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What's Your Appetite for Risk?

Choose Investments That Match Your Appetite for Risk

Risk refers to the chance you could lose money, and it’s a simple fact of investing. As you invest for retirement, it’s a good idea to review your appetite for risk. When you know how much you can tolerate, you can better match your retirement plan investments with your risk tolerance and savings goals.

There are three basic investment groups. Cash equivalents are low risk and offer relatively low returns – but you’re less likely to lose money by choosing them. Stocks come with the most risk but offer the highest potential return. Bonds fall in the middle.

Cash Equivalents

  • Stable asset funds
  • Money market funds

Potential Gain:
Consistent, lower returns

Potential Risk:
Slow growth may not make sense for a longer investment timeframe


  • Bonds
  • Bond mutual funds

Potential Gain:
Consistent, moderate returns

Potential Risk:
Moderate growth may not make sense for a longer term investment timeframe


  • Stocks
  • Stock mutual funds

Potential Gain:
High return potential

Potential Risk:
High, which may not make sense for a shorter term investment timeframe

Mix It Up by Diversifying

Whether you’re hungry for risk or just want a taste of it, aim for variety by spreading your money over the three investment groups. This way of managing risk is called diversification.

You can also diversify within investment groups. A collection of investments in a mutual fund, for example, can add diversification. Let’s say you invest your money in a stock fund. They may include stocks in many companies. Losses you may experience from poorly performing stocks may be balanced by stocks that do better than expected.

Adjust Your Strategy as You Move Closer to Retirement

Saving Guidelines

Age 20-35

Target Savings Goal:
​10-15% each paycheck

Aim to Save:
1x annual salary

Age 36-50

Target Savings Goal:
15%-20% each paycheck

Aim to Save:
3.5x annual salary

Age 51+

Target Savings Goal:
20% each paycheck

Aim to Save:
7x annual salary

Investing Guidelines

15 or More Years Until Retirement

Your appetite for risk may be high. You can take more chances in hopes of a bigger payoff.

Five to 15 Years Until Retirement

Choose a balanced approach. Even out your craving for higher-risk, higher-return options with safer ones that have more consistent returns.

Five Years or Fewer Until Retirement

Your staple should be lower-risk options.

What kind of investor are you? Take our quiz and find out.

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