ILAAX
Invesco Income Allocation-R5
Strategic Asset Allocation for Income
The Invesco Income Allocation-R5 (ILAAX) fund is designed to provide a high level of current income through a strategic asset allocation. The fund invests 65% of its total assets in fixed-income funds and 35% in equity funds, offering a balanced approach that appeals to conservative investors. This allocation is intended to provide stability and income, leveraging the relatively lower volatility of bonds while still capturing some growth potential from equities. The fund’s focus on income generation is evident in its yield of 4.72%, which is attractive for investors seeking regular income distributions. By investing in a mix of domestic and international equities, bonds, and REITs, ILAAX aims to diversify risk and enhance income potential.
At A Glance
Executive Summary
ILAAX offers a conservative income strategy with a 4.72% yield and 0.62% expense ratio, focusing on 65% bonds and 35% equities.
High current income with 4.72% yield Balanced exposure to equities and bonds Conservative risk profile with low beta
Negative alpha and Sharpe ratio Limited upside potential Higher expense ratio than some peers
Performance Analysis: A Conservative Approach
ILAAX has demonstrated a conservative performance profile, with a one-year return of 14.96%. While this is commendable, it is important to note that the fund’s alpha is -22.70%, indicating that it has underperformed its benchmark, the S&P 500 Total Return Index, which had a one-year return of 37.62%. The fund’s beta of 0.35 suggests lower volatility compared to the market, aligning with its conservative strategy. However, the negative Sharpe ratio of -3.94 and Treynor ratio of -64.14 highlight challenges in achieving risk-adjusted returns. Despite these metrics, the fund’s focus on income rather than capital appreciation may still appeal to investors prioritizing steady income over high returns.
Portfolio Composition: Diversification Across Sectors
ILAAX’s portfolio is diversified across various sectors, with significant allocations in technology (19.97%), financials (18.92%), and health care (11.15%). This sector diversification helps mitigate risks associated with any single industry, providing a buffer against market volatility. The fund’s top holdings include Invesco Core Bond R6 and Invesco Core Plus Bond R6, which together account for nearly half of the portfolio, emphasizing its strong bond focus. Additionally, the inclusion of equity ETFs like Invesco MSCI USA ETF and Invesco QQQ Income Advantage ETF provides exposure to growth sectors, balancing the conservative bond investments. This strategic mix aims to optimize income while maintaining a conservative risk profile.
Risk Metrics: Understanding the Conservative Profile
The risk metrics for ILAAX reflect its conservative investment strategy. With a beta of 0.35, the fund exhibits lower sensitivity to market movements, which is ideal for risk-averse investors. The standard deviation of 1.66% further underscores the fund’s low volatility. However, the negative alpha and Sharpe ratio indicate that the fund has struggled to deliver returns commensurate with its risk level. The max drawdown of -3.2% and a quick recovery period of one month demonstrate resilience in adverse market conditions. These metrics suggest that while the fund may not outperform in bullish markets, it provides a stable option for investors seeking to preserve capital and earn steady income.
Comparative Analysis: How ILAAX Stacks Up
When compared to similar funds, ILAAX offers a competitive yield of 4.72%, which is higher than some peers like Nuveen Lifecycle Retirement Inc-Ret (TLIRX) with a yield of 3.20%. However, its expense ratio of 0.62% is higher than some alternatives, which may be a consideration for cost-conscious investors. The fund’s conservative approach is reflected in its lower beta compared to the benchmark, making it suitable for those prioritizing stability over aggressive growth. While its one-year return of 14.96% is in line with peers, the fund’s focus on income generation rather than capital appreciation sets it apart, appealing to investors seeking regular income distributions.
Investor Suitability: Who Should Consider ILAAX?
ILAAX is particularly well-suited for conservative investors seeking a reliable income stream with moderate risk exposure. Its strategic allocation of 65% in bonds and 35% in equities provides a balanced approach that can appeal to retirees or those nearing retirement who prioritize income over growth. The fund’s low beta and standard deviation make it an attractive option for risk-averse investors looking to preserve capital while earning a steady income. However, potential investors should be aware of the fund’s negative alpha and Sharpe ratio, which indicate challenges in achieving risk-adjusted returns. Overall, ILAAX offers a compelling choice for those seeking income stability in a conservative investment vehicle.
Expense Considerations: Balancing Cost and Value
The expense ratio of ILAAX stands at 0.62%, which is relatively higher compared to some similar funds. While this may be a drawback for cost-sensitive investors, it is important to consider the value provided by the fund’s strategic asset allocation and income focus. The fund’s management team leverages Invesco’s expertise in selecting a diversified mix of underlying funds, which may justify the higher expense ratio for those prioritizing professional management and income generation. Investors should weigh the cost against the potential benefits of the fund’s conservative strategy and its ability to deliver a steady income stream.
Conclusion: A Balanced Income Strategy for Conservative Investors
In conclusion, the Invesco Income Allocation-R5 (ILAAX) fund offers a balanced income strategy that is well-suited for conservative investors seeking stability and regular income. With a strategic allocation of 65% in bonds and 35% in equities, the fund provides a diversified approach that mitigates risk while capturing income opportunities. Despite challenges in achieving risk-adjusted returns, the fund’s focus on income generation and low volatility make it an attractive option for those prioritizing income over growth. Investors should consider ILAAX if they are looking for a conservative investment vehicle that aligns with their income-focused objectives.
Similar Securities
PMIAX: Putnam Multi-Asset Income-A | Balanced Conservative Fund
PMIAX offers a balanced approach with a 3.57% yield and a focus on capital conservation, suitable for conservative investors.
PRSIX: TRPrice Spectrum Conservative Alloc-Inv | Balanced Conservative Investment
PRSIX offers a balanced portfolio with 40% stocks, 40% bonds, and 20% money markets, providing a conservative investment with a 0.67% expense ratio.
TAIAX: American Funds TaxAwr Cnsrv Gr & Inc-A | Tax-Efficient Income & Growth
TAIAX offers tax-efficient income with a 0.64% expense ratio, focusing on municipal bonds for conservative growth and income.
CAAMX: Invesco Select Risk Mod Conserv Inv-A | Balanced Conservative Investment
CAAMX offers a conservative mix of 60% bonds and 40% equities, with a 0.94% expense ratio and 2.26% yield, ideal for risk-averse investors.
PIAFX: Invesco Multi-Asset Income-A | Diversified Income for Conservative Investors
PIAFX offers a 6.18% yield with diversified income sources, ideal for conservative investors. Its 0.85% expense ratio is competitive.
Futher Reading
https://finance.yahoo.com/quote/ILAAX/”>Yahoo: Invesco Income Allocation-R5
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