February 2010

Prepared byRonald Florance, CFA®

Director of Investment Strategy & Asset Allocation Anne Symanovich Senior Investment Research Analyst

In this special report

1 Combining modern portfolio theory and behavioral finance

2 Behavioral finance

3 A case study of Julie and Josh Smith3 Whatisthemoneyfor?4 Basicneedsstrategyportfolio5 Lifestylestrategyportfolio5 Philanthropystrategyportfolio6 Legacystrategyportfolio6 Thetotal-net-worthportfolio

AssetAllocationforReal-WorldInvestors

February 2010 | Asset Allocation for Real-World Investors 1

AssetAllocationforReal-WorldInvestorsAsanindividualinvestoryoulikelyexpectyourportfoliotomeetavarietyofneedsorgoals.Whenaninvestmentprofessionaldetermineswhataninvestor’sstrategyshouldbe,acommonpracticeistoidentifyalevelofrisktolerance—ameasureoftheinvestor’sabilitytohandledeclinesinhis/herportfolio.Thispracticeisbasedonmodernportfoliotheoryandassumesthataninvestorhasone,andonlyone,levelofrisktolerance.However,inreviewingyourportfolio,youmayrealizethatyoudonothavejustoneinvestmentgoalorlevelofrisktolerance—youhavemany,relatingtobothyourshort-andlonger-termneedsandgoals.Oneofthegoalsofbehavioralfinanceistoaddressthatissue.

Yourportfoliooughttobedesignedtosatisfyanentirelifecycleofneeds.Thebasicneedsoffood,clothing,andsheltercomefirst.Beyondthat,youmaywanttoconsideryourlifestyle,education,retirement,philanthropic,andlegacygoals.Youshouldsetasidespecificmoneyforeachgoalandinvesteachpoolofmoneybaseduponyouruniquerisk,return,liquidity,cashflow,andtaxrequirementsforthatgoal.Sowhensomeoneaskswhatyourrisktoleranceis,theansweroughttobe,“Thatdependsonwhichpoolofassetsyouareaskingabout.”

Thisspecialreportaddresseshowyouandyourinvestmentprofessionalcanuseabehavioralfinanceapproachtodevelopacomprehensiveinvestmentstrategytosuityourindividualfinancialneedsandobjectives.Whenapplyingthisapproach,youbeginbydeterminingthelifespanneeds,orgoals,thatyourportfoliomustaddressandthenallocatespecificassetstosatisfyeachofthoseneeds.

Combining modern portfolio theory and behavioral financeAssetallocationistheprocessofcombiningdifferentassetclasses—suchasstocks,bonds,andrealestate—withinasingleportfoliowiththeintentofoptimizingtherisk/returnrelationship.Accordingtomodernportfoliotheory,foreverylevelofriskthereisone“optimal”portfolio—onethatmaximizesthepotentialreturnforagivenlevelofrisk.Usingdifferentcombinationsofdiverseassetclasses,aninvestmentprofessionalcancreateanefficientfrontier—aseriesofoptimal,return-maximizingportfoliosrepresentingdifferentdegreesofrisk.

Typically,investmentprofessionalsdetermineaninvestor’slevelofrisktoleranceandthenselectthecorrespondingcombinationofassetclassesontheefficientfrontier.Followingthistraditionalapproach,theportfolioatthatpointontheefficientfrontierwouldbethatinvestor’sportfolio.

Modernportfoliotheorywasaverypowerfulconceptwhenitwasfirstdevelopedinthe1950sand1960s.Institutionalinvestorswerethefirsttoembracethemethodology.Itrevolutionizedthewaythatsuchinvestorsdevelopedinvestmentstrategiesforlargeportfolios.Pensions,endowments,andfoundationsusedmodernportfoliotheorytoallocateassetsacrossstocks,bonds,andcashinawaythatextractedthemaximumpotentialinvestmentreturnwiththeleastamountofvolatility—orrisk.Asaresult,portfoliostrategywasnolongeronlyaboutGeneralElectricvs.GeneralMotors,butaboutGeneralMotorsbondsvs.GeneralMotorsstockaswell.

Webelievethatapproachcontinuestobesuitedtoinstitutionalmoneymanagement.Portfoliosforpensions,endowments,andfoundationshaveadefinedinvestmentgoal.Theseinstitutionsgenerallyhaveasetamountofassets(theportfoliosize)andawell-definedliability(pensionbenefitpayoutsorsetannualpayouts).Theydonotpaytaxesand,beinglarge,areabletotradeatlowtransactioncosts.Giventhisasset/liabilityoptimizationmodel,creatingoptimalportfoliosbaseduponriskandreturnworkswell.Thelevelofriskiscommonlysetbydeterminingthelevelofriskneededtohittheminimumreturnrequirementtosatisfytheasset/liabilityobligation.

However,webelievethatthesingle-portfolioconceptislesssuitedtoindividualinvestors.Anindividualinvestordoesnothavejustoneinvestmentgoal.Thecomplexlifeofthetypicalindividualinvestornecessitatesmultipleinvestmentgoals.Traditionalassetallocationoptimizationtechniquesarebaseduponoptimizingasinglerisk/returnrelationshipbaseduponasetasset/liabilityobligation.However,youmayfindthatyourequiretheoptimizationofmultiplerelationships.Asaninvestor,youmayhavemultiplegoals,anddifferentlevelsofrisktoleranceandreturnrequirementsfordifferentpoolsofwealth.Behavioralfinancecanhelpdevelopaneffectiveinvestmentstrategywithinamultiple-investment-goalenvironment.

February 2010 | Asset Allocation for Real-World Investors2

Behavioral financeBehavioralfinancebridgesthegapbetweenmodernportfoliotheoryoptimizationandreal-worldinvestors.Byunderstandingthatyoumayhavemorethanoneinvestmentgoalandthatriskandreturnarenottheonlyparametersaboutwhichyouareconcerned,yourinvestmentprofessionalcandevelopaninvestmentstrategythatismoresuitableforyourcomplexneeds.

Behavioralfinancelooksatthemulti-dimensionalinvestmentgoalsofinvestors.Byarticulatingandquantifyingthevariousobligationsonaninvestmentportfolio,identifyingappropriaterisk/returnrequirements,lookingbeyondrisk/returntootherinvestmentparameters,anddevelopingappropriateinvestorexpectations,thescienceofbehavioralfinancecanhelpdevelopamorepersonalizedinvestmentstrategythathasagreaterprobabilityofmeetingyourspecificneeds.

Sowhattypesoffactorsdoesthisapproachconsider?Asinthecaseofmanytheories,modernportfoliotheorymakesassumptionsabouthumanbehaviorthatdonotnecessarilyholdtrueinreallife.Forexample,itassumesthatthepainthatyoufeelifastockorassetclassfallsbyacertainamountisequivalenttothejoyyoumayexperienceifthestockorassetclassrisesbyasimilaramount.Wedonotbelievethatthisisatruereflectionofhumannature.Inourview,thelossofadollargenerallycreatesmorepainthanthejoycreatedfrommakingadollar.

Economicandfinancialtheoriesalsoassumethatinvestorstendtoactrationallywhenitcomestoinvestments.However,manystudiesshowthatinvestorstendtopileintohotassetclassesandinvestmentsjustastheyarereadytofall.Theseinvestmentdecisionsarebasedonherd-mentalityemotion,asopposedtosoundinvest-mentandvaluationanalysis.Investorsmayintuitivelyknowthattheassetisovervalued,butthefearofmissingoutonthepotentialreturnsoverpowerstheacademicvaluationargument.Sometimesitiseasiertolosemoneywiththemassesthantostandaloneinprofit.

Thesearethetypesofbehaviorsthatcanresultininappropriateinvestmentstrategiesforcertaininvestors.Aportfoliomayappeartobeinvestedprudentlyfromastatisticalpointofview,butitmaynotcapturethemultiplerisktolerancelevelsthatmanyinvestorsmayhave.Valuationsofinvestmentsmayleadtoastrategythatdoesnotsatisfythetruenatureofindividualinvestors.Webelievethatbehavioralfinance,modernportfoliotheory,and

mean-varianceanalysiscanbecombinedinawaythatsatisfiesboththeacademicintegrityofyourinvestmentstrategyandyouremotionalneeds.

Our Starting Point: What is the Money for?

Basic Needs

Lifestyle

Philanthropy

Legacy

Thisdiagramhighlightsthemajorrequirementsorneedsthatyoulikelyexpectyourportfoliotosupport.Typicallyinvestorshavefourbroadcategoriesofneeds:

1. Basicneeds.Meetingyourfood,shelter,andimmediatelifestylenecessities

2.Lifestyle.Maintainingasatisfactorylifestylethroughoutyourlife

3.Philanthropy.Supportingspecificcausesorcharities

4.Legacy.Makingsignificantbequestsduringorafteryourlifetime

Withinthesecategories,therearefivesetsofbeneficiariesthatyoumayneedtoconsider:

1. Yourself2.Spouse/partner3.Children/heirs4.Society5.Government

Therearefiveparametersthatwillneedtobeoptimizedinyourportfolio:

1. Return.Yourneedforaparticularlevelofreturn

2.Risk.Thepotentialfluctuationsinthevalueofyourinvestments,whichcouldresultinlosses

3.Liquidity.Thedegreetowhichyouneedyourportfolioassetstobeeasilyconvertibletocash

4.Cashflow.Yourneedforreliablecashflowsfromyourportfolio

5.Taxefficiency.Yourneedtoreducetheimpactoftaxesonyourafter-taxportfolioreturns

February 2010 | Asset Allocation for Real-World Investors 3

Youshouldconsideralltherequirementslistedaboveinconsultationwithyourinvestmentprofessional.Inaddition,yououghttoprioritizebetweenneedsandwantstobuildyourportfolioinsuchawaythatmaximizestheprobabilityofachievingsuccess.Thisapproachclearlygoeswellbeyondtraditionalmodernportfoliotheoryrisk/returnoptimization;itrequiresabetterunderstandingofwhatyouwantyourinvestmentstoachieveforyou.Thisiswherebehavioralfinanceisrequired.

Abehavioralfinanceapproachtoassetallocationinvolvesthreestages.Inthefirststage,youapportionyourassetsacrossthefourneedcategorieslistedonpage2.Inthesecond,youallocatetheassetswithineachofthesecategories,orstrategyportfolios,tomaximizetheprobabilityofachievingyourdesiredfinancialgoals.Inthefinalstage,youconsolidatethefourstrategyportfoliostoconfirmthattheholisticportfolioisappropriateforyourfamily’stotalwealthsituation.Thefollowingexampleillustrateshowthisapproachworksinpractice.

A case study of Julie and Josh SmithJulieandJoshSmithhaveworkedhard,raisedthreechildren,andaccumulatedsubstantialwealth.Theyareintheirlate50s,enjoyverygoodhealth,andareinalifetransition.Theynolongerplanonaccumulatingsignificantassetsbutwouldliketheirinvestmentportfoliotosupportthevariousfinancialgoalsthattheyhaveatthisstageintheirlives.Alltheirchildrenaremarriedanddoingwell.Eachhasonechild,withmorecomingbeingarealpossibility.TheSmiths’portfoliototals$1million,with$150,000inresidentialequity.

What is the money for?JulieandJoshSmithliveareasonablelifestyle,giventheirlevelofwealth.Theyspend,onaverage,$50,000ayear—afigurethatwillrisewithinflation.Theyarecomfortablewiththeirlevelofspendinganddonotanticipateanysignificantchanges.Theywouldliketosetaside$50,000togenerateincomesotheycanmakeregulardonationstocharitieswithwhichtheyareinvolved.TheSmithsalsowouldliketocontribute$100,000toaseriesofcollegefundsfortheirgrandchildren.

Thiscouplewillneedthehelpofawealth-planningstrategisttoensurethattheestateplanandinvestmentstructuremaximizethebenefitsofexistinglaws.Financial-planningtechniquesareverycomplex,inlightoftoday’sever-changinglegislativeenvironment.Awealth-planningstrategist’srolewouldbecriticalindevelopingthelegalstructuretohelptheSmithsensureasmoothtransitionofassetsastheirlivesprogress.Althoughfinancial-planningtopicsarebeyondthescopeofthisspecialreport,we’dliketostressthatusingwealth-planningstrategistsisvitalforthedevelopmentofasuccessfulinvestmentstrategy.

NowthattheSmithshavedecidedupontheirbasicinvestmentgoals,theirinvestmentprofessionalcanusetheapproachoutlinedabovetostartdividingtheassetsamongstthefourlife-spanneedscategoriesorstrategyportfolios.

Asarule,theSmithswouldbeadvisedtosetasidefourtimestheirannuallivingexpensestomeettheirbasicneeds.Intheircase,thatwouldbe$200,000.Thefour-yearcushionallowsforacomfortablemarginoferrorifthereisaneconomicdisruption.TheSmithstypicallywouldreplenishtheirbasicneedsstrategyportfoliowithassetsfromthelifestylestrategyportfolio.SettingasideenoughassetstocoverfouryearsoflivingexpensesislikelytoallowtheSmithstorebalancethelifestylestrategyportfoliowithoutbeingforcedtoliquidateitsassetsduringunfavorablemarketconditions.

TheSmithsindicatedthattheywouldliketoleavealegacyof$100,000tosupporttheirgrandchildren’scollegeeducation.

Theyalsowanttosetaside$50,000forcharity,sothatiswhattheyshouldallocatetothephilanthropystrategyportfolio.

Thisleaves$650,000tothelifestylestrategyportfolio($500,000ininvestableassetsand$150,000inresidentialequity),which,ifinvestedappropriately,willlikelybeadequatetoreplacethe$50,000thattheSmithsconsumeeveryyearfromtheirbasicneedsstrategyportfolio.

February 2010 | Asset Allocation for Real-World Investors4

Insummary,theassetallocationacrossthelife-spanstrategyportfoliosis:

Life Span Asset Allocation

Basic Needs $200,000

Philanthropy $50,000

Lifestyle $650,000Legacy $100,000

Nowweneedtoallocatetheassetswithineachstrategyportfolio,optimizingthefiveparameters(return,risk,liquidity,cashflow,andtaxefficiency)foreachofthebeneficiaries(self,spouse,children/heirs,society,andgovernment).Achartcanhelpwiththistask.

Basic Needs Lifestyle Philanthropy Legacy

Return Goal inflation + 2% inflation + 5% inflation + 4% inflation + 6%

Risk Tolerance low medium high high

Liquidity Needs high medium medium low

Cash Flow high medium medium low

Tax Efficiency medium high low high

Giventheseparameters,theSmithsandtheirinvestmentprofessionalcandevelopstrategic(long-term)assetallocationtargetsforeachlifespanstrategyportfolio.

Basic needs strategy portfolioThebasicneedsstrategyportfolioisdesignedtopotentiallyofferverylowvolatility,withadequateliquidityandcashflowtocovertheSmiths’day-to-daylivingexpenses.Thelowestvolatilityportfolioisnotonethatisinvested100percentinfixedincomesecurities,butonewithasmallallocationtoequitiesandcomplementarystrategies.Theassetallocationbelowismostlikelytoprovidetheriskcontrol,liquidity,andcashflownecessarytomeettheSmiths’basicneeds:

Basic Needs Strategy Portfolio

Short-Term Bonds 8%

Intermediate-Term Bonds 36%U.S. Small Cap 1%

Int’l Developed Markets 5%

U.S. Large Cap 11%

U.S. Mid Cap 1%

Complementary Strategies 6%

RE–Global Public REITs 4%

Commodities 2%

Int’l Developed Mkts Bonds 12%Long-Term Bonds 8%

High-Yield Bonds 6%

Portfolio Allocation

Short-Term Bonds 8% Intermediate-Term Bonds 36% Long-Term Bonds 8% High-Yield Bonds 6% International Developed Markets Bonds 12%

U.S. Large Cap 11% U.S. Mid Cap 1% U.S. Small Cap 1% International Developed Markets 5% International Emerging Markets 0%

Real Estate–Global Public REITs 4% Real Estate–Private REITs 0% Commodities 2%

Complementary Strategies 6%

Total 100%

Total Return 6.22% Standard Deviation 4.55% Yield 4.23% Sharpe Ratio 0.60

Standard deviation. A statistical measure of the historical volatility of a mutual fund or portfolio, usually computed using 36 monthly returns. More generally, a measure of the extent to which numbers are spread around their average.

Sharpe ratio. Ratio of the manager’s arithmetically annualized excess return over the annual standard deviation of the excess return. Excess returns are computed in comparison to the 3-month Treasury bill.

February 2010 | Asset Allocation for Real-World Investors 5

Lifestyle strategy portfolioBecausethebasicneedsstrategyportfolioisdesignedtomeettheSmiths’shorter-termlifestyleneeds,theirlifestylestrategyportfoliodoesnotneedtoprovideahighlevelofcashflow.Itdoes,however,needtohavesomeliquidityforrebalancingandfundingofthebasicneedsportfolio,asrequired.Taxefficiencyiscritical.Inourview,amoreaggressiveinvestmentapproachdesignedforgrowthisinorderforthelifestylestrategyportfolio.Thestrategicallocationcouldbe:

Lifestyle Strategy Portfolio

Short-Term Bonds 3%

Intermediate-Term Bonds 13%

RE–Global Public REITs 5%

Complementary Strategies 12%

RE–Private REITs 5%

Commodities 4%

U.S. Small Cap 4%

Int’l Developed Markets 13%

Int’l Emerging Markets 3%

High-Yield Bonds 4%

Int’l Developed Mkts Bonds 6%

U.S. Large Cap 20%

U.S. Mid Cap 5%

Long-Term Bonds 3%

Portfolio Allocation

Short-Term Bonds 3% Intermediate-Term Bonds 13% Long-Term Bonds 3% High-Yield Bonds 4% International Developed Markets Bonds 6%

U.S. Large Cap 20% U.S. Mid Cap 5% U.S. Small Cap 4% International Developed Markets 13% International Emerging Markets 3%

Real Estate–Global Public REITs 5% Real Estate–Private REITs 5% Commodities 4%

Complementary Strategies 12%

Total 100%

Total Return 8.32% Standard Deviation 9.60% Yield 2.99% Sharpe Ratio 0.50

Philanthropy strategy portfolioTheirphilanthropystrategyportfolioneedstobedesignedtoallowtheSmithstosupporttheirfavoritecharities.Abalancebetweengrowthandcurrentincomeisrequired.Hypothetically,thephilanthropyportfolio’sstrategicassetallocationcouldbe:

Philanthropy Strategy Portfolio

Short-Term Bonds 4%

Intermediate-Term Bonds 19%RE–Global Public REITs 4%

Complementary Strategies 10%

RE–Private REITs 4%

Commodities 4%

U.S. Small Cap 3%

U.S. Mid Cap 4%

Int’l Developed Markets 11%

Int’l Emerging Markets 3%High-Yield Bonds 5%

Int’l Developed Mkts Bonds 8%

U.S. Large Cap 17%

Long-Term Bonds 4%

Portfolio Allocation

Short-Term Bonds 4% Intermediate-Term Bonds 19% Long-Term Bonds 4% High-Yield Bonds 5% International Developed Markets Bonds 8%

U.S. Large Cap 17% U.S. Mid Cap 4% U.S. Small Cap 3% International Developed Markets 11% International Emerging Markets 3%

Real Estate–Global Public REITs 4% Real Estate–Private REITs 4% Commodities 4%

Complementary Strategies 10%

Total 100%

Total Return 7.86% Standard Deviation 8.20% Yield 3.31% Sharpe Ratio 0.53

February 2010 | Asset Allocation for Real-World Investors6

Legacy strategy portfolioThelegacystrategyportfolio,asetofcollegesavingsplans,doesnotpaytaxes,sotaxefficiencyisnolongeranissue.Liquidityisnotespeciallyimportantbecausethegrandchildrenarestillveryyoung.Growth,however,isimportantbecauseofrisingtuitioncosts.Forthisexample,thestrategicassetallocationforthelegacystrategyportfoliocouldbe:

Legacy Strategy Portfolio

Short-Term Bonds 1%

Intermediate-Term Bonds 6%

RE–Global Public REITs 5%

Complementary Strategies 15%

RE–Private REITs 5%

Commodities 5%

Int’l Developed Markets 15%

Int’l Emerging Markets 8%

High-Yield Bonds 3%

Int’l Developed Mkts Bonds 3%

U.S. Large Cap 22%

U.S. Mid Cap 6%U.S. Small Cap 5%

Long-Term Bonds 1%

Portfolio Allocation

Short-Term Bonds 1% Intermediate-Term Bonds 6% Long-Term Bonds 1% High-Yield Bonds 3% International Developed Markets Bonds 3%

U.S. Large Cap 22% U.S. Mid Cap 6% U.S. Small Cap 5% International Developed Markets 15% International Emerging Markets 8%

Real Estate–Global Public REITs 5% Real Estate–Private REITs 5% Commodities 5%

Complementary Strategies 15%

Total 100%

Total Return 9.39% Standard Deviation 12.44% Yield 2.40% Sharpe Ratio 0.47

The total-net-worth portfolioWhenyouaddupallfourstrategyportfolios,theSmiths’total-net-worthportfolioislikelytolooklikethepiechartbelow:

The Total-Net-Worth Portfolio

Short-Term Bonds 3.85%

Intermediate-Term Bonds 17.20%

RE–Global Public REITs 4.75%

Complementary Strategies 11.00%

RE–Private REITs 3.95%

Commodities 3.70%

U.S. Mid Cap 4.25%

U.S. Small Cap 3.45%

Int’l Developed Markets 11.50%

Int’l Emerging Markets 2.90% High-Yield Bonds 4.35%

Int’l Developed Mkts Bonds 7.00%

U.S. Large Cap 18.25%

Long-Term Bonds 3.85%

Portfolio Allocation

Short-Term Bonds 3.85% Intermediate-Term Bonds 17.20% Long-Term Bonds 3.85% High-Yield Bonds 4.35% International Developed Markets Bonds 7.00%

U.S. Large Cap 18.25% U.S. Mid Cap 4.25% U.S. Small Cap 3.45% International Developed Markets 11.50% International Emerging Markets 2.90%

Real Estate–Global Public REITs 4.75% Real Estate–Private REITs 3.95% Commodities 3.70%

Complementary Strategies 11.00%

Total 100%

Total Return 8.38% Standard Deviation 9.68% Yield 2.97% Sharpe Ratio 0.50

Theseportfoliosfallalongtherisk/returnlineasfollows:

0 2 4 6 8 10 12 14 160123456789

10

Hypothetical Risk

Hypo

thet

ical R

etur

n

Basic NeedsPhilanthropy Total Net Worth

Lifestyle Legacy

Thistotal-net-worthportfolioclearlyrepresentsacomprehensiveviewoftheSmiths’networth.Inourview,asinglemathematicaloptimizercouldnotcreatethatrobustaportfolio.Webelievethatsuchacustomizedinvestmentpolicycanbedevelopedonlythroughadisciplinedbehavioral-financeapproachtoidentifyingandaddressingclientgoals,rigorousquantitativeanalysistodevelopingoptimalportfolios,andprudentuseofasset-classguidelineconstraints.

Inourexample,someoftheassetclasseshaveverysmallallocationsthatareimpracticaltoimplement.Accesstosuchassetclassescanbeachievedthoughhybridinvestments,orsimplybyblendingthesmallallocationsintobroaderassetclasses.

TheSmiths’investmentprofessionalmusttrulyunderstandtheirsituationtobeabletohelpthemidentifytheiruniqueinvestmentgoals,wants,andneedsbeforeallocatinganyassets.TheSmithsshouldasktheirinvestmentprofessionaltobreakdowneachstrategyportfolioforthemtomaketheprocessmoreaccessible.Assetallocationisnotsimplycreatingpiechartsbaseduponold-fashionedideasofriskandreturn;rather,itistheprocessofconvertingtheircomplexinvestmentgoals,requirements,andconstraintsintoacustomizedinvestmentstrategy.

Weprovideourclientswithaholisticviewoftheirfinancialportfolio.Wedosobyusingsophisticatedbehavioralfinanceandassetallocationtechniques.Weinvestclientportfoliosusingarobustblended-architectureplatformthatincludesaselectionofhighlycompetitiveWellsFargoandthird-partymoneymanagers.Thisprocessbringsthefullresourcesofbanking,credit,trust,andinvestmentstohelpourclientsachievetheirmulti-generationalinvestmentgoals.

PI21009 (201002088 02/10)

Disclosures

Wells Fargo Wealth Management provides products and services through Wells Fargo Bank, N.A., Wachovia Bank, N.A. and their various subsidiaries and affiliates (including Wells Fargo Investments, LLC, member SIPC, and Wells Fargo Advisors which are non-bank affiliates of Wells Fargo & Company).

The information and opinions in this report were prepared by the investment management division within Wells Fargo Wealth Management. Information and opinions have been obtained or derived from sources we consider reliable, but we cannot guarantee their accuracy or completeness. Opinions represent Wells Fargo Wealth Management’s opinion as of the date of this report and are for general information purposes only. Wells Fargo Wealth Management does not undertake to advise you of any change in its opinions or the information contained in this report. Wells Fargo & Company affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.

Past performance does not indicate future results. The value or income associated with a security or an investment may fluctuate. There is always the potential for loss as well as gain. Investments discussed in this report are not insured by the Federal Deposit Insurance Corporation (FDIC) and may be unsuitable for some investors depending on their specific investment objectives and financial position.

The various outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Other investment categories not considered may have characteristics similar or superior to those being analyzed.

Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses. Your individual allocation may be different than the strategic long-term allocation presented due to your unique individual circumstances, but is targeted to be in the allocation ranges detailed. The asset allocation reflected above may fluctuate based on asset values,portfolio decisions, and account needs.

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