Stocks are the most exciting investment option because they have consistently outperformed
other asset classes. They are far more volatile and risky in the short term, but stocks
as a class have done better than bonds or cash investments year in and year
out, and have produced better overall returns over the long term.
In the 72 year period from 1926 through 1997, the S&P 500 Index reported positive annual returns 52 times. Of course, that also means you've got to be prepared for declines about 28% of the time.
You don't, however, have to bear the full brunt of those declines. Mutual funds have
techniques for minimizing this kind of loss. What's more, the "zig-zag" effect that you get from investments with a degree of covariance (that move out of sync) helps to smooth out the rough spots in your account's performance.
The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.
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