have been trying to live off of their investment portfolio.If annual distributions of $50,000 had been taken from the original $1,000,000 invested in the S&P 500, only $377,882 would have remained by the end of the period!

This very tumultuous decade drove many to abandon the idea of diversification and securities markets altogether in exchange for low yielding “safer” alternatives like CDs and government bonds. The problem with this way of thinking is that diversification isn’t simply owning a basket of different kinds of stocks, but rather different asset classes. By incorporating different types of assets like bonds, commodities, and stocks the end result would have been much better.

For example, had you taken the same $1,000,000 and invested it equally between bonds, commodities and stocks over the ten-year period beginning in 2000 and holding through 2009, you would have ended up with $1,735,027.* After the impact of inflation, you would have had the equivalent of $1,388,021 in purchasing power or an increase of almost 40%. With annual distributions of $50,000 you would have finished the decade with $1,091,048 or $92,048 more than the original principal. Thus, even in an environment that many consider to be the worst since the Great Depression, proper diversification still proved to be a successful tool in growing your assets and protecting your portfolio against the effects of inflation.

Although many experts and advisors understand the benefits of diversification, too many are quick to abandon this and other time-tested strategies when they see the potential for higher possible returns that riskier, more concentrated investment strategies can provide. The problem with these types of higher return strategies is that they invariably have lower probabilities of success and often have tragic results when they fail. Our research also indicates that even over long periods of time, the additional risk taken may only generate small, incremental units of return.

At MutualWealth, we continue to focus on diversification as a valuable tool that can give our clients peace of mind during even the most challenging of financial environments. As always, we are appreciative of your confidence in our capabilities and look forward to serving you well into the future.

Shayne Nagy, CTFA
Senior Vice President
Trust and Investments 

* As represented by Barclays Aggregate Bond Index, Goldman Sachs Commodities Index and S&P 500.


Contact a Representative Today

Back to Education Resources

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