457
Is Your Retirement
Rockin’ or Rollin’?
Retirement Education for LIFE®
457
Nationwide Retirement Solutions
Retirement Education for LIFE™
How to Manage Your
Investment Risk
Retirement Education for LIFE®
Retirement Specialists are registered representatives of Nationwide
Investment Services Corporation, member FINRA. In Michigan only:
Nationwide Investment Svcs. Corporation.
NRM-3448A0.1 (308)
Today, you will …
• Define the main types of
investment risk
• Learn three ways to
manage investment risk
• Prepare an action plan
to help you manage
investment risk
How to Mange Your Investment Risk
Retire — 3
What is risk?
The
possibility
of loss
How to Mange Your Investment Risk
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Investment risk
Five main types:
• Volatility
(market risk)
• Purchasing power
(inflation risk)
• Business-specific
• Interest rate
• Longevity
How to Mange Your Investment Risk
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Action step
Managing
investment risk
Three methods (strategies):
• Match investments
to time horizon
• Diversification
• Dollar cost averaging
How to Mange Your Investment Risk
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Action step
Jane’s time horizon
• Life expectancy
85
• Expected
retirement age
65
• Current age
40
• Time horizon:
85 - 40 = 45 years
NOT 65 - 40 = 25 years
How to Mange Your Investment Risk
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Action step
Diversification
Diversification is the
spreading
principle of __________
your assets around, or not
eggs in
putting all of your _____
one basket.
Use of diversification as part of an
overall investment strategy does
not assure a profit or guarantee
against loss in a declining market.
How to Mange Your Investment Risk
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Action step
Diversification in action
• Option #1
•
$50,000 @ 2% for 25 years =
$ 82,030
• Option #2
•
$10,000 @ -100%
=
•
$10,000 @ 0%
=
•
$10,000 @ 5% for 25 yrs
=
•
$10,000 @ 8% for 25 yrs
=
•
$10,000 @ 10% for 25 yrs =
$
0
$ 10,000
$ 33,864
$ 68,485
$108,347
$220,696
This illustration is hypothetical and is not intended to predict or project
investment results. It doesn't reflect any fees or charges. If they were, the
results would be lower.
How to Mange Your Investment Risk
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Dollar cost averaging
Amount
Price
# of Golf Balls
$10
.79
13
$10
.59
17
$10
.39
26
$10
.79
13
Dollar cost averaging does not assure a profit and
does not guarantee against loss in a declining market.
How to Mange Your Investment Risk
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Amount
Dollar cost averaging
Price
# of Golf Balls
• $10
.79
13
• $10
.59
17
• $10
.39
26
• $10
.79
13
$40
$2.56
69
Average store price per ball $2.56 divided by 4 = 64 cents
Average price paid per ball
$40 divided by 69 = 58 cents
Please be aware that dollar cost averaging does not assure a profit and does not guarantee against loss in
a declining market.
How to Mange Your Investment Risk
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Action step
Tools for managing risk
Type of risk
Definition
Volatility
The up and down movements
In the price of an investment
Purchasing
power
The risk that your money won’t
buy as much in the future
Business–
specific
Dollar cost
Diversification averaging
The risk that the value of a
particular company’s stock
declines
Interest rate
How an upward move in
interest rates makes the value
of your fixed income investment
decline
Accumulation
The risk that you might not have
enough money on which to retire
How to Mange Your Investment Risk
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Time
horizon
Action step
Tools for managing risk
Type of risk
Definition
Volatility
The up and down movements
In the price of an investment
Purchasing
power
The risk that your money won’t
buy as much in the future
Business–
specific

Dollar cost
Diversification averaging

The risk that the value of a
particular company’s stock
declines
Interest rate
How an upward move in
interest rates makes the value
of your fixed income investment
decline
Accumulation
The risk that you might not have
enough money on which to retire
How to Mange Your Investment Risk
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Time
horizon
Action step

Tools for managing risk
Type of risk
Definition
Volatility
The up and down movements
In the price of an investment
Purchasing
power
The risk that your money won’t
buy as much in the future
Business–
specific


Dollar cost
Diversification averaging


The risk that the value of a
particular company’s stock
declines
Interest rate
How an upward move in
interest rates makes the value
of your fixed income investment
decline
Accumulation
The risk that you might not have
enough money on which to retire
How to Mange Your Investment Risk
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Time
horizon
Action step


Tools for managing risk
Type of risk
Definition
Volatility
The up and down movements
In the price of an investment
Purchasing
power
The risk that your money won’t
buy as much in the future
Business–
specific
The risk that the value of a
particular company’s stock
declines
Interest rate
How an upward move in
interest rates makes the value
of your fixed income investment
decline
Accumulation
The risk that you might not have
enough money on which to retire
How to Mange Your Investment Risk
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Time
horizon



Dollar cost
Diversification averaging



Action step



Tools for managing risk
Type of risk
Definition
Volatility
The up and down movements
In the price of an investment
Purchasing
power
The risk that your money won’t
buy as much in the future
Business–
specific
The risk that the value of a
particular company’s stock
declines
Interest rate
How an upward move in
interest rates makes the value
of your fixed income investment
decline
Accumulation
The risk that you might not have
enough money on which to retire
How to Mange Your Investment Risk
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Time
horizon
Dollar cost
Diversification averaging












Action step
Tools for managing risk
Type of risk
Definition
Volatility
The up and down movements
In the price of an investment
Purchasing
power
The risk that your money won’t
buy as much in the future
Time
horizon
Dollar cost
Diversification averaging









Interest rate
How an upward move in
interest rates makes the value
of your fixed income investment
decline



Accumulation
The risk that you might not have
enough money on which to retire



Business–
specific
The risk that the value of a
particular company’s stock
declines
How to Mange Your Investment Risk
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Action step
So what can you do?
• Annually rebalance
Ways to
manage risk
your investments
• Change allocation as
you get closer to retirement
• Invest fixed amounts
at regular intervals
• Diversify
How to Mange Your Investment Risk
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Action step
Why combine other retirement
dollars into this plan?
• It may make investing easier!
• Personal help now and after you retire
• May pay less in annual account fees
• Nationwide is an industry leader in
both 457(b) and 401(k) markets
How to Mange Your Investment Risk
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What types of accounts
can you combine?
You can transfer other 457 dollars or rollover
dollars from a:
•
Qualified 401(k) retirement plan
•
Qualified 403(b) retirement plan
•
Rollover IRA, Contributory IRA or SIMPLE IRA account
There are differences between deferred compensation plans, individual
retirement accounts, and qualified plans, including fees and when you can access
funds. There may be sales charges or other fees when you move money out of
your current account. You should consider all factors before making a decision.
Assets rolled over from a qualified plan, DROP plan or IRA may be subject to a
10% penalty tax if withdrawn prior to age 59½. Neither Nationwide, nor any of its
representatives give legal or tax advice.
How to Mange Your Investment Risk
Retire — 20
Tools and services to make
informed investing decisions
• Face-to-face
• Online
• By phone
• Other financial
education workshops
Information provided by Retirement
Specialists is for educational purposes only
and is not intended as investment advice.
How to Mange Your Investment Risk
Retire — 21
Action step
Thank you for your attendance!
How to Mange Your Investment Risk
Retire — 22