Now that you’ve decided to make some investments, you might want to find your own investing style. You can start by asking yourself two basic questions. Where do you land on the risk and reward spectrum? How much help do you want in choosing your investments?
Choose an investment mix that will help you feel confident
Investments fall into three basic groups or asset classes: stocks, bonds and cash or stable value. More aggressive investments, those with a higher risk of loss, also tend to promise higher gains. The reverse also is true: Investments with lower risk have less potential for investment gains.
Do you lose sleep after a sharp drop in the market, or are you comfortable with market ups and downs and prepared to hold your investments for the long term? Your answer might help you decide whether you’re a conservative, moderate or aggressive investor. Here are three sample portfolio styles to consider:
Decide how much help you need
Once you’ve decided your comfort with risk and reward, consider how much help you need.
I want to choose my own investments
When you’re investing in a retirement plan, you can choose your investments from the plan’s lineup. Some plans also offer a brokerage option that allows you to select from the thousands of stocks, bonds and mutual funds available in the market.
I want some help
If you want help, you can choose a professionally managed, all-in-one investment option, sometimes called target-date or life-cycle funds. These options normally include a mix of stock and bond mutual funds in a single investment, managed to your retirement timeline and/or tolerance for risk. All-in-one funds are commonly available in retirement plans (as well as to individual investors). Target-date funds have the additional advantage of automatic rebalancing, so your investment mix becomes more conservative as your projected retirement date approaches.
Note: Target Date funds may be more expensive than other funds, and there is no guarantee that objective will be achieved at the target date.
