Investment Models

What is the difference between offering investment models in your 401(k) plan and investment company target based accounts? Let’s define the two:

Investment models are groups of investments offered to participants, usually at different risk levels. For example, a conservative model will have much less invested in the stock market than an aggressive growth model. The models are made up of a combination of the individual funds offered by the plan and are usually constructed and monitored by your investment advisor. The advisor will work as a fiduciary to the plan, working in the participant’s and your best interest. The key here is that the advice given to the plan participants through management of the models can make a difference over the years.

Target based funds are offered to the participant to choose the date that they might retire. The longer the period of time, the more aggressive the fund. For example, a 2025 fund will have less in the stock market than a 2060 fund. The funds typically use low fee index funds and are unmanaged, except that as time goes by, they become gradually less risky. This can be good as the employee approaches retirement. Low fees are the big draw to this setup and are well suited to a plan that give little or no investment help to participants.

If you wish to see examples of our investment models for 401(k) Plans, please contact us that we can get together for a discussion of our philosophies and operation. Thanks!

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Investments in target date or target retirement funds are subject to the risks of the underlying holdings. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative investments based on its respective target date. The performance of an investment in a target date or target retirement fund is not guaranteed at any time, including on or after the target date, and investors may incur a loss. Target date and target retirement funds are based on an estimated retirement age of approximately 65. Investors who choose to retire earlier or later than the target date may wish to consider a fund with an asset allocation more appropriate to their time horizon and risk tolerance. Investments are subject to risk, including the loss of principal. Because investment return and principal value fluctuate, shares may be worth more or less than their original value. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Past performance is no guarantee of future results. Talk to your financial advisor before making any investing decisions.