Portfolio

When you start saving for retirement, you'll often hear about your "portfolio." It might sound like a fancy financial term, but it's actually pretty straightforward. Simply put, a portfolio is the collection of all investments held by an individual or entity. It’s essentially your entire personal stash of financial assets, all put together in one place. Think of it as a comprehensive view of how your money is invested across various avenues to help you reach your financial goals, especially retirement.

What is in an investment portfolio?

An investment portfolio is basically a basket filled with all your different investments. This can include a wide variety of things:

• Individual stocks (ownership shares in companies)

• Bonds (loans to governments or corporations)

• Mutual funds (professionally managed collections of stocks and bonds)

• Exchange-traded funds (ETFs)

• Other assets like real estate or commodities, depending on your broader investment strategy.

This collection isn't just random. It represents your entire investment strategy and reflects how much risk you're currently taking. For instance, a younger investor might have a more aggressive portfolio with more stocks, while someone closer to retirement might opt for a more conservative mix with more bonds. Think of it as a clear snapshot of where your money is currently working for you in the market, all designed to grow over time.

How does your portfolio relate to your 401(k)?

Your 401(k) is often a significant and foundational part of your overall investment portfolio, especially when you're focusing on long-term retirement savings. For many people, their 401(k) is their first major step into investing. The specific funds you choose within your 401(k) directly shape that particular portion of your broader portfolio. These choices determine how your retirement money is allocated.

• Target-date funds automatically adjust their risk allocation over time.

• Stock funds aim for growth.

• Bond funds prioritize stability and/or income.

Understanding these 401(k) investments is crucial because it helps you manage your total financial picture and ensures it aligns with your long-term goals.. Your 401(k) is a powerful tool in your overall investment strategy.

Why is having a diversified¹ portfolio important?

Building a diverse and properly allocated portfolio is a cornerstone of smart investing, and is often referred to as diversification.

• One of the main reasons it's so critical is that diversification helps spread risk; you're not putting all your eggs in one basket.

• If one particular investment or market sector performs poorly, others in your portfolio might do well, cushioning the impact and helping to prevent significant losses.

• A smart mix of different asset types—stocks, bonds, and other investments—can help smooth out your returns over time, making your investment journey less volatile and more predictable.

This approach reduces the impact of any single investment's poor performance. Ultimately, creating and maintaining a diversified portfolio is a key strategy for promoting long-term growth potential of your wealth and helping to protect your hard-earned retirement savings during market ups and downs.

1. Diversification does not ensure a profit or protect against loss.

Investing involves risk, including risk of loss. Past performance does not guarantee future results. Human Interest Inc. is an affordable, full-service 401(k) and 403(b) provider that seeks to make it easy for small and medium-sized businesses to assist their employees with investing for retirement. For more information, please visit humaninterest.com. Investment Advisory services are provided through Human Interest Advisors LLC (HIA) to plans that select HIA as the investment adviser. HIA is a Registered Investment Adviser and subsidiary of Human Interest Inc. For more information on our investment advisory services, please visit https://humaninterest.com/hia/