Diversification

Go to the http://www.investopedia.com/articles/basics/03/050203.asp website to learn more about diversification, the factors that influence investors' risk preferences, and the types of investments that fit into each of the risk categories. Then check out http://www.investopedia.com/articles/pf/05/061505.asp for asset allocation guidelines for various types of portfolios from conservative to very aggressive. What do you conclude about your own risk preferences and the best portfolio type for you? What would you expect to happen to your attitude toward risk as you get older? How might your portfolio composition change?

Risk Comparisons

Go to www.morningstar.com and select the Funds tab. In the Quotes box, enter the symbol FAATX and click on the arrow. This will open the page that has more detailed information about the Fidelity Advisor Asset Allocation T fund.

What are the year-to-date (YTD), the 3-year and the 5-year returns for the fund? In which sectors does this fund invest? What percent does it have in each of the sectors? What are the asset allocation percentages for Cash, Stocks, Bonds, and Other assets? Identify the top five holdings of the fund. For each stock, click on the link to open a page that has information about the stock. Select the Snapshot tab on the left side menu and note the YTD return for the stock. Then click on the Data Interpreter tab and find the 3-year and the 5-year trailing returns for the stock.

Once you have obtained this information, make a list of the returns for the Fidelity Advisor Asset Allocation T fund and the comparable returns for the stocks that comprise the top holdings. How do the individual stocks' returns compare with the fund's returns? How might diversification affect the return results?