Why Invest for Income?
For more information on Franklin Templeton fixed income funds, please contact your financial advisor or download a free prospectus. Investors should carefully consider a fund's investment goals, risks, charges and expenses before investing. A prospectus contains this and other information. Please carefully read the prospectus before you invest or send money.
No matter where you are along the financial life cycle, fixed income investments can play an important role in your portfolio.
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"The value of our stock portfolio went up and
down more than we would have liked. Diversifying with fixed income investments has helped us to
lower our overall portfolio volatility." |
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"We're at the stage where growth and capital preservation are both
important. Our fixed income investments have helped add stability to our overall portfolio." |
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"Our fixed income investments provide income
to supplement our retirement savings." |
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The investor profiles above are not intended to serve as investment recommendations. Please consult with your
financial advisor to identify investments that best match your personal financial objectives.
Key Benefits of Bonds
In addition to providing income, fixed income investments can help reduce the impact of stock market
volatility. A portfolio that includes both stocks and bonds may be better equipped to weather a market
downturn and, thus, may experience steadier returns over time. Diversification does not assure or
guarantee better performance and cannot eliminate the risk of investment losses.
Bonds Can Help Reduce Risk
Adding bonds to stocks lowered the overall risk profile of a hypothetical portfolio, without a significant
sacrifice in returns. For the time period shown, a 40% allocation to bonds would have reduced volatility by 37%, while still allowing
the combined portfolio to achieve 87% of the return of the all-stock portfolio.
Blending Bonds with Stocks Has Historically Reduced Risk1
20-Year Period Ended December 31, 2007
The chart is for illustrative purposes only and does not reflect the performance of any Franklin Templeton fund.
Bonds Can Help Balance a Stock Portfolio
Over the past 20 years, stocks have dramatically outperformed bonds. However, over the short term, stocks
can be volatile, with severe fluctuations in share prices. When the stock market tumbled from 2000 to 2002,
for example, an all-stock portfolio, as represented by the S&P 500 Index, would have experienced a much
more severe decline than a diversified portfolio that included stocks and bonds.
Effect of a Stock Market Downturn Using Index Performance2
January 1, 2000 - December 31, 2007
The chart is for illustrative purposes only and does not reflect the performance of any Franklin Templeton fund.
Bonds Can Help Preserve Wealth
While bonds' long-term gains have not been as substantial as those of stocks, they historically have experienced less downside risk.
Stocks and Bonds: Best and Worst Annual Returns2
20-Year Period Ended December 31, 2007
The chart is for illustrative purposes only and does not reflect the performance of any Franklin Templeton fund.
A financial advisor can help
If you have questions about investing in fixed income funds, we urge you to contact your financial advisor,
who is best suited to help you make investment decisions based on your individual investment objectives and
risk tolerance.
A word about risk
Interest rate movements will affect a fund's share price and yield. Bond prices generally move in the
opposite direction of interest rates. Thus, as the prices of bonds in a fund adjust to a rise in interest
rates, a fund's share price may decline. These and other risk considerations are discussed in the
appropriate fund prospectus.
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Footnotes |
| 1. |
Source: Standard & Poor's Micropal, 12/31/07. Stocks as represented by the S&P 500 Index. Bonds as represented by the Lehman Brothers U.S. Aggregate Index. Risk is measured by the annualized standard deviation of monthly total returns. Successive data points on the line represent incremental changes of 20% in the portfolio allocations from 100% Bonds / 0% Stocks to 0% Bonds / 100% Stocks. Portfolios were rebalanced monthly. Past performance does not guarantee future results. Indexes are unmanaged, and one cannot invest directly in an index. |
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Source: Standard & Poor's Micropal (stocks as represented by the S&P 500 Index; bonds as represented by the Lehman Brothers U.S. Aggregate Index). Returns include reinvestment of interest and dividends. Indexes are unmanaged, and one cannot invest directly in an index. |
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