Creating a Personal Investment Strategy
The mix of investments you choose should take into account your time horizon, your financial responsibilities and goals, your retirement resources and your risk tolerance. Your tolerance for risk is the double-edged sword of investing: the degree of upside that one might like to enjoy vs. the degree of downside pain that might be encountered. Risk tolerance is something that only you can determine for yourself. To get your thinking started, try taking an online quiz offered by Rutgers University. The objective is to get an idea of where along the risk spectrum you feel most comfortable.
Some concepts to keep in mind:
Time horizon: How many years do you have until retirement? If it is only a short time, you may wish to place a higher priority on conserving the assets you have accumulated rather than taking a chance at higher returns. If you have a long time, say 20 years or more, you may decide to go for higher returns. Even if you suffer some loss from time to time, you have an extended timeframe to recover from the loss.
Strategy comfort: Irrespective of age or retirement plans, you should plan out an investment strategy that allows you to sleep well rather than one that causes you sleepless nights. Within the description of each investment option is a reminder that if you are uncomfortable with the risks of the option, then you ought to select another. This will mean different things to different people. One person might be uncomfortable with the possibility that he could lose money with stock market investments; that person would likely feel more comfortable with the fixed income options. Another person may feel uncomfortable with lower risk investments if he believes that he is forgoing the opportunity to make the most of his investments; he will likely feel that he is closer to expressing his preferences by including at least some stock market investments.
Times change: The MMBB retirement plans are extremely flexible. You can change your investment allocations when your objectives or risk tolerance change. It may be age, experience, or a changing family situation, for example, but whatever the reason, when you feel you need to adjust course with your investments, the MMBB investment options are deliberately set up to allow you to do just that – any day, day or night.