10
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.
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.
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.
