Defined Contribution Program ? PATHWAYS SUMMER 2011 Be Prepared for Volatility How to invest in an up-and-down market As an investor, you know that risk and return can’t be separated. The stock market may offer potential inflation-beating returns, but it fluctuates constantly—sometimes dramatically. If you’re unprepared for that volatility, you might panic at sudden drops and sell at the wrong times. Learn from experience There are ways you can minimize the impact of volatility. Strive to maintain an investment mix that is based on your goals and time horizon, and that reflects the degree of risk you can comfortably live with, even in a turbulent market. Consider your response to the 2008-09 stock market collapse. If you made drastic changes, it’s a sign that your original investment strategy may not have accurately reflected the amount of risk you could tolerate. Review as needed It makes sense to periodically review your goals, time horizon and comfort level with risk, and to confirm that they’re reflected in your asset allocation. Asset allocation means dividing your portfolio among the different asset classes of stock funds, bond funds and cash investments. The percentage you invest in each asset class helps to determine your portfolio’s short-term volatility and its potential long-term return. You can also diversify within each asset class. For example, your stock fund holdings could include both large- and small-company funds. Asset allocation and diversification can’t prevent a loss in a declining market or guarantee a profit, but they can help you create a portfolio that you can live with despite the market’s ups and downs. IN THIS ISSUE: Be Prepared for Volatility Make An Impact Upcoming Seminar Schedule Fund Change and Lower Fees
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Defined Contribution Program
?
PATHWAYSSUMMER 2011
Be Prepared for Volatility How to invest in an up-and-down market
As an investor, you know that risk and return can’t be separated. The stock market may offer potential inflation-beating returns, but it fluctuates constantly—sometimes dramatically. If you’re unprepared for that volatility, you might panic at sudden drops and sell at the wrong times.
Learn from experience
There are ways you can minimize the impact of volatility. Strive to maintain an investment mix that is based on your goals and time horizon, and that reflects the degree of risk you can comfortably live with, even in a turbulent market. Consider your response to the 2008-09 stock market collapse. If you made drastic changes, it’s a sign that your original investment strategy may not have accurately reflected the amount of risk you could tolerate.
Review as needed
It makes sense to periodically review your goals, time horizon and comfort level with risk, and to confirm that they’re reflected in your asset allocation. Asset allocation means dividing your portfolio among the different asset classes of stock funds, bond funds and cash investments. The percentage you invest in each asset class helps to determine your portfolio’s short-term volatility and its potential long-term return. You can also diversify within each asset class. For example, your stock fund holdings could include both large- and small-company funds.
Asset allocation and diversification can’t prevent a loss in a declining market or guarantee a profit, but they can help you create a portfolio that you can live with despite the market’s ups and downs.
IN THIS ISSUE:Be Prepared for Volatility
Make An Impact
Upcoming Seminar Schedule
Fund Change and Lower Fees
%The Difference Compounding Can MakeThanks to compounding, the earlier you start saving, the better. Compound interest is interest paid on both the principal (your contributions) and on any money you may have earned on that principal. Say you invest $20,000 and earn 6% every year: In Year One that would be $1,200. Adding the earnings to the principal, in Year Two, you’d hypothetically earn 6% on $21,200; in Year Three, on $22,472 and so on. As you can see, time works to your advantage.*The Power of Saving EarlyHolly and Harry are the same age and plan to retire in 30 years. Holly contributes $5,000 a year for 20 years, then stops. Harry opens his account 10 years after Holly opens hers and contributes $8,000 a year for 20 years, then stops. But as the chart below shows, Holly’s earlier start gives her the compounding advantage.*
Holly’s total contributions: $5,000/year x 20 years = $100,000
Harry’s total contributions:$8,000/year x 20 years (starting 10 years after Holly)= $160,000
*FOR ILLUSTRATIVE PURPOSES ONLY. This hypothetical illustration does not represent the performance of any particular investment options and assumes a 6% average annual return and reinvestment of earnings, with no withdrawals. Rates of return may vary. The illustration does not reflect any charges, expenses or fees that may be associated with your County of Orange Defined Contribution Program. The values shown above would be reduced if these fees had been deducted. In the “Power of Saving Early” example, accumulations are based on monthly payments of $416.67 for Holly and $667.67 for Harry, compounding monthly at the beginning of each month.
Make An Impact
$0 $100,000 $200,000 $300,000 $400,000
$68,625
$193,481
$352,019$309,569
Holly
Harry
$109,800
After 10 Years
Account Value
After 20 Years
After 30 Years
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Upcoming Seminar ScheduleAttend a seminar to expand your financial knowledge.
Great-West Retirement Services® and your County of Orange Defined Contribution Program (Program) offer a variety of educational seminars on financial topics throughout the year. These seminars are meant to provide you with a broad-based understanding of your Program and help increase your knowledge of investment terms and concepts, from the most basic to quite advanced. They also provide you with the necessary tools to manage your account in a manner that promotes long-term financial security. Each quarter will feature two or three different topics—for a current schedule, log on to www.countyoforangedcplan.com6 and click on the Seminars link. From July through September, the following seminars will be offered.
Reality Investing® Advisory ServicesWould you like assistance with selecting your investment options, asset allocation and how much to save to reach your retirement goal? Come learn about the new Reality Investing Advisory Services (Advisory Services) offered by the Program. This seminar will describe the three levels of assistance available to help you with the accumulation of savings through to taking distributions on your accounts after you retire.
Date/Time LocationTues., Aug. 16Tues., Aug. 23Weds., Aug. 24Tues., Sept. 13Thurs., Sept. 22Tues., Sept. 2712:00–1:00 p.m.
Hall of Administration333 W. Santa Ana Blvd.Santa AnaRoom 169
Weds., Aug. 1012:00–1:00 p.m.
Cypress SSA6100 Chip AvenueCypressRoom 146
Weds., Sept. 712:00–1:00 p.m.
Library Headquarters1501 E. St. Andrews PlaceSanta AnaConference Room B
BudgetingWhy should you create and stick to a budget if you’re not doing it already? A budget is a plan: for saving more money, for funding your retirement, for allocating money to your investments, and for determining how to spend and spend wisely. This seminar provides strategies that will get you on the road to successful budgeting and provide a way of increasing financial predictability and helping you maximize your financial worth.
Date/Time LocationThurs., July 21Tues., July 26Thurs., July 2812:00–1:00 p.m.
Hall of Administration333 W. Santa Ana Blvd.Santa AnaRoom 169
1 A bond fund’s yield, share price and total return change daily and are based on changes in interest rates, market conditions, economic and political news, and the quality and maturity of its investments. In general, bond prices fall when interest rates rise and vice versa.
2 Foreign investments involve special risks, including currency fluctuations and political developments.
3 Access to KeyTalk® and the website may be limited or unavailable during periods of peak demand, market volatility, systems upgrades/maintenance, or other reasons. Transfer requests made via the website or KeyTalk received on business days prior to close of the New York Stock Exchange (4:00 p.m. Eastern Time or earlier on some holidays or other special circumstances) will be initiated at the close of business the same day the request was received. The actual effective date of your transaction may vary depending on the investment option selected.
Core securities (except those offered through the self-directed brokerage option, if applicable), when offered, are offered through GWFS Equities, Inc. and/or other broker dealers. GWFS Equities, Inc. is a wholly owned subsidiary of Great-West Life & Annuity Insurance Company. Great-West Retirement Services® refers to products and services provided by Great-West Life & Annuity Insurance Company and its subsidiaries and affiliates. Great-West Retirement Services® and KeyTalk® are registered trademarks of Great-West Life & Annuity Insurance Company.
Fund Change and Lower Fees Reminder Two funds’ share class changed July 15, 2011. On July 15, 2011, Vanguard converted the County of Orange’s Investor Class Shares into a different share class, called Signal Shares. The underlying fund is the same and will retain the same fund managers, investment objectives and strategies. The difference between the share classes is that the Signal class has lower fees, thus resulting in lower expenses to participants.The affected funds are the Vanguard Total Bond Index Fund and Vanguard Total International Stock Index Fund. The change in expense ratios is illustrated in the table below.
You may make changes to your investment options or review all of the Program’s investment options through the website at www.countyoforangedcplan.com or by calling KeyTalk® at (866) 457-2254.3
These fee reductions are beneficial changes that will allow more of your contribution dollars to work for you!
Current Signal SharesExpense Ratio
New Institutional SharesExpense Ratio
Vanguard Total Bond Index Fund1 .22% .12%Vanguard Total International Stock
Index Fund2 .32% .20%
Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information you may obtain prospectuses for mutual funds, any applicable annuity contract and the annuity's underlying funds and/or disclosure documents from your registered representative. For prospectuses related to investments in your Self-Directed Brokerage (SDB) account, contact your SDB provider. Read them carefully before investing.
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Have Questions? Need Information?Website3: www.countyoforangedcplan.comKeyTalk®3: toll free (866) 457-2254
