Petco Barking About Benefits Magazine Q3 2012

Asset Allocation, Diversification, and Risk—Oh My! To maximize the benefits of Petco’s 401(k) Plan, it’s important to understand the basics of investing. For starters, you want the right investment mix.

Regardless of your investment mix, there is always the risk that some of your investments will decrease in value. Consider your comfort level when it comes to taking risks with your money. Are you comfortable investing in stocks, which have a higher risk with the potential for higher rewards, or is your investment style more moderate or conservative? As you assess your risk tolerance, consider your time horizon. If your retirement is many years from now, some investment risk may be appropriate. Experts say the younger you are, the more aggressive your asset allocation should be, meaning more ownership of stocks. There are no guarantees, but a longer investment period may give you a chance to ride out the ups and downs of the market. Historically, stocks have outperformed bonds, short-term investments and inflation over the long term. As you near retirement, your asset allocation should be more conservative. To preserve the money you’ve saved, experts suggest investing in less-risky short- term investments such as money market funds, certificates of deposit (CDs), and Treasury bills.

This means investing your savings, or assets, in funds that offer the right balance between risk and reward to achieve your savings goals in your desired time frame. Your investment strategy should reflect your personal situation. It should align with your target retirement date, financial situation, and risk tolerance. Important! When building your portfolio, follow the advice of experts by applying the general principles of asset allocation and diversification. In other words, “Don’t put all your eggs in one basket!” Mix It Up! Asset allocation means spreading your investments across different types of investment categories, such as stocks, bonds, and short-term investments. This allows you to invest some assets for safety, some for income, and some for growth. Diversification means spreading your investments within each of the stock, bond, and short-term investment categories. Diversification helps protect you from large losses because even if some investments drop in value, other investments may perform well.

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