Three things every investor should know

1 Investment balancing

Investing your money in different asset classes can help you balance your investments based on your risk tolerance and when you plan to retire.

Asset classes at a glance:

• Stocks – A share in the ownership of a company and represents a claim on the company’s assets and earnings.

• Bonds – An investor lends money to the issuing entity and earns a specified rate of interest when it matures or comes due.

• Cash alternatives – Assets that can generally be converted to cash quickly, such as money market deposit accounts and money market funds.

• Risk/reward – Measuring the amount of risk you want to take while remaining comfortable with your investments is very important and can vary as your situation changes or as you approach retirement. Keep in mind, there is no guarantee higher risk investments will generate higher returns.

2 Diversification

Mixing your investments among different types of funds within each asset class can help you ride out fluctuation in the market over the long term. Remember to review your investment strategy at least annually to ensure it's still appropriate for your retirement goals, and adjust as necessary.

Your precise mix of investments will depend on your unique situation, such as your retirement savings goals, time horizon and risk tolerance.

3 Rebalancing

Over time, your portfolio may become too conservative or aggressive because of market fluctuations. Rebalancing lets you bring your asset allocation back in line with your investment strategy.

See if your plan offers an automatic rebalancing option, which allows you to choose a rebalancing frequency and rebalances your account for you.

Understanding these principles and how they work together can help set you up for success.