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With a defined benefit plan, the firm faces the potential risk that in an economic downturn, the investment performance of the fund is reduced, increasing the firm's funding obligation to keep the plan fully funded, at the same time as the firm's operating cash flow is reduced. In this case, the firm's stock returns are highly correlated with the Dow Jones Industrial Average. An equally weighted fund of 25 large industrial stocks is probably also highly correlated with the Dow. Therefore the allocation to this fund should be decreased significantly. In fact, given that it is dominated by the DJIA index fund (lower return, same volatility), Sargent could argue that it should be replaced completely. However, Portfolios B and C are even better choices.