Q: What role can global allocation play in a portfolio?
A: First and foremost, because of the breadth of diversification, a global allocation portfolio could represent a core holding in virtually any investor’s portfolio. Secondly, it could also represent a more tactical slice—it’s a nice complement to typical domestic-only stock and bond portfolios because of its advanced diversification and ability to seek out return elsewhere in the world.
We are talking about diversification across countries, currencies, asset classes, alternatives and sectors. The idea is to get the greatest amount of return potential with the minimum amount of risk, or at least uncompensated risk. By seeking out asset classes and investments all over the world, we seek to maximize our return potential with the greatest possible diversification.
Diversification does not assure a profit nor does it protect against loss of principal.
The value and/or returns of a global allocation portfolio will fluctuate with market and economic conditions. International investing involves special risk considerations, including economic and political conditions, inflation rates and currency fluctuations. A fund’s investments in fixed income securities are subject to the risks associated with debt securities including credit, price and interest rate risk.
The opinions expressed are those of our investment professionals, and are no guarantee of the future performance of any American Century Investments portfolio. This information is not intended to serve as investment advice; it is for educational purposes only.