What does that mean? Retirement lingo explained
We all know saving for retirement is important but some of the terms associated with retirement plans can make things confusing. We’d like to provide some clarity. You’ll hear these terms a lot when investing for retirement. Here’s what they mean.
Asset allocation is an investment strategy aimed at balancing risk by spreading your money over different types of investments: stocks, bonds and money market/stable value. The goal is to help you deal with the ups and downs of the financial markets.
Diversification is the practice of investing in multiple asset classes and securities with different risk characteristics to reduce the risk of owning any single investment. Diversification can’t assure a profit or protect against loss in a down market.
Rebalancing is the process of moving money from one type of investment to another periodically to maintain a desired asset allocation.
A stock, also known as shares or equity, is a type of security that represents an ownership interest in a corporation. When you buy a stock, you buy a piece of a company. Stocks are riskier, because companies can be affected by any number of factors, including industry trends and the overall economy. But over the long run, they’re also likely to provide more growth to keep your retirement investments moving forward.
A bond is debt security that represents a corporation, government or other entity borrowing money. The borrowing institution repays the amount of the loan plus a percentage as interest. Income funds generally invest in bonds. Bonds are usually considered a conservative investment; one that can help cushion against the ups and downs of the stock market.