First Quarter • 2012
Diversification and Asset Allocation:
Principles of Investment Strategy
Market fluctuation is one of the few certainties of
investing. Here are some principles to help you
plan smart and build retirement security.
Portfolio Diversification
Portfolio diversification is an investment principle
and practice that is especially important when
investing for retirement. At the core, the concept is
much like the old adage “Don’t put all your eggs in
one basket.” The idea is to spread your assets among
various types of investment vehicles to balance
potential fluctuations caused by market changes. If
one investment loses money, the other investments
will hopefully outdistance or offset those losses.
Asset Allocation
Asset allocation is one of the most important
decisions that investors make can make. A
sound asset allocation is one that maximizes the
probability of achieving your investment goals
while balancing risk and reward. For example,
someone who plans to retire within five years
and is already quite close to his or her goal will
probably want to hold a more conservative
portfolio than someone who has a much longer
time horizon to meet their retirement goals.
If you are using DCP’s One-Step Investing
approach, your Retirement Strategy portfolio
is already well diversified. If you are using the
Build and Monitor approach, you can diversify
by allocating your contributions among several
available funds to meet your goals, risk tolerance
and investment horizon.
Although asset allocation and diversification will
not completely assure you against loss, they are
effective practices to manage risk and increase the
opportunities to achieve your financial goals.
Fund Fact Sheets
Looking for updates on the funds you have selected for your DCP
investments? Be sure to review the fund fact sheets available on the
DCP website (under the “Investments” tab at www.drs.wa.gov/dcp).
These fact sheets—updated quarterly—are published by the
fund managers to provide details on the characteristics of each
fund’s investment strategy, including the objective and risk
considerations. The sheets also provide information on each
fund’s composition (such as top 10 holdings or asset distribution)
and performance history.
Regularly reviewing the fact sheets for your DCP investments will
assist in monitoring your portfolio, by helping you confirm that your
allocation mix is still in alignment with your investment objectives.
Build and Monitor Funds
Fund Manager
Savings Pool
Washington State Investment Board
Washington State Bond Fund
Washington State Investment Board
Socially Responsible Balanced Fund
Walden Asset Management
U.S. Large Cap Equity Index Fund
BlackRock
Global Equity Index Fund
BlackRock
U.S. Small Cap Value Equity Index Fund
BlackRock
Emerging Market Equity Index Fund
BlackRock
One-Step Investing
Fund Manager
Retirement Strategy Funds (12)
AllianceBernstein
New DCP Administrative Fee
Effective July 1, 2012, the DCP
administrative fee changed
from 0.13% to 0.129%.
Quarterly Fund Performance
2
Performance History – Period Ending 06/29/12 – Average Annual Total Returns
Quarter
Ending
06/29/12
1 Year
3 Year
5 Year
10 Year/Since
Inception
2055 Retirement Strategy
2055 Composite Benchmark
-5.49%
-4.38%
-6.32%
-4.37%
N/A
N/A
N/A
N/A
2.68%
4.81%
2050 Retirement Strategy
2050 Composite Benchmark
-5.51%
-4.38%
-6.38%
-4.37%
10.30%
11.83%
N/A
N/A
5.39%
5.45%
2045 Retirement Strategy
2045 Composite Benchmark
-5.59%
-4.38%
-6.47%
-4.37%
10.24%
11.83%
N/A
N/A
5.35%
5.45%
2040 Retirement Strategy
2040 Composite Benchmark
-5.53%
-4.38%
-6.40%
-4.37%
10.26%
11.83%
N/A
N/A
5.30%
5.45%
2035 Retirement Strategy
2035 Composite Benchmark
-5.30%
-4.16%
-6.17%
-4.09%
10.39%
11.92%
N/A
N/A
5.37%
5.52%
2030 Retirement Strategy
2030 Composite Benchmark
-4.74%
-3.67%
-5.24%
-3.30%
10.95%
12.33%
N/A
N/A
6.08%
6.09%
2025 Retirement Strategy
2025 Composite Benchmark
-4.14%
-3.15%
-4.35%
-2.48%
11.42%
12.63%
N/A
N/A
6.69%
6.56%
2020 Retirement Strategy
2020 Composite Benchmark
-3.57%
-2.59%
-3.07%
-1.37%
11.55%
12.60%
N/A
N/A
7.16%
6.90%
2015 Retirement Strategy
2015 Composite Benchmark
-2.95%
-2.02%
-1.79%
-0.21%
11.67%
12.50%
N/A
N/A
7.62%
7.24%
2010 Retirement Strategy
2010 Composite Benchmark
-2.21%
-1.45%
-0.45%
0.79%
11.66%
12.26%
N/A
N/A
7.88%
7.44%
2005 Retirement Strategy
2005 Composite Benchmark
-1.56%
-0.89%
0.61%
1.56%
10.87%
11.21%
N/A
N/A
7.84%
7.11%
2000 Retirement Strategy
2000 Composite Benchmark
-0.91%
-0.36%
1.55%
2.22%
10.03%
10.07%
N/A
N/A
7.53%
6.74%
Savings Pool
0.53%
2.36%
3.24%
3.81%
4.40%
Washington State Bond Fund
Barclays Capital Intermediate Credit Index
1.52%
1.53%
6.79%
6.23%
8.61%
8.40%
8.07%
6.79%
6.40%
5.90%
Washington State
Socially Responsible Balanced Fund
Custom Benchmark
-2.57%
-0.53%
3.84%
6.81%
11.72%
12.44%
4.97%
3.61%
6.34%
5.87%
U.S. Large Cap Equity Index Fund
S&P 500 Index
-2.75%
-2.75%
5.51%
5.45%
16.54%
16.40%
0.39%
0.22%
5.45%
5.33%
Global Equity Index Fund
MSCI ACWI Investable Market Index
-5.39%
-5.68%
N/A
N/A
N/A
N/A
N/A
N/A
14.10%
13.41%
U.S. Small Cap Value Equity Index Fund
Russell 2000 Value Index
-2.96%
-3.01%
-2.38%
-1.44%
17.10%
17.43%
-1.14%
-1.05%
6.40%
6.50%
Emerging Market Equity Index Fund
MSCI Emerging Markets Investable Market Index
-8.18%
-8.79%
N/A
N/A
N/A
N/A
N/A
N/A
12.20%
12.02%
Fund Name
Benchmark
Current performance may be lower or higher than performance data shown. Performance data quoted represents past performance and is not a guarantee or prediction of future results. For
performance data current to the most recent month-end, please visit www.drs.wa.gov/dcp. The investment return and principal value of an investment will fluctuate so that, when redeemed,
shares/units may be worth more or less than their original cost.
A benchmark index is not actively managed, does not have a defined investment objective, and does not incur fees or expenses. Therefore, performance of a fund will generally be less than its
benchmark index. You cannot invest directly in a benchmark index.
For more details, see the Investment Options at a Glance and the Investment Guide located online at www.drs.wa.gov/dcp.
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