Staying on Target with Disciplined Rebalancing
Neither the principal nor the underlying assets of the Principal LifeTime investment options are guaranteed at any time, including the target date. Investment risk remains at all times.
This graphic illustrates a simplified concept of how rebalancing works within Principal LifeTime portfolios. Actual rebalancing ranges may vary by asset classes which comprise the equity and fixed income funds in the portfolios.
To maintain the selected asset allocation for each Principal LifeTime portfolio, disciplined rebalancing is essential. Our rebalancing process is strategic—we view it as a risk management service—in which we focus, not on short-term market trends, but on controlling and managing systematic risk.
Following the volatility of the 2008-2009 market downturn, portfolio adjustments were made. All the portfolios' allocations to underlying funds were adjusted to strategically reduce exposure to certain asset classes and to add exposure in others. For example, changes in the 2010-2030 portfolios were made to lower their overall expected risk. The goal of these adjustments was to improve the portfolios' risk/return trade-off over time. Watch portfolio manager, Jeff Tyler, talking about what factors drive changes.
Our portfolio managers blend qualitative factors and quantitative inputs, including economic fundamentals, market conditions, and changing investor sentiment, to keep each Principal LifeTime portfolio within a target range allocation for every asset class and every investment manager. Through ongoing oversight, our portfolio managers determine when the portfolios' asset allocations drift outside of their minimum or maximum target ranges. They actively manage the appropriate timing and pace of portfolio adjustments back to target weights. This systematic approach to rebalancing helps maintain consistent portfolio performance.
About Principal LifeTime Portfolios
The Principal LifeTime portfolios, which are target date portfolios, invest in underlying Principal Funds. Each Principal LifeTime portfolio is managed toward a particular target (retirement) date, or the approximate date the participant or investor starts withdrawing money. As each Principal LifeTime portfolio approaches its target date, the investment mix becomes more conservative by increasing exposure to generally more conservative investment options and reducing exposure to typically more aggressive investment options. The asset allocation for each Principal LifeTime portfolio is regularly re-adjusted within a time frame that extends 10-15 years beyond the target date, at which point it reaches its most conservative allocation. Principal LifeTime portfolios assume the value of the investor's account will be withdrawn gradually during retirement. Neither the principal nor the underlying assets of the Principal LifeTime portfolios are guaranteed at any time, including the target date. Investment risk remains at all times.