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401(k) Tools
Investment Risk Profile

Investment Risk Profile

The following profile process will help you decide how to invest your 401(k) investment dollars. Please remember that this is only a guide. The final decisions are your responsibility.

Step 1. Complete the five-question Risk Tolerance Questionnaire below and view your final score. You will have a score between 5 and 25 points.

Step 2. Using your total score as a guide, select the category that best describes your Investment Risk Tolerance

Risk Tolerance Categories

Based on your Risk Tolerance Profile Value above, select the range or ranges your value falls in to learn more about the Risk Tolerance Category

5-8 Points: Capital Preservation

Risk Tolerance Category: Capital Preservation

You are more interested in preserving your investment’s principal than the return you receive on your money.

This may be for you if you:

Want investments safe from stock market fluctuations
Desire preservation over growth potential
Believe returns of your assets are more important than earnings
Are satisfied with lower long term earnings if risk is less
You would stop contributing to a 401(k) if the stock market dropped 10-20% and you had stocks in your plan

NOTE: Interest rate fluctuations will affect the value of bonds.

Suggested Fund Selection Summary: fund name, fund type, and recommended percentage of allocation.

American Century Government Bond: Bonds 30%
American Century Inflation-Adjusted Bond: Bonds 10%
American Funds 2010 Retirement Target Date: Bonds 20%
Fidelity Advisor Total Bond: Bonds 30%
Vanguard Group Federal Money Market: Bonds 10%

13-16 Points: Moderate

Risk Tolerance Category: Moderate

You want better returns and are willing to invest in conservative stocks including some balance with bonds in order to lessen down-side risk.

This may be for you if you:

Want a balance between low and higher risks
Want a decent return with moderate risk
Believe that balancing stocks and bonds is best
Are satisfied with a moderate long term return that may beat inflation
Would rebalance your plan’s diversification if the stock market dropped 10-20%

NOTE: An equal balance between stocks and bonds may not provide the best mix for good future returns.

Suggested Fund Selection Summary: fund name, fund type, and recommended percentage of allocation.

American Century Government Bond: Bonds 10%
American Century Inflation-Adjusted Bond: Bonds 10%
JP Morgan Equity Income Fund 15%
Fidelity Advisor Total Bond: Bonds 20%
T. Rowe Price Dividend Growth: Stocks 15%
Vanguard Institutional Index: Stocks 10%
Vanguard Wellesley Income: Stocks/Bonds 10%
Vanguard Wellington: Stocks/Bonds 10%

21-25 Points: Aggressive

Risk Tolerance Category: Aggressive

You are not a speculator but want the best opportunity for higher returns and are willing to take some risks.

This may be for you if you:

Will accept more risk to achieve potentially higher returns
Will tolerate stock market swings as part of the risk to get higher returns
Believe that the stock market will eventually outperform most other investments and is worth taking short term risks of up to a few years
Want a high return from a portfolio of mid to large size growth companies
View it as buying opportunity at lower prices if the stock market dropped 10-20%

NOTE: Putting all your retirement investments in stock may be more risky than you wish.

Suggested Fund Selection Summary: fund name, fund type, and recommended percentage of allocation.

American Funds EuroPacific Growth: Stocks 10%
Fidelity Growth Strategies: Stocks 10%
JP Morgan Equity Income Fund 10%
T. Rowe Price Blue Chip Growth: Stocks 15%
T. Rowe Price Dividend Growth: Stocks 10%
T. Rowe Price Small Cap Stock: Stocks 10%
Vanguard Institutional Index: Stocks 15%
Vanguard Mid-Cap Index: Stocks 10%
Vanguard Small-Cap Index: Stocks 10%

9-12 Points: Conservative

Risk Tolerance Category: Conservative

You are uncomfortable with down-side risk and will take lower returns in order to preserve your capital. You realize that there are risks even with conservative investments

This may be for you if you:

Prefer a mix of lower risk investments
Desire safety over growth potential
Believe that a return that keeps pace with inflation is most important
Are satisfied with earnings typical to bond returns
Would be concerned about making 401(k) contributions if the stock market dropped 10-20%

NOTE: There is no guarantee that investments in either stocks or bonds will keep pace with inflation.

Suggested Fund Selection Summary: fund name, fund type, and recommended percentage of allocation.

American Century Government Bond: Bonds 25%
American Century Inflation-Adjusted Bond: Bonds 15%
JP Morgan Equity Income Fund 10%
Fidelity Advisor Total Bond: Bonds 25%
T. Rowe Price Dividend Growth: Stocks 10%
Vanguard Wellesley Income: Stocks/Bonds 15%

17-20 Points: Growth

Risk Tolerance Category: Growth

You are a stock investor and are willing to allow market forces determine values in your portfolio.

This may be for you if you:

Will accept a somewhat higher risk for potentially bigger returns
May tolerate stock market swings as part of normal economic cycles
Believe that stocks are the best way to achieve higher returns than banks and credit unions and still beat inflation
Want a return consistent with long term stock portfolios
Would view a stock market drop of 10-20% as part of the normal long term business cycle

NOTE: Banks and credit unions could yield better returns over a time period if there is a long term economic downturn.

Suggested Fund Selection Summary: fund name, fund type, and recommended percentage of allocation.