Everyone’s investing strategy is unique — we have different goals and varying risk levels. Learn about investing basics to help you make informed decisions to save for the retirement you envision. 

Understand asset allocation

Asset allocation refers to the way your investments are divided among the three main asset classes. This decision can be based upon several factors, including your risk tolerance and the amount of time you have until you plan to retire — also known as your “time horizon.”

If you’re years from retirement and more comfortable with risk, you may choose an aggressive portfolio with more exposure to stocks, while a conservative portfolio may include more bonds or stable value investments. The closer you get to retirement, you may choose to be more conservative to avoid large market fluctuations. It’s also possible to diversify within an asset class. For example, you may choose a large-capitalization (cap) stock fund and a small-cap stock fund. 

Diversify your portfolio

A diversified portfolio is invested in multiple asset classes to help manage market fluctuations. Losses in one asset class may be offset or lessened by better performance in another. It’s important to review your portfolio annually and rebalance, or reset the asset allocation, if it has shifted due to performance.

For investors seeking an all-in-one way to manage asset allocation and diversification, a target-date or target-risk fund may be a good option. These funds are designed to serve as a singular investment option and manage investment selection, diversification or risk management for you. Please note, diversification or asset allocation do not guarantee performance or protect against loss.