Last week my spouse’s employer sent home a memo about some changes to the fund lineup in their retirement plans. Now, I am still an investing newbie, and words like Mid Cap and Small Cap still go over my head. But thanks to blogs such as All Financial Matters and Advanced Personal Finance that explain a lot of terms in easy to understand ways, I have learned a bit. So I took the memo, which my spouse declared “gibberish”, and read it over. And, lo and behold, I actually understood it. Well, most of it.
Basically, the plan is replacing three funds they feel are underperforming with three different funds with similar asset allocations and risk profiles. And I actually understand asset allocation (what percentage of the fund is in bonds, stocks, cash etc) and I understand that more stocks mean more risk basically. I’m not a genius or a whiz at this stuff but I do understand a lot more than I did 6 months ago. If we have any investments in the funds marked for deletion they will automatically transfer to the new funds. I still have to check out our portfolio to see if it will affect us.
As I said, I’m not a whiz at all. There is a part of the memo I don’t understand – some funds are changing their asset class from “Value” to “Blend” or vice versa and I have no idea what that means or if I should care. But I’m happy I understand as much as I do.
We are currently in the “balanced” portfolio because I am somewhat risk-adverse but I have been learning to overcome that, so I was thinking of changing to “growth” or “aggressive” (since we have a long timeline ahead of us to retirement) but I was surprised to see that our “balanced” option has performed the best over a ten year horizon of our five pre-mixed asset allocation choices. So now I am thinking I might stay still. Maybe. I have a lot more thinking to do about that. In the short term our 12%/year increase is getting its behind kicked by Aggressive’s 16%. And so it goes.
Yay for knowledge! Although the little knowledge I have might become dangerous… I should really learn some more about investing sooner rather than later. I have some free time on my hands now….