Evaluate Investment Options Using These 8 Pieces of Information

Evaluate Investment Options Using These 8 Pieces of Information

Evaluate Investments

You will likely receive lots of documents and communication related to your retirement plan. Don’t let it overwhelm you. When it comes to investment option summary pages, or a similar investment overview, the information provided may vary among retirement plan providers, but this is what you can typically expect.

1. Investment name - The name of the investment option.

2. Investment objective/strategy - The objective of the investment and how the manager intends to reach that objective. This may be general in nature or be a specific rate of return that the investment manager is anticipating.

3. Investor profile - This section will typically include characteristics of an investor for whom the investment is intended including risk tolerance or desired outcome.

4. Fund overview/key facts - This section may include facts about the investment option, such as:

• The inception date: The date the option was made available to investors
• Availability/status: Details on who is able to invest in this option
• Fund category
• Expense ratio: The amount taken out of an account to pay for the operation and management of the investment option
• Trading/transfer restrictions
• The portfolio manager’s name and contact information

5. Portfolio statistics/analysis - This section typically includes risk measures such as:

• Alpha: The difference between the investment’s active returns and its expected performance (given its level of risk)
• Beta: A measurement of the investment’s sensitivity to market movements
• R-Squared: The percentage of the investment’s movements as explained by movements in its benchmark index
• Sharpe Ratio: Uses standard deviation and excess return to determine reward per unit of risk
• Standard Deviation: A statistical measure of the volatility of the investment’s returns

6. Top holdings - The stocks and bonds with the most influence on the returns of this investment option

7. Asset/sector allocation - The holdings of the investment, broken down by general investment class or industry sector

8. Performance - The performance of the investment option is shown in this section. This may include year-to-date data and/or historical returns for the past 3 months, 1 year, 3 years, 5 years, 10 years or since the inception of the investment option. In some cases, this section also lets you compare your returns with those of a benchmark index.

To view information on the investment options available under your retirement plans, log in to your account.

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