Playing It Safe Can Be Dangerous
Here's something very interesting to consider as you make investment decisions for your account in The Consolidated Edison Thrift Savings Plan. On the surface, short-term reserves—such as the Vanguard® Treasury Money Market Fund or the Consolidated Edison Fixed Income Fund—appear to be no-risk options because they seek to maintain a steady value. But many people overlook their hidden risk: inflation.
Over time inflation can greatly reduce the returns you receive. Here's how: Over the past 78 years (1926–2003), short-term reserves have earned an average annual return of 3.9%. During this time, inflation has eaten up about 3.0% of that return each year. With an annual return of just 0.9% after inflation, you may not reach your investment goals.
Past performance is not a guarantee of future results. Returns for short-term reserves are based on U.S. Treasury bills, which are guaranteed as to the timely payment of principal and interest.
Source: The Vanguard Group.
What's the Solution?
While an investment with plenty of high returns and zero risk would be ideal, it just doesn't exist. So you need to choose something that balances risk and return. Finding the right balance can be challenging: You don't want a volatile investment portfolio that keeps you up at night, but you need to make sure you accumulate enough money to last throughout your retirement.
Studies have shown that the way you divide your money among short-term reserves, bonds, and stocks is one of the key factors in determining investment results. Because your plan offers a wide range of fund options, you can create a portfolio with just the right combination of risk and potential return to suit your investment style.
Find the Right Mix
If you need help determining an appropriate investment mix in your 401(k) plan, complete Vanguard's Investor Questionnaire. It will provide you with a suggested investment mix based on your goal, time horizon, and risk tolerance. The link takes you to the online version, available at Vanguard.com®. Or you can call Vanguard® Participant Services to request a paper version.
To Access Your Account
Log on to www.vanguard.com to check account balances, conduct transactions, research funds, and use financial planning tools. You'll need your plan number to register, which is 090041, 090042, or 090404. Confirm your plan number by checking your account statement. You can also elect to view your statements online. Page: 1
Consider reducing your mail and the funds' expenses by opting to receive your statements online instead of on paper.
Call Vanguard at 1-800-523-1188 Monday through Friday from 8:30 a.m. to 9 p.m., Eastern time.
For more information about any fund, including investment objectives, risks, charges, and expenses, call The Vanguard Group at 1-800-523-1188 to obtain a prospectus. The prospectus contains this and other important information about the fund. Read and consider the prospectus information carefully before you invest. You can also download Vanguard fund prospectuses at www.vanguard.com.
An investment in a money market fund or a stable value fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in either fund.
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© 2004 The Vanguard Group, Inc. All rights reserved. Used with permission.