Jason Stipp: I'm Jason Stipp for Morningstar. After a hair-raising downturn and an equally exhilarating upturn in the market over the last couple of years, investors may be left wondering, "What does this mean for my portfolio?"

Morningstar's Christine Benz is going to be heading down to Orlando this week to go to the Ibbotson Conference--Ibbotson, a Morningstar company that specializes in asset allocation. She's going to be hearing what they have to say about a lot of issues that are top-of-mind for investors.

Christine, thanks for joining me.

Christine Benz: Jason, nice to be here.

Stipp: So it seems to me that one of the top issues that investors are confronting right now comes out of the crisis, when everything seemed to be going down at once. The question that comes to mind for investors is, "This diversification thing's not working too well. Why do I even bother with diversification anymore?" Seems like that's going to be a big issue this year.

Benz: It will. Many of the panels focus on the aftermath of 2008, what are the takeaways. And you're right. 2008 was a year where investors said, "Well, diversification really didn't do me many favors, unless I had long Treasuries." So, is it a good long-term strategy?

And also, the bigger-picture question is whether that long-term, strategic, batten-down-the-hatches, stick-with-your-asset-allocation approach makes sense, versus possibly employing a more tactical approach.

Stipp: So, by tactical, meaning I would move in and out of things like commodities, or move in and out of bonds and stocks instead of going by that age-based, more strategic asset allocation that we're all used to.

Benz: Right. So we'll hear a paper, for example, about whether it's possible to predict stock market crashes, and whether there are any takeaways for individual investors based on that research.

Stipp: Sounds like it would involve a lot of guessing on the investors' part, in some respects.

Benz: Possibly. And I tend to be not too positive on tactical strategies, mainly because the world of active managers hasn't shown us a lot of great ability in that realm, but we'll see.

Stipp: Those folks are the professionals, too, so...

Benz: Exactly.

Stipp: It could be very difficult for investors, but it'll be interesting to see what comes out of it.

A second issue related to the downturn is on redemption fees. Now, these are fees that some funds would charge when you want to take money out. It seems like a bad thing for investors, but it potentially could help the managers, and maybe investors, over the long term. What's the story there?

Benz: I think that there could be some interesting research there. Roger Ibbotson, at last year's conference, actually showed us some data looking at funds with holdings that are less liquid, and showing some correlation with outperformance with less liquid holdings. And so the way that that correlates with redemption fees is that if the manager could invest in a less liquid basket of stocks, because he or she doesn't have to meet redemptions frequently, that may deliver better long-run performance.

So I think that there's an interesting body of research consolidating around that idea that less liquid could equal higher investor returns.

Stipp: Certainly give the manager more flexibility to broaden the universe there.

Another thing that's more on the portfolio level is about annuities, and whether those make sense. I know, when I think of annuities, I think of high fees. But is there a scenario when investors might want to have annuities as an option in their retirement accounts?

Benz: That's increasingly a topic for debate, and there will be a couple of panels that will focus on that issue. I would say that a single-premium, immediate annuity--this is a plain-vanilla annuity where you give the insurance company your money, and in return they send you a stream of income for your entire life. I think that sort of plain vanilla annuity can make a lot of sense. Whether annuities with more bells and whistles make sense--and they typically entail higher costs--that's another question.

And increasingly, there's been a discussion about whether these guaranteed products should have a role in retirement portfolios, so in company retirement plans. Right now, typically, you're given this chunk of assets when you're retired, and it's like, "See you, you're on your own."

The idea behind putting some sort of guaranteed product in the company retirement plan is that it would give the retiree a tool for managing that stream of income throughout his or her lifetime.

Stipp: Especially if they've had no experience whatsoever throughout their accumulation years, and being more hands-on with that management.

Benz: Right. So there seems some interest in Washington in giving retirees a helping hand in this area.

Stipp: Could be an interesting one.

Lastly, alternatives. Increasingly, investors have access to all sorts of what used to be considered exotic, and maybe still are exotic, options, from leveraged ETFs to ETFs that do the inverse of what an index does. The question seems to be that there could be applications for these, but how would an investor think about using them in just an average, everyday portfolio?

Benz: Yeah, this has been a perennially hot topic at the Ibbotson Conference over the past several years. And what we've seen is a problem with some of these alternative strategies working very well in an endowment setting, but in a real person's portfolio, they can be difficult to use well. And so that's a question that will be explored at this conference as well.

Stipp: Sure, sounds like an interesting one. So, Christine, we look forward to your reports from Orlando. We wish you a safe trip, and I look forward to hearing your insights when you come back.

Benz: Thanks, Jason.

Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.

Receive $20 off a one year subscription for an Annual Premium Membership at Morningstar for Equedia Members!