Risk and Reward
Chart of the Week for May 18 - May 24, 2007
When investing in any asset class in the market, an investor assumes some level of risk. The securities with the highest return potential are typically the ones that carry the most underlying risk. Stocks, for example, are typically more volatile than bonds, cash or inflation, but also offer the possibility for larger gains. The graph above illustrates how the relationship between risk and reward in the market can play out.
In the graph above, we can see the growth of $1 invested in three different asset classes and inflation beginning in December of 1986. After 20 years, the $1 invested in stocks, as measured by the S&P 500 Index, would have grown to $9.31. If that same $1 was invested in bonds, as measured by the U.S. Long-Term Government Index, the investment would be worth $5.22. If the $1 was allocated completely to cash instruments, represented by U.S. 30-Day T-Bills, its value would be $2.42, only slightly higher than inflation.
Over the last 20 years, stocks have outperformed bonds and cash, and stayed well ahead of inflation. However, stocks can be generally riskier investments, as they have a more varied return pattern as shown in the graph above. This supports the idea that investors should remain diversified to reduce their overall risk.
*This illustration was compiled by information from outside sources. These companies are not affiliated with ICMA-RC. This information is being provided for educational purposes and is not intended to be construed as or relied upon as investment advice. ICMA-RC does not offer specific tax or legal advice. Individuals are advised to consider any new investment strategies carefully prior to implementing.Please consult both the current applicable prospectus and MAKING SOUND INVESTMENT DECISIONS: A Retirement Investment Guide carefully for a complete summary of all fees, expenses, charges, financial highlights, investment objectives, risks and performance information. Investing in mutual funds and other investment vehicles involves risk, including possible loss of the amount invested. Investors should consider the Fund's investment objectives, risks, charges and expenses before investing or sending money. The prospectus contains this and other information about the investment company. Please read the prospectus carefully before investing. All Vantagepoint Funds invested through 401 or 457 plans are held through VantageTrust. Vantagepoint Funds are distributed by ICMA-RC Services LLC, a wholly owned broker-dealer subsidiary of ICMA-RC and member FINRA/SIPC. For a current prospectus, contact ICMA-RC Services, LLC.The performance data quoted represents past performance. Past performance is no guarantee of future results. Investment returns and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data illustrated. For performance data current to the most recent month end, contact ICMA-RC Services, LLC by calling 1-800-669-7400 or by writing to 777 North Capitol Street, NE, Washington, DC 20002-4240. Para asistencia en Español llame al 1-800-669-8216. Performance data current to the most recent quarter end is available by visiting www.icmarc.org.
To contact ICMA-RC Services, LLC, ICMA-RC, or any of its affiliates call 800-669-7400 (TDD: 800-669-7471) or write to 777 North Capitol Street, NE, Washington, DC 20002-4240. You may also visit us on the Web at www.icmarc.org.. Para asistencia en Español llame al 800-669-8216.