HoldingsiShares Core Total USD Bond Market ETF, iShares Core S&P 500 ETF, and more
When it comes to investing, some investors prefer to be cautious.
They may be older and want to preserve more of their initial investment. Or perhaps they’re getting closer to a particular goal–retirement, for example, or a child getting ready to attend college–and they want to shield themselves from potential volatility in the market.
If you’re a conservative investor, Stash’s Conservative Mix may function as a core portion of your portfolio. It leans more heavily on bonds, which are seen as a more stable investment than stocks, since they tend to offer lower, but steadier returns.
For those who are sensitive to the ups and downs of the market, the Conservative Mix, a blend of stocks, bonds, and cash, can help smooth out market volatility.
Let’s talk about bonds
Bonds are considered by many experts to be a safer investment than stocks. These are essentially loans made to a government or corporation, with a regular and predictable repayment schedule.
The price of bonds often moves in the opposite direction of stocks — when stocks up go up, bonds often go down, and vice versa
Some bonds are riskier than others. U.S. Treasuries are backed by the U.S. federal government, while company bonds can be issued by some of the biggest companies around, such as General Motors, or General Electric.
Here’s the thing: The return from a bond is likely to be lower than the one you’ll get from a stock. For example, the average return on government bonds has been about 5% for the last 80 years. For equities, the average return was closer to10%.
Bonds are not risk-free, however. They are particularly sensitive to changes in interest rates: the price of bonds go down when interest rates increase. But the price of bonds often moves in the opposite direction of stocks — what that means is that when stocks up go up, bonds often go down, and vice versa.
What’s inside the Conservative Mix?
Conservative Mix, an exchange-traded fund (ETF) available on Stash is based on iShares Core Conservative Allocation ETF. It trades under the ticker symbol AOK.
You get a sampling of numerous investment worlds with the Conservative Mix fund–such as bonds from around the world, and stocks in a diverse group of companies of all sizes and from many geographies.
About two thirds of Conservative Mix is invested in U.S. bond funds that include U.S. Treasuries, or bonds issued by the federal government, as well as federally backed mortgages, and bonds issued by some large banks.
About 10% of the fund’s bond holdings are international, including bonds issued by the governments of Japan, France, Spain, Italy and Australia.
A portion of the bonds are also industrial revenue bonds, which are issued by the U.S. government on behalf of particular businesses, for the completion of specific projects, such as the development of manufacturing zones.
The remaining third of the fund is invested in index funds that track the S&P 500, companies in emerging economies such as Asia, in addition to Australia and the Eurozone. It also breaks down its stock holdings further, investing in companies of all sizes, through small cap, mid-cap and large cap funds.
Source: iShares by Blackrock, as of 11/21/17
Conservative Mix offers exposure to U.S. companies including Apple, Microsoft, Facebook and Google parent company Alphabet. Internationally, you’ll be invested in Alibaba, Tencent Holdings and Samsung in Asia. Eurozone companies include HSBC, Nestle, and Novartis.
Conservative Mix has an annual expense ratio of 0.25%. The average expense ratio for an ETF is nearly twice that amount at 0.44%, according to the Wall Street Journal. Conservative Mix’s total market return as of November 21, 2017 was 8.72%. That compares to a return of 9.85% for the S&P Target Risk Conservative Index, which the fund tracks.
Conservative Mix ranks at the top for similar funds, according to U.S. News & World Report’s most recent ETF rankings. While all funds are subject to changing economic conditions, including inflation and recession, the smaller companies in Conservative Mix could be particularly susceptible to market changes, according to analysts.
Additionally, foreign holdings can fluctuate based on currency rate changes, political conditions, and volatility in emerging markets.
Source: iShares by Blackrock, as of 11/21/17
- Conservative Mix ETF is for investors who want to diversify, but who may be worried about the potential risks of the stock market.
- Most of the fund is invested in bonds from the U.S. and globally.
- The remainder includes U.S. and international equities (stocks) of companies of small cap, mid cap and large cap businesses.
Source: Tradeview. Chart operates in real time, with delays. *See Footnote
*The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock’s weight in the index proportionate to its market value.
**Charting platform used for this analysis is provided by TradingView and may be delayed. Stash does not verify any data and disclaims any obligation to do so. Stash cannot and does not represent or guarantee that any of the information available via TradingView is accurate, reliable, current, complete or appropriate for your needs.