Seeking to Find a Balance with the Right Mix

Seeking to Find a Balance with the Right Mix

Seeking to Find a Balance with the Right Mix

If there’s one lesson to be learned from the market in recent years, it is this — the markets don’t always follow a smooth path. There will be interruptions along the way and different asset classes — stocks, bonds and cash — generally react differently to economic conditions.

That’s why the concept of asset allocation — diversifying your portfolio with a strategic mix of stocks, bonds and short-term instruments — can be critical to helping you achieve your financial goals while also managing your own tolerance for risk.

The first step in any investment strategy is to have a clear idea of what your long-term goals are. Whether it’s a comfortable retirement, second home, or leaving a legacy for your children or grandchildren, having a plan for your long- and short-term financial goals can help make it easier to ride out the inevitable ups and downs of the financial markets. The goal of asset allocation is simple: to optimize return potential for a stated level of risk. Or to put it more precisely, to identify the most efficient mix of assets that will provide the highest potential for return, given the level of risk you are willing to assume.

Strategically combining asset classes increases the possibility of reaping the potential long-term returns of each asset class, while, to a degree, smoothing out the inevitable ups and downs of the various equity and bond markets.

Find Your Balance

As you can see from the hypothetical portfolios in the chart, by diversifying your portfolio, you may be able to better manage the balance between risk and return potential. This may help you feel more comfortable staying with your investment strategy over time.

Stocks and bonds form the cornerstone of most asset allocation plans. Historical combinations of the two offer, in our view, indications of potential risk/reward tradeoffs for investors. The chart below illustrates hypothetical, historical returns of various combinations of stocks and bonds, represented using two well-known, broadly-based indices.

Bloomberg Barclays U.S. Aggregate Bond Index vs. S&P 500 Stock Index

Source: FactSet. Past performance is no guarantee of future results. Risks and returns for portfolios comprising the S&P 500 Index and the Bloomberg Barclays U.S. Aggregate Bond Index. Portfolios rebalanced monthly. Actual investment returns will vary and may be greater or less than the indices, which do not reflect the deduction of any fees or expenses. The S&P 500 Index is a widely accepted, unmanaged index of U.S. stock market performance. The Bloomberg Barclays U.S. Aggregate Bond Index is a widely accepted, unmanaged total return index of corporate, government and government-agency debt instruments, mortgage-backed securities and asset-backed securities with an average maturity of 1–10 years. Investors cannot invest directly in any index. Standard deviation is the statistical measure of the degree to which an individual value in a probability distribution tends to vary from the mean of the distribution. It is widely applied in modern portfolio theory, where the past performance of securities is used to determine the range of possible future performance, and a probability is attached to each performance.

Charts are provided for illustrative purposes only and are not indicative of the past or future performance of any Dreyfus product.

But which type of mutual fund can potentially offer that type of diversification to help support an asset allocation strategy? 

Balanced Opportunity

Dreyfus Balanced Opportunity Fund

The fund seeks high total return through a combination of capital appreciation and current income. To pursue this goal, the fund invests in a diversified mix of stocks and fixed‐income securities. The fund selects securities that, in the portfolio managers’ judgment, will result in the highest total return consistent with preservation of principal. The fund normally will allocate between 25% and 50% of its assets to fixed‐income securities.  It’s important to note that diversification cannot assure a profit or protect against loss.

Balance Opportunity

1Strategy allocations as of 12/31/16, unless otherwise noted. Strategy allocations will vary and are subject to change, without notice. Subject to board approval, Dreyfus may hire, terminate or replace portfolio managers and modify material terms and conditions of portfolio management arrangements without shareholder approval. As of 12/31/16, the Fund’s equity holdings were primarily US-based.

Portfolio Management

The fund’s investment adviser is the Dreyfus Corporation (Dreyfus). Keith Stransky is the fund’s Portfolio Allocation Manager, a position he has held since March 2007. Mr. Stransky serves as Chief Investment Officer (Traditional) and a Senior Portfolio Manager for EACM Advisors LLC (EACM). The Portfolio Allocation Manager monitors and evaluates the performance of the equity and fixed income portfolio managers of the fund, and has the discretion to change the allocations to these portfolio managers when deemed appropriate. The Portfolio Allocation Manager also advises and recommends to Dreyfus and the fund’s board any changes to the fund’s portfolio managers. Dreyfus has ultimate responsibility (subject to oversight by the board) to supervise all the portfolio managers of the fund and recommend the hiring, termination and replacement of portfolio managers to the board.

EACM, TBCAM and Standish investment professionals manage Dreyfus‐managed funds pursuant to a dual‐employee arrangement, under Dreyfus’ supervision, and apply their firm’s proprietary investment process in managing the funds.

For more information on Dreyfus Balanced Opportunity Fund, please contact a Dreyfus Representative at 1-800-DREYFUS (800-373-9387).

Investors should consider the investment objectives, risks, charges, and expenses of a mutual fund carefully before investing. Download a prospectus, or summary prospectus, if available, that contains this and other information about the fund, and read it carefully before investing.

The fund’s equity portfolio managers are Brian Ferguson, John C. Bailer, George E. DeFina, Mark A. Bogar, CFA, James A. Lydotes, CFA and Andrew Leger. Mr. Ferguson is a Senior Vice President and the Director of the US Large Cap Value Equity Team at The Boston Company Asset Management (TBCAM). Mr. Bailer is a Senior Portfolio Manager of US dividend‐oriented and large‐cap strategies at TBCAM. Mr. DeFina is a Director, Portfolio Manager and Senior Quantitative Analyst at TBCAM. Mr. Bogar is a Managing Director, Portfolio Manager and Head of the Global Equity Team at TBCAM. Mr. Lydotes is a Managing Director, Portfolio Manager and Senior Research Analyst at TBCAM. Mr. Leger is a Director and Senior Research Analyst at TBCAM.

The fund’s fixed income managers are David Bowser and David Horsfall. Mr. Bowser is Managing Director and Senior Portfolio Manager at Standish Mellon Asset Management (Standish). Mr. Horsfall is Co‐Deputy Chief Investment Officer and Managing Director at Standish. Each portfolio manager also is an employee of Dreyfus.


Asset allocation and diversification cannot assure a profit or protect against loss. Equities are subject to market, market sector, market liquidity, issuer, and investment style risks, to varying degrees. Small and midsized company stocks tend  to bemore volatile and less liquid than larger company stocks as these companies are less established and have more volatile earnings histories. Bonds are subject to interest-rate, credit, liquidity, call and market risks, to varying degrees. Generally, all other factors being equal, bond prices are inversely related to interest‐rate changes and rate increases can cause price declines.

This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular investment, strategy, investment manager or account arrangement. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Please consult a legal, tax or investment advisor in order to determine whether an investment product or service is appropriate for a particular situation. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. The Dreyfus Corporation, EACM, TBCAM, Standish, and MBSC Securities Corporation are companies of BNY Mellon.

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