What's your investment style?

The decision to save for retirement is an easy one when you consider the potential future benefits, but how to invest is often the source of uncertainty and frustration for investors new and old. At its most basic, how you decide to invest should be based on what kind of investor you are—your style—so you can make choices that are right for you.

So, what kind of investor are you?

Eric Schwartz, Financial Planning Specialist for WEA Member Benefits, helps members answer this question every day. “Because the world of investing can seem overly complicated, it’s a question that many have a hard time answering. Knowing the answer, however, is fundamental to investing and it empowers members to make investing decisions with confidence.”

Eric explains that an investor’s style can be defined by answering two questions:

1. How involved do you want to be in managing your investments? Are you a do-it-yourselfer (DIYer) or would you prefer to have someone else manage your investments?

Many people don’t feel they have the time, knowledge, or desire to manage their own investments. “They just want an easy way to invest,” says Eric. “It’s like electronic devices. If we had to build them and maintain them ourselves, most of us wouldn’t even bother because we just want to plug and play. Fortunately, taking a more passive investment approach is very doable.”

On the other hand, if you like the idea of being hands-on in selecting, trading, monitoring, and rebalancing your investments, you might be of the DIY persuasion. “Typically, the DIYer has some investment experience or the interest in building their knowledge. They enjoy it. Having the right temperament is also important for the DIYer,” notes Eric. “This means being able to keep your emotions in check and not reacting to market volatility.”

2. Where do you fall on the conservative-to-aggressive investment spectrum?

Determining how aggressive or conservative you are as an investor depends primarily on your comfort level with risk. Are you willing to take more risk for the possibility of earning higher returns or does the idea of losing money keep you up at night? Where you fall on the spectrum is best determined by completing a Risk Profile Assessment. This is a series of 12 questions that take into account factors such as your investing experience, age, current financial situation, future expectations, time horizon, and tolerance for risk.

Your answers are used to calculate your investment style which generates an appropriate asset allocation based on one of Member Benefits’ five investor profiles. “Completing the Risk Profile Assessment is recommended for all investors,” says Eric. “And, it is not a one-time assessment.”

According to Eric, as you move into different stages of life, your circumstances may cause your risk tolerance to change. For instance, when you are young and just starting out, you have time on your side. A longer timeline allows you to look at riskier investments with the potential for higher rates of return because you have time to “ride out” a market downturn.

In mid-career—and increasingly as you approach retirement—you may feel the need for more nest egg protection, thus your tolerance for risk may be lower. Reassessing periodically will identify whether your risk profile has changed and what adjustments might be needed to your investment portfolio.

Go to weabenefits.com/riskcalc to complete the assessment.

Now that you know your investor style...

With these two important pieces of information in hand, you have everything you need to select investments. “With over 10,000 investment choices available just in North America, this step has the potential to be both intimidating and time consuming,” acknowledges Eric. However, choosing your investments with Member Benefits, whether you are a DIYer or a plug-and-play investor, is about as easy as it can get.

“We take care of doing the hard work for you by sorting through the thousands of investment options, selecting those that best fit the needs of Wisconsin public school employees, and then monitoring them to make sure they continue to meet our standards,” says Eric.

The current lineup of 23 investments includes one fixed income option and 22 mutual funds (five of which are Target Retirement Funds). Each fund is vetted through a strict investment process. Our Investment Committee carefully selects and regularly monitors our offerings based on a variety of quality standards like performance, cost (to keep operating expenses low), volatility, style drift, the fund manager’s level of expertise and tenure, and asset size (funds must have assets of at least $50 million).

The income options include the Prudential Guaranteed Investment* and the Pioneer Bond fund. The Prudential Guaranteed Investment is not a mutual fund but an investment contract that guarantees the principal and interest. The Pioneer Bond fund—which we rolled out earlier this year—complements the Prudential Guaranteed Investment and is appropriate for those looking for additional income from a portfolio based on preserving capital and balancing risk.

...apply what you know and choose your investments

For those who prefer not to manage their own investments, Member Benefits has two easy options: Model Portfolios and Target Retirement Funds.

Model Portfolios**  

Model Portfolios can help you achieve your personal investment goals by placing you in one of five pre-defined portfolios based on the results from your Risk Profile Assessment. “We’re excited about this new option. Model Portfolios give members the ability to build a personalized portfolio that’s more comprehensive than the Target Retirement Funds but still doesn’t require a ton of time selecting and managing individual investments,” Eric adds.

Members who choose to invest in a Model Portfolio will need to take the Risk Profile Assessment when they initially invest and then again every three years to determine if there are any changes in their risk tolerance and investment goals.

The investments that make up the Model Portfolios are selected from the prevetted mutual funds offered by Member Benefits.

Target Retirement Funds

Like Model Portfolios, Target Retirement Funds (TRFs) are a nice alternative for those not interested in managing their own investments.

TRFs—sometimes called lifecycle funds—are age based. “This is truly one-decision investing. Simply choose the fund that is closest to your anticipated retirement year or the year in which you may begin withdrawing funds. For example, if you think you’ll retire in about 20 years, you would choose Vanguard Target Retirement 2035 Fund,” says Eric. Target Retirement Funds split up your money into a mix of stocks, bonds, and other holdings, and then adjusts them over time. They rebalance regularly and adjust the asset allocation as you grow older, automatically becoming more conservative as you near retirement.

Do-it-yourself

If you are determined to be hands-on, you can build your own portfolio from the 23 investments in our current lineup. Funds are from stable fund families that represent each of the investment style categories: large-cap, mid-cap, small-cap, specialty, and international equity funds. “Reviewing the fact sheets, prospectuses, and Morningstar reports available at weabenefits.com together with the results of your Risk Profile Assessment can aid in the selection process and help you build a nicely diversified portfolio,” offers Eric.

The DIYer can manage their investments by logging into their yourMONEY online account. You can change your asset allocations and move money in your account between the Prudential Guaranteed Investment, the Pioneer Bond K Fund, and the various other mutual funds, as well as rebalance your account and change your contribution levels when you like.

We’re here to help

At Member Benefits, we recognize that you have more important things to do (like teach!) than sort through thousands of investment choices. That’s why we’re here. We’ve done most of the homework for you by preselecting investments that meet your needs and our strict standards. We are also here to provide further assistance and answer your questions. It’s what we do.

Make an appointment with one of our Retirement and Investment Service Specialists if you have questions about your investment options. You can also take advantage of our free and fee-based financial planning services if you’re looking for a more comprehensive analysis of your current retirement portfolio.

Don’t wait to start investing or to reassess your portfolio—call us today at 1-800-279-4030.  


 >>View our investment options quick reference.

This article is for informational purposes only and is not intended to constitute legal, financial, or tax advice. Certain recommendations or guidelines may not be appropriate for everyone. Consult your personal advisor or attorney for advice specific to your unique circumstances before taking action.

The Trustee Custodian for the WEAC IRA accounts is Newport Trust Company. The 403(b) retirement program is offered by the WEA TSA Trust. TSA program registered representatives are licensed through WEA Investment Services, Inc., member FINRA. 

Keep in mind that mutual fund investments are not guaranteed and may gain or lose value. Past performance is no guarantee for future results. Future performance may be lower or higher than past performance.

Before investing in any mutual fund, call WEA Member Benefits at 1-800-279-4030 to request a prospectus. We advise you to read it carefully and consider the fund’s investment objectives, risks, and charges and expenses carefully before investing. The prospectus contains this and other information about the investment company.

*Interest is compounded daily to produce the current annual yield prior to the deduction of program administrative fees. Contributions and earnings are held in the general account of Prudential Retirement Insurance and Annuity Company (PRIAC). Principal and net credited interest are fully guaranteed by PRIAC. Such guarantees are based solely upon the financial strength and claims-paying ability of PRIAC. For more information go to weabenefits.com/pru.

**Model Performance
The reported performance of the models is hypothetical yet based on actual performance of the underlying mutual funds and their corresponding weightings. The performance data on the underlying funds was derived from Morningstar®, an independent third party. The illustration does not reflect the actual performance of individual investors in the models. Investment models are not FDIC-insured, and they are not bank-guaranteed. Investment models may lose value. Past performance is no guarantee of future results. Model performance returns illustrate the relationship between risk and reward. The WEA Member Benefits model portfolios are risk based. The more conservative the underlying asset weightings are, the lower the expected rate of return. Because of market changes, the makeup of your actual account portfolio will not exactly match the model portfolio. We may perform periodic adjustments of the model portfolio investments and rebalancing of your account to more closely match the model portfolio you select.

Model portfolios are developed by WEA Financial Advisors, Inc., (WEA FA) under the oversight of the WEA Member Benefits Investment Committee. Model portfolios may be adjusted at the discretion of WEA FA and the Investment Committee with prior notice to you. From time-to-time there may be extraordinary situations that will warrant more scrutiny when making adjustments. An example is the market downturn in October 2008. Although WEA FA carefully evaluates the makeup of the portfolios on a regular basis, we make no representation regarding the likelihood or probability that any or all of the portfolios will in fact achieve a particular investment goal or fulfill the risk tolerance profile as described for each portfolio. As a self-directed investor, you should carefully consider the merit and appropriateness of the available investments under your district’s retirement plan in light of your own personal financial circumstances, including your other assets, income, investments, and/or cash flow needs.

Reassess Your Investment Needs Regularly
Because your needs, goals, portfolio, and situation may change over time, be sure to reevaluate your investment strategy at least once a year. You can always choose a different model or create your own mix. Redemption fees may apply. When participating in a WEA Member Benefits model portfolio, you must complete the Risk Profile Questionnaire every three years. You may not continue to use the model portfolio option if you do not timely complete a Risk Profile Questionnaire. In such an event, and if we receive no other instruction from you, your plan assets will be moved to your plan’s QDIA (qualified default investment alternative).

 

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