As you can see, the 50/50 portfolio returned almost as much as TLT did, but with less risk in the form of a lower standard deviation and a higher Sharpe ratio (the greater a portfolio’s Sharpe Ratio, the higher its risk-adjusted returns have been).
Note that the 50/50 portfolio return is hypothetical and does not reflect an actual portfolio or investment. (Returns do not reflect any management fees, transaction costs or expenses.) Past performance does not guarantee future results. For standardized performance, click here: TLT, DVY.
If managing risk is one of your investment goals, as it is for IYLD, then diversification is a practice you’ll want to get acquainted with.
Matt Tucker, CFA, is the iShares Head of Fixed Income Strategy.
[1] Distribution yield as of 6/20/2013. The distribution yield represents the annual yield an investor would receive if the most recent fund distribution stayed the same going forward. The yield represents a single distribution from the fund and does not represent the total return of the fund. The yield is calculated by annualizing the most recent distribution and dividing by the fund NAV from the as-of date. This information must be accompanied by a current prospectus, which can be obtained by clicking HERE.