Asset Allocation Risk & Return Spectrum January 2015

Craig L. Israelsen, Ph.D.

17-Year Period from 1998-2014
www.7TwelvePortfolio.com

Risk Level

Various Asset Allocation Models

17-Year
Annualized
Return (%) of
Lump Sum
Investment

17-Year Growth
of $10,000 Lump
Sum Investment*

Retirement Account
Ending Balance**
(see next page)

Very
Conservative

100% Cash

2.39

14,931

72,462

Conservative

50% Cash
50% Bonds

3.78

18,799

132,382

6.47

29,046

252,847

7.64

34,975

389,651

100% US Stock

6.37

28,591

201,319

Chasing Last Years

Best Performing
Asset Class

2.69

15,708

92,335

Moderately
Aggressive

Moderately
Aggressive

60% US Stock
40% Bonds
Traditional
Balanced Fund

8.33% in
12 different
asset classes
Diversified

7Twelve Portfolio

Very
Aggressive

Crazy

(from among 12)

* Ending account balance on December 31, 2014 assuming a lump sum investment of $10,000 on January 1, 1998 (17-year period).
** Ending account balance on 12/31/2014 in a retirement portfolio with a starting balance of $250,000 on January 1, 1998, 5% initial withdraw rate, 3% cost of living increase
in the annual cash withdrawal. A total of 17 annual withdrawals totaling $272,020.
7Twelve is a registered trademark belonging to Craig L. Israelsen

17-Year Portfolio Survival Test: 1998-2014

$250,000 starting balance on January 1, 1998
5% initial withdrawal
3% COLA (annual cost of living adjustment)
Shaded area indicates account is underwater (less than starting balance of $250,000)

Retirement Portfolio
Asset Allocation
Model

1-Asset
Portfolio

2-Asset
Portfolio*

2-Asset
Portfolio*

12-Asset
Portfolio*

1-Asset
Portfolio

1-Asset
Portfolio

Very
Conservative

Conservative

Moderately
Aggressive

Moderately
Aggressive

Very
Aggressive

Performance
Chasing

Cash
and
Bonds

US Stock
and
Bonds

100%
Large
US Stock

Investing
Entirely in Last
Years Best
Performing
Asset Class

(50% in each)

(60% Stock,
40% Bonds)

100%
Cash

Calendar
Year

12 Asset
7Twelve
Model

(8.33% each)

(from among 12)

Annual
Cash
Withdrawal
(3% annual
increase)

1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014

12,500
12,875
13,261
13,659
14,069
14,491
14,926
15,373
15,835
16,310
16,799
17,303
17,822
18,357
18,907
19,475
20,059

Internal Rate of Return

(% IRR )

250,843
250,531
253,027
249,903
239,964
227,624
215,220
206,321
200,561
194,565
183,158
166,830
149,111
130,822
111,965
92,512

Year-End Account Balances

254,867
289,068
247,176
310,442
255,893
293,359
258,199
268,669
259,332
230,741
251,166
258,912
242,925
264,966
234,004
259,760
228,806
272,924
226,202
272,465
222,138
204,920
209,532
222,999
198,324
230,876
187,853
222,437
172,668
228,363
151,395
251,234

243,414
269,539
274,517
256,294
240,225
290,812
327,535
352,015
389,522
417,248
297,740
354,587
388,187
365,925
386,701
404,113

309,185
359,304
311,139
260,734
190,477
229,628
239,261
235,514
256,891
253,737
143,817
164,356
171,252
156,128
162,189
195,112

309,185
359,304
247,429
264,582
212,949
253,477
305,229
384,071
430,326
343,371
147,009
135,140
143,593
137,534
127,412
101,668

72,462

132,382

252,847

389,651

201,319

92,335

2.50

3.88

5.90

7.56

5.13

3.01

7Twelve is a registered trademark belonging to Craig L. Israelsen

* The multi-asset portfolios were rebalanced at the start of each year
Raw data source: Lipper Investment View, calculations by author

www.7TwelvePortfolio.com