tetMAXamillian Funds
12/18/02
Dear Mr. Funds,

Thank you for choosing 401(k) Planner for your 401(k) advice. We've analyzed the list of mutual funds available to you in your plan and have evaluated your risk profile from your responses to our risk quiz questionnaire.

From your information we've selected our choices for the best mutual funds available to you and built a portfolio using these funds for your 401(k) plan. If you have any questions concerning your customized 401(k) plan, please contact us by clicking here.
You are a moderate risk investor. The two most important factors we make use of to assess your personal risk profile are how long you have until you need to use your investments for living expenses (usually how long until you retire) and your personal tolerance for risk.

A moderate risk profile means your ideal model portfolio does not go overboard on risk, but is positioned to deliver strong returns over your time horizon without leading to large losses that could either destroy too much of your retirement too close to when you need it or cause you to want to sell all your investments prematurely.
We've selected the mutual funds from your 401(k) plan best suited for building your model portfolio and have indicated the recommended allocation for each fund. These funds and percentages can be entered directly onto your allocation worksheet in your 401(k) plan kit.

Our current recommendation for a balanced portfolio is 55% stocks, 40% bonds, and 5% cash. We are a bit lighter than usual in bonds for this risk level as we feel the bond market has just had a strong run up these past few years, leaving yields and likely future returns low. The bond funds we have chosen from your list are the Vanguard High Yield Corporate and the Dodge and Cox Income fund.

Stocks, while still far from cheap, represent a reasonable place to invest for the future, given the broad weakness these last few years. We are not favoring value oriented funds as much as we did a few years ago and are taking a balanced approach between value and growth where appropriate. Our stock fund choices from your fund list are the Vanguard 500, T. Rowe Price International Stock, and Royce Total Return funds.
Vanguard 500 fund
VFINX
Stock
20%
T. Rowe Price Int. Stock
PRITX
Stock
20%
Royce Total Return
RYTRX
Stock
15%
Vanguard High Yield Corp.
VWEHX
Bond
20%
Dodge and Cox Income
DODIX
Bond
20%
SSgA Yield Plus
SSYPX
Money Market
5%
The following charts show your plan's broad allocation, and individual allocations into stocks and bonds:
A moderate risk profile portfolio like the on we built for you is balanced in bonds and stocks in such a way as to produce an average annual return of between 4 - 8%. This portfolio should rarely decline more than 15-20% in any one year, allowing for a relatively smooth ride. Taking less risk would cut down on downside volatility, but would also lower your expected annual average return. Taking on more risk would increase downside volatility, but could increase your annual average return over the long run.

This table shows how much you can expect your retirement account to grow in the future investing in a moderate risk portfolio. The two variables on this table are how much money you invest each year (including the match from your employer) and how much time you invest this amount.
5
10
20
30
40
$1,000
$5,638
$13,183
$36,789
$79,064
$154,772
$2,000
$11,276
$26,363
$73,574
$158,122
$309,534
$3,000
$16,913
$39,544
$110,360
$237,180
$464,296
$4,000
$22,550
$52,725
$147,146
$316,238
$619,058
$5,000
$28,187
$65,906
$183,931
$395,297
$773,820
$6,000
$33,824
$79,087
$220,717
$474,355
$928,582
$7,000
$39,461
$92,267
$257,502
$553,413
$1,083,344
$8,000
$45,098
$105,448
$294,288
$632,471
$1,238,106
$9,000
$50,735
$118,629
$331,074
$711,529
$1,392,868
$10,000
$56,372
$131,810
$367,859
$790,588
$1,547,630