Strategies to Help Reduce Risk
Investing involves risk – risk in a market that is full of unknowns. Predicting the path the market will take can become quite overwhelming for the average investor, so it may make sense to work with an investment professional to develop an investment strategy.
Investing for retirement is usually a long-term commitment, and time may take the punch out of market risk. There are strategies designed to help you reduce risk as you invest for retirement. Each strategy has its pros and cons, and no strategy is guaranteed, so talking with an investment professional about which one may be right for you could be a smart move.
It’s easy to lose confidence in your investment strategy when you see your account value fluctuating, but historically, the stock market bounces back. So choose an investment strategy, be patient, and let time work to your advantage.
Some strategies to consider
Asset allocation is the process of diversifying your retirement plan portfolio across different asset categories. You’ll determine your time horizon and risk tolerance and then build a portfolio to meet your needs. Keep in mind that asset allocation and diversification do not assure investment profit and cannot prevent loss, especially in a down market.
Asset rebalancing is an investment strategy that addresses the effects of varying returns among the assets in your retirement account. Over time, those variations can move your account away from your intended mix of assets and cause you to take on added market risk. Through asset rebalancing, you periodically buy and sell assets in your plan account to bring it back to the investment mix you decided could help you achieve your long-term goals.
Dollar cost averaging is a natural benefit to retirement plan participation. Contributions each payday mean you’re buying into the market regardless of its highs and lows. The result is that over time you’ll likely purchase an overall larger amount of shares than if the shares had been purchased with one lump sum. This strategy helps reduce the effects of market volatility. Dollar cost averaging does not assure a profit and does not guarantee against loss in a declining market.
Get the help you need
Talk with one of our Retirement Specialists for more information about investment strategies. Keep in mind that information provided by Retirement Specialists is for educational purposes only and is not intended as investment advice.