Slide 7 of 17
Asset allocation can have such a strong influence on a portfolio’s overall return. Here’s a look at each major asset class.
Cash equivalents are investments that are readily convertible into cash. Some consider money market mutual funds a cash equivalent. Money market funds are not insured or guaranteed by the FDIC or any other government agency. Money market funds seek to preserve the value of your investment at $1.00 a share. However, it is possible to lose money by investing in a money market fund. Money market mutual funds are sold only by prospectus. You should consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.
Fixed-income tools are vehicles that offer fixed payments. Some fixed-income tools have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, and mortality and expense fees. They may also have surrender fees if you withdraw the money in the initial years. Bonds are debt investments that are issued by federal, state, and local governments, government agencies, and corporations. Those who invest in bonds receive interest payments until the bonds mature, at which time the investors’ original principal is repaid, barring a default by the issuer. The market value of a bond will fluctuate with changes in interest rates. As rates rise, the value of existing bonds typically falls. If an investor sells a bond before maturity, it may be worth more or less than the initial purchase price. Investments seeking to achieve higher yields also involve a higher degree of risk. With stocks, the return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. Investments seeking to achieve higher yields also involve a higher degree of risk. Finally, we have more speculative investments. These types of investments can be attractive due to their high potential return. But high return also can have severe downside potential. These types of securities may not be suitable for everyone.