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RETIREMENT PLAN INVESTOR

Use your plan ID (available on your account statement) to determine which employer-sponsored retirement plan website to use:

IF YOUR PLAN ID BEGINS WITH IRK, BRK, 1 OR 2

Visit americanfunds.com/retire

IF YOUR PLAN ID BEGINS WITH 34 OR 135

Visit myretirement.americanfunds.com

Understanding the types of risk is the first step to selecting investments for your retirement portfolio.

Types of risk

Stocks and bonds carry three major risks. Let’s take a brief look at them.

  • Market risk: The daily rise and fall of stock and bond values. Sometimes the day-to-day changes are small; at other times, they can be dramatic.

  • Interest-rate risk: Interest rates influence the cost of borrowing money for companies and governments. Fluctuations in interest rates can pose a risk to the value of the bonds issued by these groups.

  • Inflation risk: The cost of goods and services rises over time. Inflation decreases the purchasing power you’d get if you cashed in your investment returns. If the rate of inflation exceeds your investment returns, your money is losing value.

See Understanding risk for a more detailed discussion.

How to deal with risk

Risk is a natural part of investing. Here’s how to manage it to your advantage.

  • Diversify — By investing in a number of securities, you reduce the effect of fluctuations of individual investments. Losses in some holdings may be offset by gains in others. Investing in mutual funds is one way to diversify. You can also choose different types of investments or mutual funds to increase the effect even further.

  • Keep perspective — Don’t obsess over the daily ups and downs of your investments. If your goals are long-term, stay focused on them. The goal for most people saving for retirement is to have enough money when they leave the workforce.

  • Don’t stop saving — If you stop investing or withdraw money during market declines, you could miss an opportunity to participate in an eventual recovery. Regular investing doesn’t ensure profits or prevent losses, but the market’s history of growth over long periods should make you feel better about staying invested through the ups and downs.

Balancing risk and return

Generally speaking, the more risk you take on, the greater the potential for higher returns. Risk and return go hand-in-hand — you can’t have one without the other.

Your challenge is to find the right balance between investments risky enough to produce sufficient returns, and investments conservative enough to preserve your assets — and your peace of mind. Your choice of investments should reflect that balance.

Diversify your assets

See how putting your money in different types of investments can reduce investment risk.

Asset allocation models

Use our sample portfolios as a guide to build your investment strategy.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.

All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.

Use of this website is intended for U.S. residents only.

American Funds Distributors, Inc., member FINRA.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.