Plans typically offer an array of options to invest your funds that are selected by the investment fiduciary for your plan. Depending on your retirement goals, you may want to have a more or less conservative portfolio. If you have a personal financial advisor, they can help guide you to a suitable choice for your goals. Below are different investment types typically found in retirement plans hosted on our platform.
Mutual funds are a portfolio of various investments, such as stocks, bonds, or cash. An individual investor owns a fraction of each security purchased by that fund. A professional investment manager for the mutual fund makes decisions about buying and selling securities in the portfolio in order to achieve and maintain a certain mix of equities and other investments. Common types of mutual funds include stable value funds, government bond funds, income stock funds, aggressive growth funds, indexed stock funds, and others.
Target Date Funds
Target date funds are a type of mutual fund that blends various funds, usually a mix of stocks and bonds, into a broad-based asset allocation that may be appropriate for investors with certain time horizons before their desired retirement age. These funds shift over time to more conservative investments as a participant nears a stated retirement age.
Some retirement plans offer another option of risk-based portfolios. Like Target Date Funds, Risk-Based Portfolios are a blended portfolio, typically utilizing a variety of fund types to create various strategies, ranging from Conservative to Aggressive. Unlike Target-Date Funds, Risk-Based Portfolios do not become more conservative as participants approach their stated expected retirement age; instead, participants must affirmatively decide whether and when to switch all or part of their account into a different risk portfolio.
A Managed Account feature, if your plan offers it, uses information about a participant, such as a participant’s age, contribution rate, and other data points, to create a suggested asset allocation from investments selected by the plan’s investment fiduciary. Participants can provide additional information to their profile in order to maximize the probability of successfully achieving the participant’s retirement goals.
Real Estate Funds
Real estate funds invest mainly in real estate investment trusts (REITs) or other types of securities representing ownership interests in real estate.
Exchange-Traded Funds (“ETF”)
An ETF is a security that tracks an index, a particular commodity, or a group of assets. It trades like a stock, so the price of individual shares can fluctuate throughout the day and transactions often require paying brokerage commissions. However, since ETFs follow an index they are not professionally managed, so they tend to cost less than other managed mutual funds.
Neither Vestwell nor its affiliates provide investment or other financial, legal, or tax advice to any individual investor. All articles in our Help Center are intended for general educational purposes only and should not be taken as advice or suggestions about how to invest in your retirement plan or any other assets. You may wish to consult with a qualified financial professional for guidance about how to invest in your retirement plan or other financial accounts.