All investments carry some risk. But generally, the higher the risk, the higher your potential return. Conversely, the lower your risk, the lower your potential return. To help you manage your investment risk, make use of some basic strategies that will help manage risk in a way that suits your investment needs.

Investment strategy #1: Put time on your side

Money makes money if you give it time. That's the power of compounding. If you start early, compounding can dramatically reduce the amount you need to save between now and the time you retire. Giving your money plenty of time to work means you might find it easier to reach your financial goal.

Investment strategy #2: Take some calculated risks

Your willingness to accept changes in the value of your investments is called your risk tolerance. The amount of risk you can tolerate depends on how long you're going to be investing.

For people with short time horizons — those who need their money in a few months or years — volatility can be a serious risk. The market may be down in value when they want to take their money out. With a longer time horizon, however, the risk of losing principal due to volatility drops. Therefore, if you have a long time to ride out market ups and downs, you may be able to accept more volatility in order to reach your goal.

Investment strategy #3: Allocate your assets — spread your money among different investment classes

Asset allocation means spreading your money among different investments (e.g. stocks, bonds, cash). When you diversify investments, you divide them among several types of investment classes with different holdings, management styles and risk. Different types of investments often react differently to similar market conditions. If one investment falls in value, others may be rising, so not all of your money is at risk. Applying the principle of asset allocation may help limit your overall risk and produce more consistent investment returns over time.

Investment strategy #4: Stay in touch with your portfolio

Finally, you can't just create an investment portfolio and forget about it. Your situation may change. Investment markets may change. Your goals may change. For those reasons, you should review your asset allocation at least annually to ensure your portfolio continues to meet your financial goals and make necessary changes to your account.

The information provided in the Investment Basics portion of this web site is presented for general educational purposes only and should not be construed as investment advice. Before investing and periodically thereafter, you should read the prospectus and consider additional research to ensure that your investments satisfy your goals and objectives.

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