Six retirement investment terms to know

Defining types of retirement funds 

There are different types of retirement accounts such as 401(k) plans and individual retirement accounts (IRAs) that can help you save for retirement. Within those accounts, you can put your contributions into a wide variety of funds. Financial companies are required to provide you with information about the funds available for your investment—and they usually use the same terminology. If you’d like a better understanding of how to evaluate funds available for your investment, you can start by getting to know these six terms. 

1 Fund objective and investment strategy

The fund’s objective is what your fund sets out to do such as long-term capital appreciation (which means growth), preservation of capital (which means maintaining value), or income generation (which means providing you with dividends that you can reinvest or receive as cash at regular intervals). 

The fund’s investment strategy is how a fund plans to achieve its objectives. It tells you what types of assets, including stocks, bonds, or cash and cash equivalents, will be purchased with your contributions. A strategy can focus on certain types of assets, including large U.S. stocks; a specific sector such as technology; a certain economy, including emerging markets; or an impact goal such as investing in socially responsible companies. Investment strategies also tell you how risks, or the potential for losses, are managed relative to the potential for returns, or what you may earn by investing in the fund.

2 Benchmark index

The fund’s benchmark tracks the performance of a specific market or sector relevant to the fund. You can compare your fund’s performance with the fund’s benchmark. For example, the S&P 500® Index is a benchmark that measures the stock performance of the 500 largest U.S. publicly traded companies. A fund that invests in large, U.S. stocks may use the S&P 500 Index as its benchmark index. Other benchmarks may offer broader comparisons such as comparing an all-stock fund with an all-bond benchmark. Note that it's not possible to invest directly in an index.

3 Fund manager

Qualified professionals who set the fund’s objective and implement the fund’s strategies are known as fund managers or portfolio managers. Fund managers can use a passive or active approach. 

Passive fund managers focus on mirroring the securities or assets found in a specific benchmark index. They tend to make minimal changes in how a fund invests and seek to match the fund’s investments and its returns with the specific benchmark.

Active fund managers use their specialized expertise to pick what to invest in, what to sell, and what to keep, and may do so more frequently than a passive manager. They tend to invest in assets found in the fund’s benchmark index and those outside of it. Actively managed funds may seek to generate higher fund returns than the fund’s benchmark.

4 Year-to-date (YTD) returns

The YTD return is shown as a percentage and gives you an idea of what your investment is earning today compared to the beginning of the year.

5 Top 10 holdings

The top 10 holdings tell you where most of the fund was invested during a specific time period. You'll see a list of 10 names, known as securities or assets, which are ranked by highest dollar value or percentage of the fund's total assets. It can give you an idea of the types of securities the fund invests in, but this doesn't mean that the fund is limited to 10 holdings. A fund likely holds more and the top 10 list can change, depending on the fund’s investment strategies. 

6 Hypothetical growth chart

This line graph gives you a quick visual of how a fund and its benchmark have performed over the past 10 years, or since the fund’s inception if that’s shorter. You’ll get an idea of how much you could earn over a longer period than the YTD return.

Understanding retirement investments

Now that you know what certain retirement investment terms mean, you can start reviewing the funds in your retirement account. As you dig deeper, you may become curious. What strategies can help you reach your long-term retirement savings goals? Keep in mind that the value of your retirement account changes daily. Short-term losses are common but may be temporary. If you want to make a change or discuss your retirement investment options, contact the plan provider listed on your statement, mobile app, or online retirement account. For more complex questions, you may want to speak with a financial professional.

For complete information about a particular investment option, please read the fund prospectus. You should carefully consider the objectives, risks, charges and expenses before investing. The prospectus contains this and other important information about the investment option and investment company.  Please read the prospectus carefully before you invest or send money. Prospectus may only be available in English.

1 John Hancock commissioned Edelman Public Relations Worldwide Canada to conduct the 2024 financial resilience and longevity survey. John Hancock and Edelman Public Relations Worldwide Canada are not affiliated, and neither is responsible for the liabilities of the other.