Ten minutes from now, you could know your investment mix. And if your goal is to choose investment options that you can be comfortable with, this is an important step. The attached Investor Profile Questionnaire will help you determine what type of investor you are.
Reaching your retirement goals takes the right mix.
No matter how far away you are from retirement, it makes good financial sense to set a strategy for reaching your retirement goals.
Your Investment Options
Your workplace savings plan offers a variety of investment options. How do you choose what is best for you? The first step to answering this question is to determine the proper investment mix – that is, how you invest your savings across the three basic investment types: stocks, bonds, and short-term investments. Neither diversification nor asset allocation ensures a profit or guarantees against a loss.
Also called equities, stocks give you a greater potential for growth. But they also come with a higher investment risk. Generally, the more years until retirement – and the longer you have to ride out short-term changes in the market – the bigger the role stocks could play in your investment mix. Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments.
Also known as fixed-income investments, bonds are generally less risky than stocks, so they can help offset some of the investment risk stocks can create. The potential risk and return on bonds is moderate – generally lower than stocks, but higher than short-term investments. In general, bond prices rise when interest rates fall, and vice versa. This effect is usually more pronounced for longer-term securities. Fixed-income securities also carry inflation risk and credit and default risks for both issuers and counterparties.
Also referred to as money market or cash investments, short-term investments are considered the least risky of the three basic investment types. But they also tend to produce the lowest returns over the long run. Short-term investments often become more important as you get closer to and into retirement.1