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.
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.
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.
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.