Stocks and Bonds

There are two primary types of investments: equity and debt. Equity investments, such as stocks or company shares, represent ownership in a company. Investors earn returns through dividends paid and the appreciation in the stock’s per-share value. Debt investments, on the other hand, involve lending capital to companies or governments without an ownership stake. Fixed income investors receive interest payments in exchange for lending their money. Bonds are typically purchased for a specific duration, during which time the bondholder typically receives interest payments. At the bond’s maturity date, the principal amount is repaid.

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 is using passive, index funds for the blend categories and actively managed funds for the value and growth categories.

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 a fund that focuses on inflation-protected bonds, an index and actively managed core intermediate term U.S. bond funds, an actively managed global bond fund, an index foreign bond fund, 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.