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Diversification Through a Single Fund

Investing doesn't have to be complicated. Understanding how to build a diversified portfolio through a single fund can be a way to help simplify your financial life.

Building a diversified portfolio often means owning several different funds, each of which focuses on a different asset class or a different style of investing. But that method, which requires investors to choose their own funds and then monitor and adjust the mix over time, may not be for everyone. Some people don't have the time, some may not feel they have the expertise, while others simply don't want to worry about it. If one of these descriptions sounds familiar, a single-fund strategy may make sense for you.

RPB offers a single-fund strategy through our target allocation funds. Each fund contains both stocks and bonds and provides you with the opportunity to own a diversified portfolio with just one fund.

Target allocation funds

Target allocation funds' asset allocations remain constant. For example, say a fund's target allocation is 75% stocks and 25% bonds. The fund's manager will continually adjust the portfolio on an as-needed basis to maintain that asset allocation. So, if the value of stocks in the portfolio rises and the value of bonds falls, the manager can liquidate a portion of the stock position and shift the proceeds into bonds to maintain the 75/25 mix. These funds may be a good option for investors who understand their tolerance for risk and how that translates into an asset allocation.

One thing to remember, though, is that the right asset allocation today may not necessarily be the right one tomorrow. As your time horizon changes, you should continually evaluate your investments to make sure your asset allocation matches your investment objectives.

The RPB Plan has five different target allocation funds. Each maintains an asset allocation containing between 15% and 95% stocks. You simply select the portfolio that best matches your risk tolerance, investment objectives, and time horizon.

Advantages of single fund strategies

Simplicity and convenience
You don’t have to worry about building or actively managing a portfolio.

Single fund portfolios provide a diversified mix of investments in different asset classes and securities. Remember, diversification does not ensure a profit or guarantee against loss.

Disciplined investment approach
When you’re managing your own investments, it may be hard to stay on track, particularly when markets are volatile. Most fund managers follow a carefully developed investment methodology that can help you stay true to the funds’ investment objectives.

Before investing in any of the funds in RPB’s retirement plan, you should consider its investment objectives, risks, and fees. Fact sheets for each fund are available here.

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