Stocks and Bonds

There are two main types of investments - Equity and Debt.  Equity (stocks), or company shares, is considered ownership in a company.  Investors receive a return based upon dividends paid and the change in the per share price of the stock.  Debt (fixed income) investors do not have an ownership stake in the company but act as lenders of capital. In exchange for interest, fixed income investors lend their money to companies or governments.  A bond is purchased for a period of time.  During that time period, the bond holder typically receives interest payments, and at the end of the period their principal is returned.

U.S. Equity (Stocks) Style Box

Listed above is the Morningstar Style Box representing the different categories of U.S. stock investment strategies.  The Plan has an investment for each category except Mid Cap and Small Cap Blend because these categories could be covered by combining the respective Value and Growth investment options.  The Plan's Large Cap Blend investment option is the Vanguard Total U.S. Stock Market Index Fund that provides a market-weighted exposure to the U.S. stock market.

International Investment Options

The Plan offers exposure to both developed and emerging international markets.  Developed markets would include countries such as Canada, Japan and Europe.  Well known emerging market economies are Brazil, Russia, India, China, and South Africa who are often referred to as the BRICS.  The U.S. economy is one the world's largest, but globally, it only accounts for roughly 25% of the world's economy.  Having exposure to international investments can add diversification to the stock portion of an investment porfolio.

Hard Assets

Hard or physical assets are generally those types of assets that you can touch or hold, such as buildings, land, timber, oil and other commodities.  As with international stocks, having exposure to real estate and material investments can provide another way of diversifying your portfolio.  Real estate investment trusts (REITS), the common way of investing in real estate in a mutual fund, typical pay a nice dividend yield.  Material investments generally track economic growth.  Because these investments are sectors of the overall stock market, one should be cautious about being overly exposed to either real estate or materials investments.  Typically these investments would be used to compliment other equity investments in your portfolio.

Fixed Income

The Plan offers several ways to diversify your fixed income portfolio.  There is an investment that focuses on inflation-protected bonds, a core intermediate term U.S. bond fund, two foreign bond funds, a high yield (junk bond) fund, a short-term U.S. bond fund, and an FDIC insured money market fund.

Balanced Fund

A balance fund is an investment that combines stocks and bonds into one mutual fund.  It typically has between 50% - 70% in equities.  Because the exposure of stocks to bonds is close to even, these types of funds are commonly referred to as balanced funds.

Target Date Funds

Similar to a balance fund, a target date fund will offer a diversified portfolio that can have exposure to stocks and fixed income in one mutual fund; however, the investment strategy is based upon a projected retirement date and the investments strategy changes as the retirement date approaches.