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Atlantic Southeast - Measuring Portfolio Risk

When building a 401k portfolio, many people simply look at a fund’s performance without considering the risk of the investment. Fund performance should not be the only tool used in selecting mutual funds for your 401k. Another analytical tool that should be used is standard deviation.

Standard deviation measures the risk of an investment. For example, the Growth Fund of America has a 5 year standard deviation of 16.45 and a 5-year average annual return of 4.76. This means that the portfolio historically has moved 16.45% above 4.76 and 16.45% below 4.76 over a 5 year period. This gives you an idea of your downside risk and upside potential. In comparison, the PIMCO bond fund has a 5 year standard deviation of 4.25 and a 5 year average return of 7.17. Adding these two funds to a portfolio at a 50/50 ratio would give the portfolio a 5 year standard deviation and rate of return of 10.35 and 5.96, respectively. In this scenario, we just lowered the risk of the overall sample portfolio by adding bonds. You can use Morningstar.com, a free and independent research firm, to find the standard deviation and rate of return of each fund within our 401k plan. As you will see, some funds in our 401k plan, while they may be in the same asset class, do not have the same risk.

Wiser Wealth Management, Inc. is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

Happy Birthday to Kylie, our Marketing Assistant! Kylie works hard behind the scenes on our website, podcast, social media, and so much more.

Meet Daphne, our Financial Planning Intern. She is studying Finance at The University of Georgia. We are excited she's joined us for the summer!

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Your Medicare premium is affected based on which tax bracket you fall within after age 63. IRMAA is your income-related monthly adjustment amount. Watch today's video to learn more about how IRMAA works.

https://conta.cc/3zK9WGw #irmaa #medicare

The big question is, will we have a recession in 2022? Watch this video to find out!

https://conta.cc/3Mz2z7D #recession2022 #recession
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Happy birthday to LJ our Video Production Manager! LJ works behind the scenes producing all of our podcasts and videos that we post every week. 🎉

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