Investing 101

You have the following options available to you for investing your Defined Contribution (DC) account:

• Fixed Income Fund
• Inflation Linked Fixed Income Fund
• International Equity Fund
• Large Cap Equity Index Fund
• Money Market Fund
• Small/Mid Cap Equity Fund
• Stable Value Fund
• Target Date Funds

For more information about investing in your DC account, please visit Investing 101.

A stock is a financial asset that an investor can purchase. They give investors an opportunity to own a share, or a small portion, of a public company.

For more information about stocks, watch the video below.

Bonds are fixed-income investments that are similar to a loan, or an IOU. They allow investors to loan money to a company or the government. The company or government borrows the money for a set amount of time at a fixed or varied interest rate.

For more information about bonds, please watch the video below.

Commodities are real assets. They are partially processed or unprocessed goods, like grains, fruits, vegetables, crude oil and precious metals. A commodity can also be livestock.

For more information about commodities, please watch the video below.

When you invest in any fund option, you buy shares of that fund and become a "shareholder." As a shareholder, you pay an annual fee called an "expense ratio." The expense ratio is the amount deducted each fiscal year for fund expenses.

To see what the expense ratios are for the Defined Contribution account investment options available to you with INPRS, please read this fact sheet.

Diversification refers to the concept of spreading contributions among different types of investments to reduce overall risk.

A variety of investments will not usually move in the same direction, at the same rate, or at the same time. Keep in mind that a diversified retirement plan may reduce instability over longer periods, but does not guarantee earnings.

Risk tolerance refers to how comfortable you are with your account value rising and falling with the markets.

When you review your investment choices, it's important to decide how much instability you can afford to risk over short and long-term investments. Investments with more risk may have higher returns, but may be more likely to rise and fall sharply over a certain period. You should have a thorough understanding of what your particular risk tolerance is before you choose an investment. Take our quiz here to learn more.

Compound interest is interest paid on principal and accumulated interest. With compounding, the interest in your INPRS account earns additional interest.

Time horizon refers to the period between now and when you need to access your invested money. Before you invest, you should ask yourself how long you intend to invest. Risk tolerance is associated with time horizon.

A person nearing retirement has a shorter time horizon than someone further away from retirement. The older investor may have a lower risk tolerance than the younger investor because the older investor has a shorter time horizon to bear sharp rises and falls in the market. The younger investor may accept greater risk since he or she has more time to bear the rises and falls of riskier investments.

*Market-associated risk is involved with investing. INPRS' investment fund choices are not insured. INPRS cannot guarantee against the risk of loss based on your self-directed investment fund choices.

Your assets are the dollars in your defined contribution account, and the allocation refers to how those dollars are split among the available investment options.

You can find more info about how asset allocation can help you, here.