INVESTMENT VIEWPOINTS
Asset Allocation Perspective
Rich Weiss
Senior Vice President and
Senior Portfolio Manager,
Asset Allocation Strategies
fi rst q uarter 2011
Asset Allo cati o n Su m mary
Last November, we made a couple small but important changes to the relative asset
weights in each of our Strategic Allocation portfolios (Conservative, Moderate and
Aggressive).
1. In all three portfolios, we increased the relative weight and exposure to
domestic equities.
• For Strategic Allocation: Moderate and Aggressive, the increase was +1%.
• For Strategic Allocation: Conservative it was +0.75%.
These increases shift our overall domestic equity allocations back from slightly
underweight to neutral relative to the long-term benchmarks.
While the current economic recovery remains somewhat weak, equity market valuations
relative to other asset classes—particularly fixed income—were beginning to appear
attractive. In particular, the spread between stock earnings yields (earnings divided by
price) versus bond yields became compelling relative to historical norms.
In implementing these changes for domestic equities, we retained a slight bias in favor
of growth stocks. Based on quantitative analysis, we believe growth equities tend to be
longer duration assets (i.e. having lower dividend yields with more return coming from
price appreciation) and therefore tend to outperform in low interest rate environments.
All three portfolios now have a +0.5% overweight position in large-cap growth and
mid-cap growth stocks offset by a -0.5% underweight position in large-cap value and
mid-cap value stocks.
2. The other change made in November was to reduce our overall exposure to
domestic bonds by -1% for all three portfolios.
• For Strategic Allocation: Conservative, this was accomplished by a -1% change
in the weighting for high-quality bonds.
• For the Strategic Allocation: Moderate and Aggressive portfolios, the reduction
in exposure to high-quality bonds was -2%. This brings all three portfolios’
positions back to their long-term benchmark weight.
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INVESTMENT VIEWPOINTS asset allo cati o n perspective

For the Moderate and Aggressive portfolios the overall decrease in fixed income exposure was accompanied by an increase
of +1% in exposure to high-yield bonds which we had been slightly underweight. The adjustments reflect our belief that return
spreads will tighten or remain stable in the near-term.
The table below summarizes our current asset class and category weightings.

First Quarter 2011 Asset Allocation Weightings

Strategic Allocation: Conservative Moderate Aggressive

Asset Category Benchmark Target Over/Under Benchmark Target Over/Under Benchmark Target Over/Under
Large-Cap Growth 4.75% 5.25% 0.50% 8.00% 8.50% 0.50% 14.50% 15.00% 0.50%
Large-Cap Core 9.00% 9.00% 0.00% 16.00% 16.00% 0.00% 14.50% 14.50% 0.00%
Large-Cap Value 11.00% 10.50% -0.50% 9.50% 9.00% -0.50% 8.50% 8.00% -0.50%
Mid-Cap Growth 4.00% 4.50% 0.50% 7.00% 7.50% 0.50% 13.50% 14.00% 0.50%
Mid-Cap Value 6.75% 6.25% -0.50% 5.50% 5.00% -0.50% 4.75% 4.25% -0.50%
Small-Cap Growth 0.75% 0.75% 0.00% 1.00% 1.00% 0.00% 1.25% 1.25% 0.00%
Small-Cap Value 0.75% 0.75% 0.00% 1.00% 1.00% 0.00% 1.00% 1.00% 0.00%
Real Estate 2.00% 2.00% 0.00% 2.00% 2.00% 0.00% 2.00% 2.00% 0.00%
Domestic Equity 39.00% 39.00% 0.00% 50.00% 50.00% 0.00% 60.00% 60.00% 0.00%
International Developed 6.00% 6.00% 0.00% 10.00% 10.00% 0.00% 12.50% 12.50% 0.00%
International Emerging 0.00% 0.00% 0.00% 4.00% 4.00% 0.00% 6.50% 6.50% 0.00%
International Equity 6.00% 6.00% 0.00% 14.00% 14.00% 0.00% 19.00% 19.00% 0.00%
High-Quality Bond 30.00% 30.00% 0.00% 19.00% 19.00% 0.00% 11.00% 11.00% 0.00%
High-Yield Bond 0.00% 0.00% 0.00% 3.00% 3.00% 0.00% 5.00% 5.00% 0.00%
Inflation-Adjusted Bond 9.00% 9.00% 0.00% 6.00% 6.00% 0.00% 4.00% 4.00% 0.00%
Domestic Bond 39.00% 39.00% 0.00% 28.00% 28.00% 0.00% 20.00% 20.00% 0.00%
International Bond 8.00% 8.00% 0.00% 3.00% 3.00% 0.00% 0.00% 0.00% 0.00%
International Bond 8.00% 8.00% 0.00% 3.00% 3.00% 0.00% 0.00% 0.00% 0.00%
Cash & Equivalents 8.00% 8.00% 0.00% 5.00% 5.00% 0.00% 1.00% 1.00% 0.00%
Totals 100.00% 100.00% 0.00% 100.00% 100.00% 0.00% 100.00% 100.00% 0.00%

Source: American Century Investments

This table details the difference (Over/Under) between current target weightings and the long-term benchmark strategic allocations
within each portfolio. Periodic adjustments are occasionally needed to balance our overall risk-reward ratio. Target weight numbers
reflect current adjustments to each portfolio as of December 31, 2010. The risk designations are relative only to the three Strategic
Allocation portfolios and do not represent comparisons with any other investment.

You should consider the fund’s investment objectives, risks, and charges and expenses carefully before you invest. The fund’s
prospectus or summary prospectus, which can be obtained by visiting americancentury.com, contains this and other information
about the fund, and should be read carefully before investing. Investment return and principal value will fluctuate and it is possible
to lose money by investing.

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INVESTMENT VIEWPOINTS asset allo cati o n perspective

Consumer spending is
showing signs of recovering.
By December 2010, retail
sales had increased for six
consecutive months with
overall spending reaching its
highest since October 2007.
Economic Outlook:
Partly Sunny, but a Few Clouds Remain
As the fourth quarter 2010 came to an end, the economy seemed poised to break out of
the sluggish growth it had been in since the Great Recession ended in June 2009. Most
importantly, consumer spending is showing signs of recovering. By December 2010,
retail sales had increased for six consecutive months with overall spending reaching its
highest since October 2007. Some attributed this simply to consumer psychology based
on pent-up demand and frustration after nearly three years of relative austerity. However,
there are other indicators that suggest consumer finances are on the mend.
The National Income Product Accounts, published quarterly by the U.S. Bureau of
Economic Analysis, shows the ratio between total consumer debt and the personal
savings rate from the first quarter of 1947 to the third quarter of 2010. Consumer debt
and personal savings are calculated as percentages of personal disposable income.
There have been encouraging shifts in the trends of both total consumer debt and
personal savings rates over the past three years (illustrated by the dashed oval in the
chart below). Consumer debt has begun to drop (slowly at first, but more convincingly
since late 2009) while personal savings rates have increased to over 5% of personal
income. The gap or spread between these two statistics had been widening over a 16-
year period from 1991 to 2007 as the personal savings rate plummeted while
the consumer debt ratio increased substantially. The reversal in this spread based on
rising savings and declining debt is a positive sign for the future outlook of households
and spending.

The Consumer Debt to Disposable Personal Income Ratio

Is Declining While Savings Rates Are Increasing
First quarter 1947 to Third quarter 2010

Consumer Debt to Disposable Personal Income Ratio

12% 1.2
Personal Savings as a % of
Disposable Personal Income
(left scale)
10% 1.0
Personal Savings Rate

8% 0.8

6% 0.6
Total Consumer Debt to
Disposable Personal Income Ratio
(right scale)
4% 0.4

2% 0.2

0% 0.0
1947-Q1
1949-Q3
1952-Q1
1954-Q3
1957-Q1
1959-Q3
1962-Q1
1964-Q3
1967-Q1
1969-Q3
1972-Q1
1974-Q3
1977-Q1
1979-Q3
1982-Q1
1984-Q3
1987-Q1
1989-Q3
1992-Q1
1994-Q3
1997-Q1
1999-Q3
2002-Q1
2004-Q3
2007-Q1
2009-Q3

Year/Quarter

Note: Savings rates are based on a rolling 12 month average.

Source: U.S. Bureau of Economic Analysis and U.S. Federal Reserve

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INVESTMENT VIEWPOINTS asset allo cati o n perspective

Businesses have been
reluctant to expand either in
terms of capital spending or
substantial new hiring based
on soft demand from the
consumer sector.
Businesses have also continued to generate impressive earnings and earnings growth,
which was actually one of the very few bright spots in the early stages of the recovery.
However, businesses have been reluctant to expand either in terms of capital spending
or substantial new hiring based on soft demand from the consumer sector. One result is
that corporations have accumulated the largest amount of liquid assets as a percentage
of total assets on their balance sheets in 50 years (see chart below). At $1.9 trillion
(third quarter 2010), this pool of money could be put to use for expansion and hiring if
aggregate demand—especially consumer demand—continues to recover. Alternatively,
the excess cash could also be used to increase dividend payouts or share repurchases.
Corporate Liquid Assets Are at a 50 Year High
Nonfarm, Non-financial Corporations
First Quarter 1960 to Third Quarter 2010
Liquid Assets as a Pecent of Total Corporate Assets

8.0%

7.0%

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0%
1960-Q1
1961-Q3
1963-Q1
1964-Q3
1966-Q1
1967-Q3
1969-Q1
1970-Q3
1972-Q1
1973-Q3
1975-Q1
1976-Q3
1978-Q1
1979-Q3
1981-Q1
1982-Q3
1984-Q1
1985-Q3
1987-Q1
1988-Q3
1990-Q1
1991-Q3
1993-Q1
1994-Q3
1996-Q1
1997-Q3
1999-Q1
2000-Q3
2002-Q1
2003-Q3
2005-Q1
2006-Q3
2008-Q1
2009-Q3
Year/Quarter

Source: U.S. Federal Reserve

Unemployment Still Clouds Recovery

Unemployment remains unacceptably high—November marked the 19th consecutive
month where the national unemployment rate exceeded 9%, which is a record dating
back to 1945. With the exception of the 1970s when stagflation occurred (high
unemployment and high inflation), the relationship between unemployment and
inflation has been inversely related with inflation rising as labor markets tighten
and industrial capacity utilization peaks (see chart on the next page). Neither is the
case at the moment, and recent inflation rates have been low by historical standards
to the extent that the U.S. Federal Reserve has been more concerned about deflation
than rising inflation.

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INVESTMENT VIEWPOINTS asset allo cati o n perspective

With the exception of the
1970s when stagflation
occurred (high unemployment
and high inflation), the
relationship between
unemployment and inflation
has been inversely related with
inflation rising as labor markets
tighten and industrial capacity
utilization peaks.
However, given the huge amount of liquidity remaining in the global economic system
and highly stimulative policies such as record federal budget deficits and quantitative
easing programs by the Federal Reserve (where they buy U.S. Treasuries to inject more
liquidity into the financial system), there is a risk that accelerated economic growth
could quickly change the inflationary outlook from low to moderate or even high. And if
that occurs, the Federal Reserve would be forced to choose between anti-inflationary
steps that could choke off the recovery or allow inflation to accelerate in order to
continue growth and address the high unemployment rate.
Unemployment Rate and 12 Month Rolling Inflation (CPI-U)
January 1960 to November 2010
Rate of Unemployment and 12 Month Change in CPI-U

16.0%

14.0%
12 Month Rolling Rate of Inflation

12.0%

10.0%
Unemployment Rate

8.0%

6.0%

4.0%

2.0%

0%
Jan-60
Feb-62
Mar-64
Apr-66
May-68
Jun-70
Jul-72
Aug-74
Sep-76
Oct-78
Nov-80
Jan-83
Feb-85
Mar-87
Apr-89
May-91
Jun-93
Jul-95
Aug-97
Sep-99
Oct-01
Nov-03
Jan-06
Feb-08
Mar-10
Month/Year

Source: U.S. Bureau of Labor Statistics

In summary, while our economic outlook remains cautious, we are more optimistic
today than in past quarters. The 11th hour decision to extend the Bush-era tax cuts
across the board for another two years, along with encouraging signs of life from the
U.S. consumer and corporations flush with cash, all point to a potentially higher rate
of economic growth than we experienced in 2010. If these insights prove correct (and
there are no guarantees), this year may be the year we finally put the Great Recession in
the past and move on.

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INVESTMENT VIEWPOINTS
American Century Investment Services, Inc., Distributor
©2011 American Century Proprietary Holdings, Inc. All rights reserved.
IN-WHP-70239
asset allo cati o n perspective
A Word About Risk
The funds’ performance depends on the investment managers’ skill in determining the
strategic asset class allocations, the mix of underlying American Century Investments
funds, as well as the performance of those underlying funds. The underlying performance
may be lower than the performance of the asset class they were selected to represent.
Stocks and bonds can decline due to adverse issuer, market, regulatory, or economic
developments. International markets may be less liquid and can be more volatile than U.S.
markets. These risk factors, including those associated with currency exchange rates, also
apply to investments in international markets, all of which make international markets more
volatile and less liquid than investments in domestic markets. Some of the underlying
funds can invest in either high-yield securities or small/emerging growth companies.
Investments in these types of securities generally are subject to greater volatility than either
higher-grade securities or more established companies, respectively. Before making an
investment in any fund, you should consider all the risks associated with it.
Rich Weiss, Senior Vice President and Senior Portfolio Manager, Asset Allocation, is
the senior investment officer assigned to American Century Investments Strategic Asset
Allocation Funds (Conservative, Moderate, and Aggressive). The risk designations are
relative only to the three Strategic Allocation Funds and do not represent comparisons
with any other investment. The three diversified portfolios invest in varying levels of stocks,
bonds, and cash and account for approximately $3.1 billion (as of December 31, 2010)
in assets.
The opinions expressed are those of the contributors from the portfolio investment team. The
opinions are no guarantee of the future performance of any American Century Investments
portfolio. Material presented has been derived from industry sources considered to be
reliable, but their accuracy and completeness cannot be guaranteed. Statements represent
personal views and compensation has not been received in connection with such views.
This information is not intended to serve as investment advice.
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