RIT works diligently to ensure your best interests are met when you invest for your retirement in RIT's Retirement Savings Plan. The RIT Retirement Savings Plan Investment Committee, with the assistance of an expert investment consultant, has selected investment options for the Plan and monitors them periodically. The Committee’s goal is to provide a diverse set of asset classes so that you can make investment decisions that are appropriate for your risk tolerance and return objectives.
Below are some commonly used investment terms to help you understand more about your investments in the Plan.
Asset class is a group of securities that exhibits similar characteristics, behaves similarly in the marketplace and is subject to the same laws and regulations. The three main types are:
fixed income (bonds)
cash equivalents (money market instruments)
Asset allocation is the process of spreading money among different asset classes.
Diversification is the process of spreading out your investment within each asset class – investing in different companies, countries, business sizes, and industries.
Investment mix = Asset allocation + diversification
An investor should consider these key factors, among others:
Time horizon – how long until you retire and how long you expect you’ll need your assets to last
Risk tolerance – how willing you are to endure the market’s ups and downs in exchange for more long-term growth potential
Financial situation – including your lifestyle and assets
Investment Management Styles - The investment options offered within the Plan’s investment lineup can be categorized into two different management styles:
Passively Managed Investments
Actively Managed Investments
As you may know, each equity fund in the Plan’s investment option lineup is a collection of company stocks. The combination of these stocks determines the investment objective, investment returns of the fund, and the cost associated with managing the fund. The fund manager selects the combination of stocks based on the fund’s objective. In order to evaluate the performance of a fund, it is often compared to a benchmark or “index.” There are many different indexes, depending on the type of fund. For example, the S&P 500® Index, created by the Standard & Poor’s Company, is a collection of 500 stocks that are considered to be widely held. The S&P 500 Index is weighted by market value, and its performance is thought to be representative of the stock market as a whole. A fund’s performance may be compared to the S&P 500 to evaluate its performance.
Passively Managed Funds commonly known as “index funds”—do not seek to beat their benchmark, but rather to match the benchmark’s performance. Since the investment decisions made by the fund manager are made to simply mirror each fund’s particular index, passively managed funds are designed to provide a broad selection of investments at relatively low cost.
While index funds typically perform very similarly to the index they track, you should be aware that not all index funds are able to meet or beat the index’s performance. As with any investment, you want to be certain that you understand the goals of each fund, the expenses you pay, and the role the fund plays in your overall retirement plan. Before you make any investment decision, you should always read the fund’s prospectus. Also, you should periodically monitor each fund you choose to ensure your investment is performing in a way that meets your expectations and goals.
Actively Managed Funds seek to beat, or exceed, their benchmarks. Unlike the index funds, the managers of actively managed funds do not attempt to mirror the stocks and performance in an index. The fund managers often have broad flexibility to actively seek out investments that they believe will exceed the performance of a particular index. As a result, these funds are called “actively managed,” and since managing the fund often involves a great deal of research and the transactions within the fund are often more frequent, expenses tend to be higher than those of passively managed funds.
Target Date Retirement Funds also known as TDFs, can be attractive investment options for employees who do not want to actively manage their retirement savings. TDFs automatically rebalance to become more conservative as an employee gets closer to retirement. The “target date” refers to a target retirement date, and often is part of the name of the fund. TDFs offer a long-term investment strategy based on holding a mix of stocks, bonds and other investments (this mix is called an asset allocation) that automatically changes over time as the participant ages. A TDF’s initial asset allocation, when the target date is a number of years away, usually consists mostly of stocks or equity investments, which often have greater potential for higher returns but also can be more volatile and carry greater investment risk. As the target retirement date approaches (and often continuing after the target date), the fund’s asset allocation shifts to include a higher proportion of more conservative investments, like bonds and cash instruments, which generally are less volatile and carry less investment risk than stocks.
Liquidity- How easily and quickly assets can be converted into cash.