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Equities (stocks), which represent shares of ownership in companies, have historically outperformed other investments over long periods. They have also tended to be the most volatile in the short term, which means investors may experience fluctuating account values. (Past performance does not guarantee future results.)

Definition: TIAA-CREF

A form of debt issued by a governmental entity or a company. When you invest in a bond, you are lending money to the entity that issues the bond. In return you are paid interest. Bonds can be distinguished by credit quality (the ability of issuing entity to pay back its bondholders) and maturity (when due).

This category includes bonds and securities that are designed to pay a rate of interest over a set time period and then return the investor's principal. The value of fixed-income investments fluctuates in response to interest and inflation rates.

There are different ways to invest in bonds; traditional bonds are generally debt instruments of different companies and government agencies. Returns will vary based on interest income and price changes in the bond market.

With inflation-linked securities, the interest payments tend to rise during periods of accelerating inflation, making them a good choice for more conservative investors. However, neither traditional nor inflation-linked bonds are insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other U.S. government agency.

Definition: TIAA-CREF

This asset class consists of short-term debt instruments and government securities which carry little risk. They generally pay more interest than savings accounts or CDs, but historically their returns have been lower than those of stocks and bonds.

Keep in mind that an investment in a money market fund or annuity account is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and that it is possible to lose money with these investments. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.

Definition: TIAA-CREF

Fixed annuities operate much like certificates of deposit but are not insured by the Federal Deposit Insurance Corporation (FDIC). Generally, investors are given two interest rates: the current rate and the guaranteed rate. The current rate is the return that the insurance company promises to pay for a set period of time, typically between one and five years. The guaranteed rate, usually lower, is the minimum rate that investors will receive after the current rate expires, regardless of market conditions.

A variable annuity offers a range of investment options — typically mutual funds that invest in stocks, bonds, short-term money-market instruments, or some combination of the three. These investment options are referred to as the subaccount. The value of the investment will vary depending on the performance of the investments in the subaccount. There is usually a death benefit that will pay a beneficiary the greater of the account value or a guaranteed minimum amount, such as total purchase payments. Variable annuities are securities regulated by the Securities and Exchange Commission (SEC).

A mutual fund is an investment that pools money from many participants and invests in stocks, bonds, short-term money-market instruments, or some combination of the three. The combined holdings of stocks, bonds, or other assets that the fund owns are known as its portfolio. Each investor in the fund owns shares, which represent a part of these holdings. There are two kinds of mutual funds: loaded mutual funds and no-load mutual funds.

A load is a commission the investor must pay in order to purchase that fund. All mutual funds have operating costs. Mutual funds are securities regulated by the Securities and Exchange Commission (SEC), but are not guaranteed or insured by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

A relatively new — and considered by many to be a simple — approach to ensuring a suitable allocation over time is to invest in a single Target Date Retirement Fund. This strategy, which is also known as the Lifestyle, Lifecycle or Age-Based approach, requires that an investor choose an estimated retirement date; for example the year 2027. The investor then picks a Target Date Retirement Fund that most closely corresponds to that date (such as a 2030 fund).

The longer the time until retirement, the more weighted the mutual fund is toward equities (stocks). As the target retirement date approaches, the fund automatically becomes more weighted toward fixed investments. The investor does not have to make any changes to the fund. All allocation changes are made by the fund operators. When the target date is reached, the fund remains open for about five years; during that period the fund gradually reduces its equity (stock) exposure until its investment mix mirrors that of a typical static retirement fund (generally 80 percent fixed investments and 20 percent equities). Rules of operation and costs vary by vendor.

The Standard and Poor's (S&P) 500 consists of five hundred companies chosen from a range of industries. The five hundred companies represent the most widely held U.S.-based common stocks, chosen by the S&P Index Committee for market size, liquidity, and industry sector representation. Because the companies are highly diverse, spanning every relevant portion of the U.S. economy, the index is useful in giving investors an idea of the overall direction of the stock market.

The S&P 500 is usually considered the benchmark for U.S. equity performance. It represents 70 percent of all U.S. publicly traded companies.