Target date funds are designed to simplify the investment process by automatically adjusting the asset allocation based on the participant’s expected retirement date. As the target retirement date approaches, these funds gradually shift from more aggressive investments, such as stocks, to more conservative ones like bonds. This option is ideal for employees who prefer a hands-off approach to managing their investments.
Stable value funds provide a conservative investment option that focuses on capital preservation. These funds offer steady returns and lower risk when compared with stock-based investments. This makes them a good choice for employees nearing retirement or those with a low risk tolerance.
Bond funds invest in a mix of government, corporate and municipal bonds. These funds are less volatile than stock funds and provide regular income through interest payments. Bond funds are generally more stable than equity investments and can be a good choice for employees who want to balance risk and return in their portfolio.
Stock funds invest primarily in equities, which have the potential for higher returns over the long term. However, they come with more risk. Employees who are early in their careers or have a longer investment horizon may choose stock funds to maximize growth potential.
Balanced funds combine both stocks and bonds to provide a diversified portfolio. These funds offer a moderate risk-return profile. This makes them a good option for employees who want a mix of growth and stability in their investments.