The Franklin LifeSmart Investment Process
Long-Term Strategic Allocation:Following a Thoroughly-Tested, "To Retirement” Glide Path
The LifeSmart glide path—or plan for how the funds’ allocations will shift over time—is at the core of our risk management strategy.
As a result of Franklin Templeton's robust research and thousands of test scenarios, Franklin LifeSmart Retirement Target Funds ("LifeSmart Funds") follow a “to retirement” glide path. This means that LifeSmart Funds reach their most conservative allocation at each fund’s target date, a critical point when investors may start to take withdrawals from their accounts.
In contrast, “through retirement” glide paths used by many other target date funds only reach their most conservative allocation sometime after the funds’ target dates, often many years later. This can mean a higher allocation to equities at retirement and increased risk during periods of negative market performance (as in 2008).
Short-Term Tactical Asset AllocationImplementing Tactical Shifts to Stay on Track and Take Advantage of Market Opportunities
Staying true to the LifeSmart glide path, the investment team continually evaluates the funds’ allocations and makes adjustments based on their findings.
This risk-focused approach to portfolio management encompasses active asset allocation shifts between equities, fixed income and alternative investments, based on the measurement of the most significant risks and opportunities identified in the market.
Identify > Short-term market opportunities and dislocations
Implement > Tactical shifts between asset classes (+/-5%)
Manager Research:Identifying Key Components for Portfolio Construction
The LifeSmart Funds have access to numerous mutual funds managed by three specialized and independent managers—Franklin, Templeton and Mutual Series—as well as an array of exchange traded funds (ETFs) to construct highly diversified portfolios, generally with few common holdings.
Important Legal Information
The investment risk of the retirement target fund changes over time as its asset allocation changes. Since these funds invest in underlying funds, which may engage in a variety of investment strategies involving certain risks, the Franklin LifeSmart Retirement Target Funds may be subject to those same risks. All investments involve risks, including possible loss of principal. Principal invested is not guaranteed at any time, including at or after the fund's retirement target date; nor is there any guarantee that the fund will provide sufficient income at or through the investor's retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds in the fund adjust to a rise in interest rates, the fund's share price may decline. Foreign investing carries additional risks such as currency and market volatility and political or social instability; risks which are heightened in developing countries. These risks are described more fully in the prospectus. Investors should consult their financial advisor for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of their investment objectives, retirement time horizons and risk tolerance.
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