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What's Right for You?
Asset allocation is the strategy of investing your money across a variety of different asset classes, as opposed to simply diversifying holdings within one particular asset class. That's because when one sector of the market declines, some or all of portfolio losses may be offset by the performance of sectors on the rise.
Many 401(k) plan participants have no asset allocation strategy, which isn't a wise approach to managing an individual's hard earned money. You may consider consulting with an investment representative to help you determine a diverse portfolio of investments appropriate for your:
- Level of risk tolerance
- Investment time horizon
- Financial objectives
The investment pyramid
The following roster of investment choices covers the spectrum from the most conservative to the more high-risk-yet potentially higher return-investments.
- Savings preservation/low risk. Cash/money market accounts, Short-term fixed accounts, Time accouts (CDs), Treasury bills
- Income potential/medium risk. Fixed account options, Government bonds, Corporate bonds, High-yield bonds
- High growth potential/high risk. Growth-income securities, Large capitalization (large cap) stocks, Mid cap stocks, Small cap stocks, Value stocks, International stocks, Utility stocks, Real estate investment trusts (REIT), Capital appreciation stocks, Emerging markets stocks and bonds, Private equity, Venture capital
Global considerations
Nearly every type of asset class offers securities on a global scale. For example, instead of simply buying U.S. utility stocks, you may take advantage of the huge growth potential-and risk-of Latin American telecommunication stocks.
When building a well-balanced portfolio, it's important to consider
all the world's market offerings for the sake of performance potential
and risk management through diversification.
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