You may not have initially put much thought into the amount of risk you are willing to take with your retirement savings. Taking more risk for the possibility of higher returns comes with a higher risk of fluctuation in value. As you develop a better idea of your needs and expectations, take the time to make sure your investment strategy aligns with your tolerance for risk and your time horizon. As your savings grow, it’s important to review and understand your asset allocation. Asset allocation is how you distribute your savings among the different types of investments, such as stocks, bonds, and cash.
Your asset mix is a major determinant of your portfolio returns and the variability (risk) of those returns.
For instance, a portfolio that holds 80% bonds and 20% stocks will provide a return and risk pattern that is typically very different from that of a portfolio holding 15% bonds and 85% stocks.
Maintaining an appropriate asset allocation is critical to aligning your investment strategy with your overall investment objectives.
As a younger investor, you can afford to hold more stocks or stock mutual funds as a percentage of your retirement savings.
You can get the most benefit from potential long-term gains and can potentially recover from short-term losses.
Many people make the mistake of being too conservative with their funds even when they don’t need the money for 30 or 40 years.
A target date mutual fund can be a cost-effective way to build a well-diversified portfolio. It automatically adjusts your asset allocation to become more and more conservative the closer you get to retirement (the “target date”).
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This article has been prepared for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. The accuracy and completeness of this information is not guaranteed and is subject to change. Since each investor’s situation is unique you need to review your specific investment objectives, risk tolerance and liquidity needs with your financial professional(s) before a suitable investment strategy can be selected. Also, since Wells Fargo Advisors does not provide tax or legal advice, investors need to consult with their own tax and legal advisors before taking any action that may have tax or legal consequences.
Exchange Traded Funds seek investment results that, before expenses, generally correspond to the price and yield of a particular index. There is no assurance that the price and yield performance of the index can be fully matched. Exchange Traded Funds are subject to risks similar to those of stocks. Investment returns may fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost.
Target date funds are mutual funds that periodically rebalance or modify the asset mix (stocks, bonds, and cash equivalents) of the fund’s portfolio and change the underlying fund investments with an increased emphasis on income and conservation of capital as they approach the target date. Different funds will have varying degrees of exposure to equities as they approach and pass the target date. As such, the fund’s objectives and investment strategies may change over time. The target date is the approximate date when investors plan to start withdrawing their money, such as retirement. The principal value of the funds is not guaranteed at any time, including at the target date. More complete information can be found in the prospectus for the fund.
Mutual Fund investing involves risk. The investment return and the principal value of your investment will fluctuate and your shares, when redeemed, may be worth more or less than their original cost.
Mutual funds available without transaction fees may change at any time without notice. Therefore, any mutual funds purchased without a transaction fee may be subject to a transaction fee for subsequent purchases or upon liquidation.
Investment and Insurance Products:
Are Not insured by the FDIC or any other federal government agency
Are Not deposits of or guaranteed by a Bank
May Lose Value
Retirement Professionals are registered representatives of Wells Fargo Advisors, LLC. Wells Fargo Advisors is the trade name used by two separate registered broker-dealers: Wells Fargo Advisors, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, non-bank affiliates of Wells Fargo & Company. Discussions with Retirement Professionals may lead to a referral to Wells Fargo Advisors’ affiliates including Wells Fargo Bank, N.A. Wells Fargo Advisors and its associates may receive a financial or other benefit for this referral. Wells Fargo Bank, N.A. is a banking affiliate of Wells Fargo & Company.
A mutual fund is a security that pools money from investors to purchase stocks, bonds, or other securities for its portfolio.
An exchange-traded fund, or ETF, is an index-tracking fund that's traded like an individual stock on an exchange, enabling it to be bought and sold at any time during market hours.