Asset Class Descriptions
When you enroll assets into your employer-sponsored retirement plan account, you’ll need to choose which funds to invest in. Funds are grouped by asset classes, which identify funds that tend to have similar investment objectives and strategies. Funds within asset classes generally react in a similar manner to market fluctuations as other funds in the same class.
Spreading your investment selections across several asset classes, a technique known as diversification, can help increase your total return based on the level of risk you are willing to accept. However, as with any investing strategy the use of diversification and asset allocation does not assure a profit or protect against loss in a declining market. Read more about investment strategies in the Learning Center.
Types of asset classes
While most retirement plans provided by Nationwide offer a broad spectrum of assets classes, not all plans offer all asset classes. These descriptions are provided to help you learn more about the differences among classes. You can visit the fund performance table to learn more about their performance over time.
- Asset Allocation funds allow an investor to participate in a professionally managed, diversified portfolio which includes a combination of several asset classes with a goal of providing the highest return given a specified level of risk.
- Specialty funds invest in a specific market sector or type of security from a similar industry or market sector. These investments generally bear a higher level of risk than other asset classes because they aren’t usually diversified outside their market sector.
- International Stock funds select from non-U.S. equity securities. Generally, any mutual fund that invests no more than 49% in U.S. markets is classified as International Stock. International stocks may also include World Stock funds, Diversified Emerging Markets funds, and regional foreign stock funds.
- Small Cap Stock funds invest primarily in shares of smaller, lesser-known corporations, and have a market capitalization (valuations) of less than $1.6 billion. Small company stocks may have a higher growth potential than large or Mid Cap Stock funds, but also are more volatile and may fail more often.
- Mid Cap Stock funds invest primarily in the stocks of mid-size corporations and have a market capitalization (valuations) greater than $1.6 billion and less than $10 billion.
- Large Cap Stock funds stocks invest in the largest domestic equity companies and generally have a market capitalization (valuations) greater than $10 billion. They’re the larger, more established, profitable and well-known companies.
- Diversified Real Return funds are made up of assets from three classes: Treasury Inflation Protected Securities, US Real Estate Investment Trusts and globally traded commodities. Typically, the fund manager gives an equal weighting to – that is, invests to maintain an equal amount in – each asset class. These three asset classes comprising the composite historically have had low correlation with one another. That is, they tend to move independently of each other.
- Balanced funds generally have a three-part investment objective: 1) to conserve investors' initial principal, 2) to pay current income, and 3) to promote long-term growth of both income and growth. Balanced funds typically invest in a mix of at least 25% in bonds and the remainder in stocks.
- Bond funds invest, as the name suggests, in bonds, which are debt securities issued by a corporation, the U.S. Government, or a governmental agency. Essentially, a bond represents a loan to the issuer. The issuer guarantees to repay the loan by a specific date and to pay regular, fixed interest payments during that period.
- Short Term Investments generally do not fluctuate in market value and yield regular interest payments. Assets may be placed in bank deposits, money market instruments, U.S. Treasury Bills, Guaranteed Investment Contracts (GICs), stable value funds, short term bonds, and/or fixed annuity products offered by insurance companies.
- Stable Value funds are investment options designed to preserve capital. The fund manager invests in a high quality, diversified fixed income portfolio that tends to be protected against interest rate volatility.
Get the help you need
Questions? Talk with a Retirement Specialist for more information about the specific asset classes and funds available as part of your employer’s plan. Information provided by Retirement Specialists is for educational purposes only and is not intended as investment advice.