Living with volatility
Living with volatility
We don’t anticipate the market roller coaster will get less bumpy in the second half of 2025.
We don’t anticipate the market roller coaster will get less bumpy in the second half of 2025.
07/08/2025
INVESTING ESSENTIALS
Asset class correlations can help you to balance your portfolio
05/13/2025
05/13/2025
Historically, stocks and bonds have acted as natural hedges against each other. While diversifying a portfolio within those major asset classes can’t eliminate risk, it can help reduce volatility and may improve risk-adjusted returns1 over the long term.
The matrix below shows how different assets are correlated to each other. Sometimes, the correlation between equity asset classes and fixed-income asset classes is low. In some cases, they are negatively correlated—when one asset falls, the other often rises (i.e., U.S. large-cap stocks vs. long-term Treasury bonds). This shows the benefits of also diversifying within asset classes. Different sectors, market caps, styles or regions can have different return characteristics.
The graph below shows the return and the risk (standard deviation2) of the broadly diversified Morningstar Target Risk indexes. By combining numerous asset classes with different correlations to each other, the indexes have been able to produce varying risk-reward profiles.
The Morningstar Target Risk Index family consists of five indexes covering risk preferences ranging from aggressive to conservative. The indexes utilize asset allocation methodologies developed and maintained by Morningstar Investment Management to determine underlying index weighting. Results shown assume reinvestment of dividends or interest.
Talk with your financial professional about building, balancing and diversifying your portfolio with Thrivent mutual funds.
1 Risk-adjusted return refines an investment’s return by measuring how much risk is involved in producing that return, which is generally expressed as a number or rating. Risk-adjusted returns are applied to individual securities, mutual funds and portfolios.
2 Standard deviation is a statistical measure of volatility. The higher the standard deviation, the riskier an investment is considered to be.
© 2025 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
The Morningstar average represents the average total return annualized when greater than one year for all reported funds in the category. Morningstar averages do not include sales charges/fees. If included, returns would have been lower.
U.S. Large Cap Stocks are represented by the S&P 500® Index, a market-cap weighted index that represents the average performance of a group of 500 large-capitalization stocks. U.S. Small Cap Stocks are represented by the S&P SmallCap 600® Index, which measures performance of small-cap stocks. Developed International Stocks are represented by the MSCI EAFE Index, which measures developed-economy stocks in Europe, Australasia and the Far East. Emerging Markets Stocks are represented by the MSCI Emerging Markets Index, which measures developing-economy stocks.
High Yield Bonds are represented by the Bloomberg High Yield Index, which measures performance of the high yield bond sector. Investment Grade Corporate Bonds are represented by the Bloomberg U.S. Corporate Investment Grade Index, which measures performance of the investment grade bond sector. Total Bond Market is represented by the Bloomberg U.S. Aggregate Bond Index, which measures performance of a wide variety of publicly traded bonds. Long-Term Treasury Bonds are represented by the Bloomberg 20+ Year Treasury Index, which measures performance of longer maturity Treasury bonds.
Any indexes shown are unmanaged and do not reflect the typical costs of investing. Investors cannot invest directly in an index.
Index performance is not indicative of the performance of any Thrivent product.
Past performance is not necessarily indicative of future results.
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