If you’re doing it this way, it’s important that you keep a close eye on your choices over the years.
For example, as you get closer to retirement, you might prefer not to invest as much in higher-risk funds and look towards protecting the value of your account.
You can track and change your investment choices online by logging into Optimize.
Those who want the freedom to choose might want to learn more about risk and investment styles and asset classes before you make your decisions.
How much risk do you want to take?
You also need to decide how comfortable you are with risk.
All investments come with some level of risk – but generally speaking, the higher the risk, the higher the potential rewards.
The opposite is true, too – investments with a lower risk of losing your money generally offer less potential for a higher return.
There’s no right or wrong answer – it’s up to you what you feel happy with, and this might change over time, too.
Investment funds can be passively or actively managed
- Passive funds aim to track a particular stock market index, with the fund’s allocation to individual stocks the same as their weighting in the index.
- Active fund managers make investment decisions to try to beat the particular stock market index. Because of the higher level of research and transactions involved, these funds tend to have higher charges than passive funds.
Asset classes
An ‘asset class’ is a category of assets or investments, like equities or bonds.
Normally, assets in the same class have similar characteristics, but they can have very different returns or risks. The value of the investments in all asset classes can go up as well as down.
