Ohio Deferred Compensation offers a variety of investment funds for those who looking to be more hands-on with their retirement planning.
How do I get started?
How much of a risk taker are you? How long do you have to invest before you need your money? These are questions you should think about before choosing your investments. You can determine what type of investor you are by answering questions in the Asset Allocation Calculator.
Investing involves risk. It can’t be avoided. However, you can find your balance between market risk and return. This concept is known as your risk tolerance.
Trying to get higher returns might lead to more ups and downs, or volatility, from the market. However, going with less risky options might lead to lower returns, which may not keep up with the rate at which prices are rising, or inflation. If your investment returns are not beating inflation, the value of your savings is shrinking. Therefore, it’s important to find that right balance of investments that work for your style.
Knowing your time horizon, the length of time until you will need most of your money, is one of the most important steps to managing investment risk. When you invest, you may lessen overall risk by matching your time horizon to an investment type(s) that might best meet your goals.
Have you ever been told not to put your eggs all in one basket? That’s similar to the principle of asset allocation. With asset allocation, your investments are divided across different asset types, like stocks, bonds, and cash. This way, if one asset type falls in the market, the others may perform better or maintain to protect you against losses.
Your asset allocation mix should be similar to your investment style, from aggressive to conservative.
Learn about your risk tolerance, time horizon, and asset allocation mix by answering four simple questions in the Asset Allocation Calculator.
Make sure to rebalance your portfolio yearly to make sure it matches your investment style.
Rate of Return
Another factor to consider in investing is the rate of return. Rate of return is the amount of money an investment earns, stated as a percentage. A few percentage points can make a huge difference!
This chart shows the impact a 6, 8, and 10 percent rate of return can have on the size of an investment portfolio. After 25 years, an annual beginning of year investment of $1,000 grows to over $58,000 at 6 percent, and at 10 percent, it grows to over $108,000. That's a big difference!
This illustration is a hypothetical compounding calculation. It is not intended to serve as a projection or prediction of the investment results on any specific investment. Investment return is not guaranteed and will vary depending on your investments and market experience. Returns will vary, particularly for long-term investors. No taxes, fees, or expenses are reflected in this example, which would have lowered the results shown. Taxes will be due when withdrawn and will lower the totals shown.
Investing involves risk including possible loss of principal.