Test Your Mutual Fund Knowledge

More than 60 percent of people responding to an investor literacy survey could not estimate a "reasonable" average annual return from a broadly diversified stock mutual fund.¹

One in four had no idea of what return to expect. Perhaps more alarming was the 21 percent who expected a 15 percent or higher average annual return over time.²

Although historical investment performance can provide some perspective, it is not a guarantee of future results. Having unrealistic expectations can be dangerous to your financial health.

Do Your Homework
Choosing a mutual fund that is appropriate for your portfolio begins with a review of your financial strategy. Consider how much you need to save for retirement, your time frame, and your comfort level with investment risk. Of course, what could be considered a "reasonable" return from a mutual fund will vary according to the type of fund.

Once you have decided which type of mutual fund is appropriate for your portfolio, you may want to consider scaling back your expected annual return to leave a margin for the unexpected. For example, did you know that 37 percent of today's retirees left the workforce earlier than they had planned? Or that a majority of retirees left the workforce prior to age 65?³

If you are investing in a mutual fund based on best-case-scenario projections, you could be faced with a retirement income shortfall if events don't go as planned. By underestimating your expected return and then adjusting your contributions accordingly, you may be able to help offset the risk of a shortfall if unexpected events occur.

The return and principal value of mutual fund shares fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost.

Mutual funds are sold only by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

1, 2) Applied Research & Consulting, 2003
3) 2004 Retirement Confidence Survey, Employee Benefit Research Institute

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