Investment theory and historical capital market return data suggest that, over long periods of time, there is a relationship between the level of investment risk and portfolio return. In general, in order to attain higher returns one must accept higher risk (i.e. volatility of return). Consider the following two asset classes:
- Money market funds have a very low risk and pay rates of return consistent with ultra short bonds that are often only slightly more generous than bank savings accounts.
- Emerging market stocks will sometimes provide eye-popping returns, albeit with very high risk.
An investor knows what one is going to get with money market funds (predictable means low risk). The year-to-year returns, however, of emerging markets stocks are highly unpredictable and often result in wild swings (unpredictable means high risk). As with most of life’s circumstances, the same holds true with investing – you are hard pressed to locate a free lunch.
401k Rollover Frequently Asked Questions
Here are some answer to your frequently asked questions regarding 401k rollovers.
- What will the stock market do tomorrow, next month, or next year?
- How do I know what my investment return is?
- Why is my 401k such an important benefit?
- How important are taxes when investing?
- What is a 401K Rollover?
- Is there such a thing as a “free lunch” in investing?
- What is an IRA Rollover?
- What is an investment policy statement?
- What do I do after I inherit an IRA?
- What are Treasury Inflation Protected Securities (TIPS)?
- How much risk should I be taking in my IRA rollover and other retirement assets?
401k Rollover Section Menu:
- 401k Rollovers
- Sample Fee Disclosure – Detailed Fee Disclosure
- Investor Resources – Investment Management Process – 401k Rollover Errors
- Common Investing Mistakes – No Guarantees of Continuance – Not All Investors are Experts – Nobody is Perfect – It’s All About Discipline
- 401k Rollover Options – Direct Rollover IRA – Direct Rollover to Your Current Employer’s Retirement Plan – Lump Sum Distribution
- Glossary of Investment Terminology
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