Investment Terms

investmentOptions

A wide assortment of investment options is available to employees desiring to put money aside for retirement or emergency situations. The County of San Bernardino offers you most of the common investment vehicles available in today's financial marketplace, including Growth and Income Options and Stable Value Options to meet the needs of your investment style. The County also offers various styles of funds including value, blend and growth as well as large cap, mid cap and small cap funds in the array of investment funds offered.


Following are brief descriptions of investment categories available through the County.

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Aggressive Growth Option

An Aggressive Growth Option invests in common stocks with an objective of maximum long term capital gains. This fund can be expected to have greater volatility than any other options but is also expected to produce greater long-term returns. This option is appropriate for a portion of participants' account that a participant can postpone liquidating for a relatively long period of time.

Asset Allocation Funds

Asset Allocation Funds (Model Portfolios) offer an allocation of investments, principally stocks, bonds, and cash or cash equivalents that are appropriate for a given stage of an individual's investment life cycle. An aggressive asset allocation fund will have greater weighting in stocks than a moderate or conservative asset allocation fund. A conservative asset allocation fund will be more heavily weighted toward current income and protection of capital. The objective of an asset allocation fund is to provide a composite rate of return from current income and capital appreciation which is appropriate for a given stage of an individual's investment life cycle.

Balanced Option

A Balanced Option invests in several asset classes (typically common stocks, bonds and money market instruments). Investment returns come from both current income and capital changes. Professional investment managers make the asset allocation decisions, and the option can be used by participants who do not wish to self-manage their asset mix. The Balanced Option is expected to produce higher longer-term returns than the Bond Fund option, although volatility may be greater.

Asset allocation, quality and sector concentration guidelines will be dictated by the stated policies of the manager or prospectus of a fund. The investment objective is to provide a diversified investment return of current income and capital appreciation.

Bond Option

A Bond Option invests in cash equivalents and marketable fixed income securities. The average duration of a portfolio should not exceed that of the Lehman Brothers Government/Corporate Bond Index by more than 10%. The average portfolio quality shall be AA (or a comparable rating) or better by Moody's, Standard & Poor's or Fitch's ratings services. Sector and issue concentration guidelines will be dictated by the state policies of the manager of the fund(s).

The investment objective is to provide longer-term preservation of capital while earning a high level of current income. However, principal values may fluctuate over time, primarily in response to changes in interest rates.

Growth and Income Option

A Growth and Income Option invests primarily in dividend-paying common stocks but may also have a relatively small percentage of assets in preferred stocks, convertible securities, fixed income and money market investments. The investments are selected with a long-term goal of moderate capital appreciation while generating more current income than the S&P 500 stock index.

Growth Option

A Growth Option invests primarily in common stocks but may also hold cash equivalents. The stocks in the portfolio are selected with the expectation that long-term return will be realized through capital appreciation and growth of dividends. Current dividend income is a secondary consideration. Returns may fluctuate more than those of the overall market.

Guaranteed Equity Option

A Guaranteed Equity Option seeks to achieve maximum total return without compromising a minimum targeted rate of return by participating in favorable equity market performance during the guarantee period and participating in fixed return obligations during periods of unfavorable equity market performance. Invested principal is guaranteed if held throughout the guarantee period. The investment objective is to participate in potential gains in equity markets while preserving the principal invested.

Index Fund

An Index Fund invests identically to the market index whose return it seeks to duplicate. The objective of an index fund is to provide market diversification and a market average rate of return reflective of the market segment represented by a given index, e.g., the Standard & Poor's 500.

International/Global Equity Option

The International Equity Option invests primarily in common stock of established non-U.S. issuers. This fund can be expected to be subject to risk factors not prevalent in domestic markets, including currency risk. The Global Equity Option (aka World Equity Option) invests in common stocks of established non-U.S. issuers as well as domestic common stocks as deemed appropriate by the fund managers. These funds are appropriate for a portion of a participant's account for which additional risk is acceptable in exchange for diversification from options tied to domestic markets. Currency fluctuation will contribute to increased return volatility.

Money Market Option

A Money Market Option invests in cash equivalent securities with maturities of less than one year. The average quality of the portfolio must be A1, P1, or AAA. The objective of the fund is to protect underlying principal value and produce a reasonable level of current income. While the volatility risk of this option is the lowest, accumulation risk is the highest.

Self-Directed Brokerage Option

Self-Directed Brokerage Option will offer a wide array of various families of mutual funds that can be accessed by individual participants.

Stable Value Option

A Stable Value Option invests in book value investments which may include General Account annuity products, Separate Account Annuity products, Guaranteed Accumulation Accounts (GAAs), Guaranteed Investment Contracts (GICs), Bank Investment Contracts (BICs), "Synthetic" GIC arrangements and money market instruments, and may invest in intermediate term fixed income securities with a duration of 5 years or less. Investments may either be made directly or through pooled arrangements. The objective of the fund is to provide higher income than a money market fund while still providing no fluctuation in principal value.

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