Gusto Investment Services approaches retirement investing with a few core principles. Learn how those principles shape our managed portfolios and how we select your recommended portfolio.
Our investment decisions are built on core principles designed to help you build a stronger retirement.
Many employees, especially at small businesses, do not have access to a retirement plan at all. Providing a 401(k) with automatic enrollment generally increases participation and helps take advantage of any employer matching dollars to grow account balances faster.
Employer matching and profit sharing can help employees save even more by adding to the amount they are already putting away for retirement.
We cut participating employees' costs by avoiding layers of fees and using low-cost index mutual funds. We designed our managed portfolios using a variety of index funds with a blended average mutual fund expense ratio of just 0.058% – 0.061%. See the complete fund menu.
We subscribe to Modern Portfolio Theory (MPT), a widely accepted framework for managing investment portfolios. According to MPT, broad diversification in a portfolio allows you to potentially reduce your risk for an estimated rate of return, or may maximize your rate of return for a given level of risk.1
Our first step in creating diversified portfolios is to identify diversified asset classes and then select index funds that represent those full asset classes. It is then essential to understand each participating employee's time horizon and risk tolerance.
Our managed portfolios are designed to promote a long-term investment strategy rather than short-term reactions to market performance. Participants can select a portfolio allocation that aligns with their investment objectives, time horizon, and risk tolerance, and maintain it through periods of market volatility. If you change your portfolio selection, we will reallocate your account to align with your new selection.
We attempt to use time to our advantage and automatically rebalance participating employees' portfolios to keep them on track with their selected asset allocation. Since a 401(k) is a tax-deferred retirement account, there are no tax implications for rebalancing.
Following these investment principles, we created six managed portfolios — from Conservative to Very Aggressive. Each portfolio is built using low-cost, diversified index funds and is designed to align with a range of ages, risk tolerances, and retirement goals. The key difference between them is the mutual funds' mix of stocks and bonds, which determines the risk and potential reward of each portfolio.
Portfolio
Stocks
Bonds
Conservative
45%
55%
Moderately Conservative
55%
45%
Moderate
65%
35%
Moderately Aggressive
75%
25%
Aggressive
85%
15%
Very Aggressive
95%
5%
See our managed portfolio breakdowns or Investment Policy Statement to learn more about our investment philosophy and objectives.
When you first enroll in your Gusto Retirement account — or any time you choose to change your 401(k) or IRA managed portfolio — you'll be asked a series of questions, like when you plan to retire and how comfortable you are with investment risk. Based on your answers, we'll recommend a suitable portfolio.2
For example, if you're at the start of your career with a longer time horizon until you plan to retire, you can typically accommodate more risk — and thus the possibility for more reward — because your investments will have time to balance out from market swings. If you are set to retire in the next several years, you may be suited to a more conservative portfolio to minimize volatility in the short term before retirement.
After completing the portfolio questionnaire, you'll have the opportunity to review our recommendation, along with information and investment details about the portfolio. The choice is up to you on whether to go with the recommended option or one of our other managed portfolios.
Pro tip: If you are an experienced investor or working with a personal financial advisor, you can instead design a fully customized portfolio from our fund lineup.
Investment advisory services for Gusto's 401(k) (when 3(38) fiduciary services are appointed) and SEP IRA/IRA products are offered by Gusto Investment Services, LLC, an SEC-registered investment adviser. References to “Gusto,” “we,” or “our” in this article specifically refer to Gusto Investment Services, LLC. For more information regarding fees and services, see Gusto's ADV 2A Brochure and Form CRS.
The information provided herein is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax advice that considers all relevant facts and circumstances. Gusto makes no representations or guarantees with regard to investment performance as investing involves risk and investments may lose value, including loss of principal. Clients should consult a qualified investment or tax professional to determine the appropriate strategy for them.
1Diversification and asset allocation do not ensure a profit or guarantee against loss.
2As a robo-advisor, once an individual completes the suitability assessment, which is a simple questionnaire, Gusto Investment Services recommends one of six professionally managed portfolios composed of mutual funds via our proprietary software.