CHOOSE
Your Investments1
You have many different ways to invest.
The types of investments you choose should be based on two key factors:
1. The amount of time you have before you retire, and
2. How comfortable you are with investment risk.
Investment risk is the chance that an investment will decrease in value.
Investment return (or rate of return), usually expressed as a percentage,
is how much your investment gains or loses in a given time period.
The Long and Short of It
Typically, investments that have the potential for the highest returns also have the greatest
potential for risk. The opposite is generally true — investments with the lowest returns also
have the least risk.
If you have a long time, ten years or more, before you will need the money you are saving for
retirement, you may be able to choose investments with the potential for higher returns. That’s
because over the long term you may be able to recover any losses that might occur in the short
term. If you are just a few years from retirement, you may want to choose investments that are
less risky, although you should generally expect to earn less on those investments.
Ways to Reduce Risk
Spreading your money across many different investments, also known as diversification, is a proven way to reduce many of the risks of investing. Most retirement plans make it easy to diversify
by offering both mutual and collective funds.2 The chart on the following page shows the basic
types of investments found in most mutual and collective funds: stocks, bonds and stable value
investments.
1 The information contained herein and any information provided by employees and representatives of Wells Fargo & Company and its affiliates is intended to constitute investment
education under U.S. Department of Labor guidance and does not constitute “investment advice” under the Employee Retirement Income Security Act of 1974 or regulations
thereunder. Neither Wells Fargo & Company nor any of its affiliates, including employees and representatives, may provide “investment advice” to any participant or beneficiary
regarding the investment of assets in an employer sponsored retirement plan. Please contact your personal investment, financial, tax or legal advisor regarding your specific needs
and situation.
2 Collective funds offer tax-qualified retirement plans many of the same benefits as mutual funds, such as portfolio diversification, professional management and investment flexibility. Since a
collective fund does not impose the same administrative fees and does not have some of the regulatory requirements that mutual funds do, it generally has lower operating expenses.
EISP/CIP Education Center
Imagine
Investment Types
You
STOCKS
BONDS
Stable Value
Investments1
What they are
Ownership in a large, small
or mid-sized U.S. or international company.
A loan to a government entity
or corporation in exchange for
interest payments.
Short-term investments that
seek to preserve the money
invested.
Risk/potential
return
Higher risk, higher potential
return
Medium risk, medium return
Lower risk, lower potential
return
Key risks
Market risk: Price swings
could lead to losing some of
the money you invest.
Business risk: A company
could go out of business or
perform poorly.
Interest rate risk: As rates rise,
bond prices fall.
Credit risk: A bond issuer
might not repay money to the
bondholders.
Inflation risk: As prices rise
over time, your purchasing
power could shrink.
Ideal time frame
Long-term – 10+ years
Medium-term – 3-10 years
Short-term – 3 years or less
1
While stable funds seek to maintain relative stability of principal, the funds are not money market funds. The funds’ value may fluctuate due to changes in interest rates
and changes in the value of securities in which the fund invests. Investments in stable funds, when redeemed, may be worth more or less than their original cost.
Deciding on the Right Mix
Selecting among the different types of investments
to create a mix that makes sense for your situation is called asset allocation. The combination
that you choose affects both your investment risk
and your investment return, so it’s important to
find the mix that is right for the type of investor
you are.
Discover Your Investor Profile
See which of the following descriptions most
closely fits your situation.
Choose the pie chart that most matches your
description. Each gives an example of a mix of
funds that might suit a Conservative, Moderate
or Aggressive investor who is at least 15 years
from retirement.
15+ Years to Retirement
Conservative
Conservative: You are willing to accept the
lowest potential returns to protect your savings.
Moderate
Moderate: You are willing to tolerate the possibility of losing some of your savings in exchange
for an average return over time.
Aggressive: You are willing to take on a
high potential for losing some of your savings in
exchange for potentially earning the highest
possible return over time.
Aggressive
10%
25%
50%
25%
Stable Value Investments
65%
25%
Bonds
100%
Stocks
The asset allocation information provided above is intended to constitute investment education under U.S. Department of Labor guidance and does not constitute “investment advice” under the
Employee Retirement Income Security Act of 1974 or regulations thereunder. You should consider other assets, income and investments you have in addition to your plan account in applying these
models to your particular situation. Please contact your personal investment, financial, tax or legal advisor regarding your specific needs and situation.
EISP/CIP Education Center
Retirement