Making the right investment decisions
Much like your favorite smoothie recipe, how you invest is personal. We give you tools and resources to help you make the investing decisions that are right for you.
Whether you want some help making investment decisions, you are a do-it-yourself investor, or you're most comfortable with someone handling those decisions for you, the County of San Diego Deferred Compensation Program provides options. You can find details that help you identify your investing approach, as well as specific information about funds available through the Program.
Stocks (Equities) – Units of ownership in a corporation. Many factors influence the value of a stock, but a company’s earnings generally have the biggest impact. As earnings increase, the value of the stock typically increases, too.
Bonds – Loans or debt instruments issued by governments or corporations to raise money. These instruments are issued for a stated period, during which interest payments are made to the bondholder. Bonds may be bought or sold, and may gain or lose value, as investment property.
Mutual Funds – Professionally managed investment vehicles that pool money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities. The fund is overseen by a board of directors or trustees charged with ensuring that it is managed in the best interests of investors, and with hiring the mutual fund manager, who buys and sells assets in accordance with the mutual fund's investment objective. Because a mutual fund buys and sells a large number of investment shares at a time, management costs are designed to be lower per investor than they would be if an individual investor purchased individual stocks and bonds.
Mutual fund categories
Short-Term Investments (fixed accounts/cash) – Short-term investments are sometimes referred to as cash equivalents because they can be easily sold (converted to cash) without affecting their value. While these short-term investments are generally less risky than stocks or bonds, their returns are also usually much lower and may not keep pace with inflation. A variety of investment types can be generally categorized as short-term investments, including Certificates of Deposit (CDs), Money Market Accounts (MMAs) and Treasury bills (T-bills). The Plan’s short-term investment option is a stable value fund. Because the value of the securities held by stable value funds will fluctuate, there is the risk that an investor will lose money by investing in stable value funds.
Bond Funds – These funds are made of bonds purchased from a government entity or corporation that agrees to pay back the original amount paid along with interest on a specified date. Many bonds are generally more stable than stocks and provide a steadier flow of income. However, they also typically provide a lower rate of return. High-yield bond securities are typically subject to greater risk and price volatility than funds which invest in higher-rated securities.
Balanced Funds – These funds typically invest in a combination of stocks (which tend to be higher risk), bonds (which tend to be more stable), and, occasionally, short-term investments. This is similar to an asset allocation approach, but the asset mix is never adjusted in response to the investor’s age or risk tolerance. This fund is aimed at preserving proportionate levels of risk, safety and gains.
Large-Cap Equity Funds – These funds include stock in companies with market values (or capitalization) greater than $10 billion. Because these tend to be large, established corporations, their stocks generally offer lower risk than stocks from mid- and small-cap companies.
Mid-Cap Funds – These funds include stock in companies with market values (or capitalization) between $2 billion and $10 billion. These stocks are typically more volatile than large-cap stocks but less risky than small-cap stocks.
Small-Cap Funds – These funds include stock in companies with market values (or capitalization) under $2 billion. Small companies can often grow much faster than big companies, but their stocks also tend to be riskier because they are generally less established.
International Equity Funds – These funds include stock in companies located outside of the United States. These stocks may trade on either the U.S. or foreign stock exchanges and are generally considered higher-risk investments. Risks include currency fluctuations, political instability, differences in accounting standards and foreign regulations.
Specialty Funds – These funds are mutual funds investing primarily in the securities of a particular industry, sector, type of security or geographic region. Funds that focus on real estate investing are sensitive to economic and business cycles, changing demographic patterns and government actions. Includes real estate, energy, health care and other industry-specific funds.
Risk vs reward
Different kinds of investments mean putting your money at different levels of risk. Greater risk equals potentially greater reward. Here’s a simplified way of looking at risk versus reward.
The importance of the right mix of investments
Your asset allocation strategy should be consistent with your investing style — ranging from conservative to aggressive. The idea is to find an appropriate balance of risk vs. reward by mixing investments to suit your style and your time horizon. Use our easy My Investment PlannerSM to help determine your personal investment style and asset allocation strategy.
Because various assets will grow at different paces, the allocation of assets in your County of San Diego retirement account could become unbalanced as compared to your original strategy. That’s why we recommend that you consider rebalancing your assets regularly.
Investing involves risk and you could lose money.
Asset allocation, rebalancing and diversification do not assure a profit or protect against loss in a down market.