Asset Allocation: The funds and percentages you choose to invest in; Homestead Funds offers 10 funds.
Asset Allocation Model: Technology that allows you to identify your chosen funds and percentages on our website to be used for all payroll purchases going forward; your model can be changed or deleted at any time; this allows you to control your allocations online instead of through your payroll department.
One-Time Rebalance: Process to reallocate your current assets to your chosen model.
Auto Rebalance: Process to schedule a regular rebalance back to your Asset Allocation Model (shifts in percentages allocated to each fund can occur over time through market movement and transactions).
Go to the Homestead Funds webpage at www.homesteadfunds.com and click on “Log In.” If you need assistance logging in, please call 800.258.3030, option 1.
Once logged in, click on Asset Allocation Model in the left-side menu and select the account you wish to add a model to.
There are three different ways to add a model to your account. You can either:
Once you make your selection, be sure to review the disclosure language and scroll all the way down to select “Next.”
If you choose the Select a Pre-Defined Asset Allocation Model option, you will be presented with five portfolios. When you click on a model, the funds and percentages for that model will be displayed. You can accept it as is, change to another model or customize to your own model. Once you have reviewed the disclosure language at the bottom, please scroll down to click “Submit.”
If you chose Take a Questionnaire, you will be asked to complete a brief questionnaire about your investment time horizon and risk tolerance. The system will highlight in gray the Asset Allocation Model that is proposed based on your answers. You can accept it as is, change to another model or customize to your own model. Once you have reviewed the disclosure language at the bottom, please scroll down to click “Submit.”
If you chose Create a Custom Asset Allocation Model, you will be prompted to enter the funds and percentages according to your wishes. Once you have reviewed the disclosure language at the bottom, please scroll down to click “Submit.”
Establishing a model will direct your payroll contributions to your chosen funds going forward but will not change your current asset mix. If you would like to rebalance your current assets, you will need to select “Process One Time Rebalance.” If you would also like to set your account up to rebalance on a schedule, you can then select “Set up Auto Rebalance.”
Neither asset allocation nor diversification guarantees a profit or protects against a loss in a declining market. They are methods used to help manage investment risk.
Debt securities are subject to interest rate risk, credit risk, extension risk, income risk, issuer risk and market risk. The value of U.S. government securities can decrease due to changes in interest rates or changes to the financial condition or credit rating of the U.S. government. Investments in asset-backed and mortgage-backed securities are also subject to prepayment risk as well as increased susceptibility to adverse economic developments. High-yield, lower-rated, securities involve greater risk than higher-rated securities. Loans are subject to risks involving the enforceability of security interests and loan transactions, inadequate collateral, liabilities relating to collateral securing obligations and the liquidity of the loans.
Equity securities generally have greater price volatility than fixed-income securities and are subject to issuer risk and market risk. The Stock Index Fund pursues its objective by investing substantially all of its assets in another pooled investment vehicle (a “master fund”). The ability of the Stock Index Fund to meet its investment objective is directly related to the ability of the master fund to meet its investment objective. Index funds may hold securities of companies that present risks that an investment advisor researching individual securities might otherwise seek to avoid and are subject to tracking error risk. Value stocks are subject to the risk that returns on stocks within the style category will trail returns of stocks representing other styles or the market overall. Growth stocks are subject to the risk that returns on stocks within the style category will trail returns of stocks representing other styles or the market overall. Securities of small and medium-sized companies tend to be riskier than those of larger companies. International investing involves currency, economic and political risks, which may be greater for investments in emerging and frontier markets.
Using the Asset Allocation Tool
The asset allocation tool relies entirely on the limited information you provide in response to the questions posed in the risk tolerance questionnaire, and does not take into account any other information pertaining to your particular personal financial or investment situation, to create a model portfolio and asset allocation. Homestead Funds, Homestead Advisers Corp. and Homestead Financial Service Corp. do not verify the completeness or accuracy of such information and do not further tailor the model portfolio and asset allocation to your particular circumstances.
As a result, you should not rely on the tool as a recommendation as to any asset allocation or security selection. The tool does not provide any information regarding whether or how your model portfolio and asset allocation should change over time and is not a substitute for consulting with a financial advisor. Changes in tax or benefit laws, investment markets or your own financial situation over time can cause actual results of any asset allocation made today to deviate substantially from expectations. To address this uncertainty, you should create several scenarios, with various sets of assumptions, to evaluate a wide range of possible outcomes. You may make changes to your responses and portfolio selection at any time.
The asset allocation tool is provided on a non-discretionary basis, and you are under no obligation to buy or sell any investment based on any model portfolio or asset allocation.
Once an asset allocation model is selected, future payroll deposits will be invested according to that asset allocation model unless you direct us differently.
Deactivating an Asset Allocation Model
You may discontinue the use of an asset allocation model at any time. However, once the model that you previously selected has been deactivated, your investments in the Homestead Funds will no longer be periodically rebalanced. Should you thereafter add additional funds to your account, you will be required to select a new asset allocation model or choose the specific Homestead Funds in which you wish to invest.
Predefined Asset Allocations
The asset allocation tool and predefined mutual fund portfolios are educational tools and should not be relied upon as the primary basis for investment, financial, tax-planning or retirement decisions. The tools provide a sample of possible mutual fund portfolios based on varying degrees of market risk. These portfolios are not tailored to the investment objectives of any specific investor. The predefined portfolios and model portfolio and asset allocations neither are, nor should be construed as, investment advice, financial guidance, or an offer or solicitation or recommendation to buy, sell or hold any security, or to engage in any specific investment strategy by Homestead Advisers Corp. or Homestead Financial Services Corp.
The asset allocations for one or more predefined or model portfolios may change at any time and neither Homestead Advisers Corp. nor Homestead Financial Services Corp. will notify you when such changes are made. In addition, predefined and model mutual portfolios do not utilize any rebalancing methodologies and also will not be rebalanced when deposits or withdrawals are made. Therefore, if you choose to allocate your mutual fund holdings according to a predefined or model portfolio, your mutual fund holdings will not be updated as a result of any changes to the predefined or model portfolios nor according to any rebalancing strategy unless you elect to set up auto-rebalancing for your holdings. A rebalancing strategy seeks to minimize relative risk by aligning the portfolio to a target asset allocation as the portfolio’s asset allocation changes. Not rebalancing a portfolio may over time change its risk and return characteristics. Strategies that do not rebalance may not address prolonged changes in market conditions. You are responsible for monitoring your investments and their performance and for determining whether your investments should be rebalanced. You may set up auto-rebalancing for your portfolio at any time. This will rebalance your account to the current asset allocation model percentages of the applicable pre-defined or model portfolio according to the frequency you select. Further, we are under no obligation to update or change the asset allocation tool in any way or inform you of any changes to the tool or to its hypothetical asset allocation models.
A predefined or model portfolio can help you focus on a possible asset allocation strategy and create a plan of action. Homestead Advisers Corp., Homestead Financial Corp. and their affiliates do not provide tax advice, and you always should consult your own tax advisor regarding your personal circumstances before taking any action that might have tax consequences. You may also wish to consult a financial advisor for advice that is tailored to your investment needs. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives, provide you with a given level of income or protect against a loss in a declining market. The predefined portfolios and model portfolios and asset allocations are methods used to help manage investment risk.
You understand and acknowledge that in using the asset allocation tool and/or predefined mutual fund portfolios, you are choosing to enter a series of mutual fund orders allocated across a group of mutual funds that you have selected.
Investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost.
Customized Asset Allocation Model
You should consult with your financial advisor to establish your investment goals and the appropriate allocations of your investments. Please confirm you are comfortable choosing a customized approach for your portfolio instead of a predefined portfolio.
When an Asset Reallocation is run, the system performs exchange transactions between the funds in the account, so that the resulting positions are in line with the Reallocation percentages listed in the Asset Allocation Model for the account. As a result, each exchange involves purchase and sell transactions. Please note that this may result in a taxable event for non-IRA accounts.
Rebalancing can entail transaction costs and tax consequences that should be considered when determining a rebalancing strategy.