Investing can be rewarding, but it does come with some risk. Below, we illustrate some ways to manage your investment risk.
Investing in mutual funds may help to reduce your risk:
Mutual funds typically invest in many — sometimes hundreds — of securities.
Diversification generally increases the chance that your investment will perform more evenly as declines in the value of some holdings can be offset by gains in others.
Invest with your goals and time horizon in mind:
Match your investment goal with the mutual fund’s goal.
For example, if you want an investment with the potential for strong growth, you will probably want to consider a stock fund. But the value of a stock investment is likely to fluctuate more widely over the short term — meaning there will typically be periods of gains and periods of losses. If you have a long time horizon, you can keep your money invested and ride out any setbacks.
Practice asset allocation:
Based on your risk tolerance and investment time horizon, you will want to spread your savings across different types of assets — money market securities, bonds and stocks — to potentially reduce your overall risk.
Our client services associates can help you do this by providing an asset allocation plan tailored to meet your specific investing needs.
Review your allocation over time:
Once you settle on an asset mix — say 80 percent stocks and 20 percent bonds — review that mix at least once a year.
If you want to maintain that mix, you’ll need to periodically rebalance your account by making exchanges that will take you back to your target percentages. For personal assistance, call one of our friendly client services associates at 800.258.3030 (option 2).
Neither asset allocation nor diversification guarantee a profit or protect against a loss in a declining market. They are methods used to help manage investment risk.
Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk. Rebalancing can entail transaction costs and tax consequences that should be considered when determining a rebalancing strategy.