Knowledge Center

Key takeaways

• First, think about how long you plan to stay invested, your financial needs, and how much risk—or changes in portfolio value—you can tolerate.
• Then determine how much of your money should be invested in different asset classes (such as stocks, bonds, and short-term investments) to meet your goals with a level of risk you can live with.
• Finally, select one or more RPB funds to achieve the diversified investment mix you want.

Here’s a common problem.

You want to start investing for retirement but you’re faced with so many options that it can feel overwhelming.

But it doesn't have to. You can build your portfolio methodically just like many professionals do—starting with asset allocation.

Asset allocation refers to how you spread your investing dollars across different asset classes based on your time frame, risk tolerance, and financial situation. Asset classes are groups of similar investments like stocks (US and foreign), bonds, short-term investments (such as money market funds), commodities, and real estate.

Studies have shown that the way you divide your portfolio across multiple asset classes can have a tremendous influence over your long-term returns—and that’s before you’ve chosen your specific investments.

Let's take a look at the three most common asset classes.

Why stocks? Growth potential

Stocks have historically provided higher returns than less volatile asset classes, which may be necessary for you to meet your goals. Keep in mind that there is generally a higher risk of loss and more ups and downs in stocks than in investments like bonds. Over the short term, the stock market is unpredictable, but over the long term, it has historically trended up.

Why bonds? Diversification and income

Bonds can provide a steady stream of income by paying interest over a set period (as long as the issuer can keep making payments). There’s a spectrum of risk and return between lower and higher risk bonds.

The credit risk of the bond issuer determines how much interest the bond may pay. Bonds issued by the U.S. government pay a relatively low rate of interest but have the lowest possible risk of default. Corporate bonds typically pay a higher interest rate than Treasury securities of similar maturity. On corporate bonds, interest rates (yields) vary as a reflection of the creditworthiness of the bond issuer.

Because bonds have different risks and returns than stocks, owning a mix of stocks and bonds diversifies your investment portfolio to help weather different market environments and smooth out the ups and downs of your overall portfolio.

It's important to understand that diversification and asset allocation do not ensure a profit or guarantee against loss—but they may help you reach your investment goals while taking on the least amount of risk to do so.

Why short-term investments? Stability and diversification

Short-term investments, like the Tier 2 RPB Capital Preservation Fund, are typically a small portion of an overall investment mix. These investments generally pay a minimal rate of return but can offer stability and additional diversification to your portfolio.

Select which funds to invest in.

After you’ve decided on your asset allocation, it’s time to select your specific investments. While there are a lot of ways to do this, the primary consideration is making sure you're diversified not only across asset classes but also within asset classes.

This additional level of diversification can further reduce the overall risk in your portfolio and may increase your expected return for that level of risk. For instance, if you invested all of your money in just one concentrated stock fund, that would increase your level of risk should the stock markets could go through a rocky period. Investing in several different stock funds, reduces the risks that come with putting all your eggs in one basket.

Another key concept in diversification is correlation. Investments that rise or fall at the same time are considered to be perfectly correlated. If your investments go up and down at different times, the investments that do well may reduce the impact of the investments that have poor performance.

The funds in the RPB Plan are grouped into three tiers—Tier 1 is our target allocation funds, Tier 2 is our self-directed funds, and Tier 3 is our socially responsible funds. This makes it easier for you to understand your investment choices and tailor your portfolio to your financial goals. Participants can choose to invest in a single fund or multiple funds.

Remember: RPB’s Tier 1 funds build in diversification for you while RPB’s Tier 2 funds allow you (or your financial advisor) to create a customized portfolio.

Select your investments using the MyRPB for Participants Portal.

Once you know the investment mix that’s right for you, you can easily log in to the MyRPB for Participants portal to make your selections. Here’s how:

1. Go to the MyRPB for Participants portal.
2. Log in to your account or create an account by following the prompts on the screen.
3. Click “Manage Investments.”

Visit the MyRPB for Participants portal at any time to check on your investments and adjust them.

Commit to an ongoing balancing act.

Asset allocation is not a set-it-and-forget-it exercise. You want to revisit how your money is allocated across asset classes at least once a year—or if your goals, investment horizon, or financial situation changes.

Another reason it’s important to periodically revisit your allocation is because your intended asset allocation may change as some of your investments grow while others shrink due to market movements. Getting your asset allocation back on track is known as rebalancing.

You can set your RPB account(s) to automatically rebalance by logging in to the MyRPB for Participants web portal from our home page:

• Select 'Manage Investments'
• Click 'Change Investments'
• Click 'Exchange Multiple Investments'
• Then click 'Go to Rebalance'

Don't go it alone.

Investing can be confusing but it doesn’t have to be. With a basic asset allocation plan to grow your retirement savings, you might find that planning your investment strategy isn’t so complicated after all.

If you don't feel comfortable determining your own asset allocation, we're here to help.

If you have questions about the Plan, call RPB:

Robert Perry
Director of Participant and Employer Services
646.884.9890
rperry@rpb.org

If you want personalized investment advice, call Fidelity’s retirement planners:

Fidelity Retirement Planners
800.328.6608

El Equipo Fidelity de Servicio Español
800.587.5282