Managing Risk in Your Retirement Plan Account
When it comes to investing, there are various types of risk. While most investors tend to think of market risk—the possibility that an investment will decline in value—whenever they hear the word “risk,” there are actually several kinds of risk that retirement savers face, and they are virtually unavoidable. But understanding the various kinds of risk is extremely important, since it can help you make educated investment choices for your retirement account.Various Types of Risk
Generally, the more risk you take, the higher the potential rewards. However, most successful investors don’t always take the highest risk—nor do they try to avoid it. Avoiding risk altogether can be a risk itself. Money that is not invested will likely lose value due to inflation. So potentially making money through investments requires you to consider the various kinds of risk, and find a balance among a range of investments to manage that risk.
The Importance of Time
To a degree, risk tolerance is a function of time. Investors who have more time to let their investments grow may be in a better position to use higher-risk/higher-yield investments than someone who needs their money right away. So you may wish to carefully consider—and reconsider—both your feelings about risk and your investment time horizon when choosing investments for your retirement account.
Managing RiskAsset allocation and diversification are important strategies to consider when choosing investments:
Please keep in mind, application of asset allocation and diversification concepts does not ensure a profit or protect against loss in a declining market. It is possible to lose money by investing in securities.
For more information, refer to Choosing Your Retirement Plan Investments.To Learn More…
You can learn more about risk by contacting a financial professional or a Prudential® Retirement Counselor.* Simply call 1-877-PRU-2100 toll free, Monday through Friday, from 8 a.m. to 6 p.m., ET and say "Retirement Counselor."
* Retirement Counselors are registered representatives of Prudential Investment Management Services, LLC (PIMS).