Investment Tidbits 2
Some people think that the money in 401(k) plans is insured against loss. It depends on what kind of loss you are talking about. Federal law requires that trustees of plans be bonded by an insurance company, which reimburses the trust in the case of fraud, embezzlement, or other criminal activity. However, your money is not protected against investment losses. Contrary to some beliefs, the Federal government does not guarantee your account in any manner in plans such as 401(k) plan. Your best protection is your investment knowledge. The only way to protect against investment losses and still achieve a reasonable growth rate is by creating a portfolio with n optimal combination of investments for a specific level of risk. The higher expected growth of an investment, the higher the risk. The lower the risk, the lower the expected return. The real risk is not the volatility of periodic returns, rather it is the probability of not having enough money to meet a financial goal, such as retirement.
For more information on investing, contact Rogers Wealth Group.