Petco Barking About Benefits Magazine Q3 2012

Investment Types—Choose Your Breed Sure, you want to reach your retirement savings goal. But attaining this goal requires more than regular, old-fashioned saving. Deciding how to invest your retirement savings can be just as significant as how much you decide to save. That’s why it’s essential to gain an understanding of the basics in order to select the investment options in the 401(k) Plan that are best suited for your goals and risk tolerance. Each of the three main asset types – stocks, bonds and short-term investments – has distinct characteristics and may perform differently in response to changes in the market. When you develop your retirement savings portfolio, it’s important to keep these characteristics in mind:

Investment Type

Description

Benefits

Considerations

Stocks

While stocks generally do provide the most growth potential, they also tend to have the most risk. If you choose to invest in stocks, be sure you understand and are willing

Stocks or “equities” are ownership shares in a company. For example, if you buy 10,000 shares in a company with one million shares outstanding, you own one percent of the company. A bond is a type of security that pays a fixed amount of interest at regular intervals over a certain period of time. Bonds are essentially loans given to companies and government entities that promise to pay back the loan at a specified interest rate. Bonds may also be known as fixed-income investments. Short-term investments are relatively steady investment securities that can be easily converted to cash, such as Certificates of Deposit (CDs), Treasury bills, some money market accounts and some Stable Value Funds.

Historically, stocks have outperformed every other investment type over the long-term. Stocks can be a great way to add momentum to your savings. Bonds are usually less risky than stocks and can provide income that is more consistent. The full faith and credit of the U.S. Government or its agencies back federal government bonds. Other types of bonds are municipal and corporate bonds. Short-term investments are great for “temporary parking.” They offer access to your cash and typically modest growth.

to accept this risk, including a possibility of loss of money.

Bonds

Generally, bonds don’t provide the same level of growth that stocks can. While they’re considered a more moderate risk investment, there are risks to consider, such as the creditworthiness of bond issuers and interest rate fluctuations. If you choose to invest in bonds, be sure you understand and are willing to accept this risk, including a possibility of loss of money. Short-term investments alone are better than stuffing money in your mattress, but they typically don’t give you the kind of growth you may need to keep up with increases in the cost of living over the long term.

Short-term Investments

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