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Investing Principles

Rebalancing

Regaining Your Focus. Investing can sometimes feel like a balancing act. You want your assets to grow, but you don't want to expose yourself to too much risk. Allocating assets strategically between equities (also known as stocks) and fixed income (such as bonds) can help balance potential risks and rewards. But as time goes by, the investments in your portfolio may grow at different rates, causing your portfolio to become lopsided. To get your investments back to their original allocation, consider setting up your portfolio to automatically rebalance.

This strategy can sometimes feel like you're letting go of winners and replacing them with losers. But remember, all you're doing is executing the most basic principle of investing: buying low and selling high.

The Benefits of Rebalancing

Electing to automatically rebalance your portfolio at regular intervals — quarterly, semiannually or annually — allows you to realign your investments to reflect your desired asset allocation.

As seen in the accompanying example, the initial $100,000 investment allocated 60% to equities and 40% to fixed income. But after 20 years, the portfolio's allocation had become unbalanced due to market performance. Equities, which inherently carry more risk, accounted for a larger percentage of the portfolio's assets, which may not be in line with the investor's tolerance for risk and long-term objectives. You can see that, had the portfolio been rebalanced quarterly over a 20-year period, risk levels would have remained in line with the original goals — and, perhaps most importantly, the value of the portfolio would've been nearly $12,000 higher.

A Strategy For Staying The Course
Hypothetical infographic for staying the course when investing for retirement.

Source: Lipper, a Thomson Reuters Company. Time periods, reflecting a strong stock market and a strong bond market, respectively, are based on performance of the following indices from 12/31/1996-12/31/2016. Equity performance is represented by the S&P 500®. Fixed Income is represented by the Barclays US Aggregate Bond Index. Indices are unmanaged and not available for direct investment.

Past performance is no guarantee of future results. Chart is for illustrative purposes only and is not representative of the future performance of any particular portfolio or security.

Systematic investment programs do not assure a profit or protect against loss in a declining market. They involve continuous investing regardless of fluctuating price levels. Investors should consider their ability to continue investing through periods of fluctuating market conditions.

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Annuities are issued by Jackson National Life Insurance Company® (Home Office: Lansing, Michigan) and in New York by Jackson National Life Insurance Company of New York® (Home Office: Purchase, New York). Variable annuities are distributed by Jackson National Life Distributors LLC, member FINRA. May not be available in all states and state variations may apply. These products have limitations and restrictions. Contact Jackson for more information.

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CMN16263 09/17

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