Index definitions
Producer Price Index (PPI): An inflation indicator used to evaluate the wholesale price level in the economy.
S&P 500 index: The Standard & Poor's (S&P) 500 Index tracks the performance of 500 widely held, large-cap U.S. stocks.
Risk considerations
Equity securities may fluctuate in response to news about companies, industries, market conditions and the general economic environment.
Tie up are subject to interest rate risk. When interest rates rise, bond prices fall; In general, the longer the term of a bond, the more sensitive it is to this risk. Bonds may also be subject to call risk, which is the risk that the issuer, at its sole discretion, will repay all or part of the debt before its scheduled maturity date. The market value of debt securities may fluctuate and proceeds from sales prior to maturity may be more or less than the original amount invested or the maturity value due to changes in market conditions or the credit quality of the issuer. Bonds are subject to the credit risk of the issuer. This is the risk that the issuer will not be able to make interest and/or principal payments on time. Bonds are also subject to reinvestment risk, which is the risk that principal and/or interest payments from a particular investment will be reinvested at a lower interest rate.
Bonds with a rating below investment grade may have speculative characteristics and involve significant risks beyond those of other securities, including increased credit risk and price volatility in the secondary market. Investors should carefully consider these risks, as well as their individual circumstances, objectives and risk tolerance, before investing in high yield bonds. High-yield bonds should only make up a limited portion of a balanced portfolio.
Length of time, the most commonly used measure of bond risk, quantifies the impact of interest rate changes on the price of a bond or bond portfolio. The longer the duration, the more sensitive the bond or portfolio would be to changes in interest rates. In general, when interest rates rise, bond prices fall and vice versa. Longer-dated bonds have longer or higher duration than shorter-dated bonds; Therefore, if interest rates rise, they would be affected by changes in interest rates over a longer period of time. As a result, the price of a long-term bond would decrease significantly compared to the price of a short-term bond.
Invest in raw materials carries significant risks. Commodity prices may be affected at any time by a variety of factors, including, but not limited to, (i) changes in supply and demand conditions, (ii) government programs and policies, (iii) national and international political and economic events, war and terrorist events, (iv) changes in interest and exchange rates, (v) trading activities in commodities and related contracts, (vi) plague, technological change and weather and (vii) the price volatility of a commodity. In addition, commodity markets are subject to temporary distortions or other disruptions due to various factors, including lack of liquidity, involvement of speculators and government intervention.
REITs invest The risks are similar to those of direct investment in real estate: fluctuations in property values, lack of liquidity, limited diversification and sensitivity to economic factors such as interest rate changes and market recessions.
Hedge funds may involve a high degree of risk, frequently use leverage and other speculative investment practices that may increase the risk of investment loss, may be highly illiquid, may not be required to provide regular pricing or valuation information to investors, may have complex tax structures involve and delays in disseminating important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees that can offset any trading profits, and in many cases the underlying investments are not transparent and known only to the investment manager.
Asset allocation and diversification They do not guarantee a profit or protect against loss in declining financial markets.
Investments in small and medium-sized companies involve special risks such as limited product lines, markets and financial resources, as well as greater volatility than securities of larger, more established companies.
Because of their narrow focus Industry investments tend to be more volatile than investments that diversify across many sectors and companies. Technology stocks can be particularly volatile. Risks for companies in the Energy and natural resources Sectors include commodity price risk, supply and demand risk, depletion risk and exploration risk. Healthcare stocks are subject to government regulations and government approval of products and services, which can have a significant impact on price and availability and can also be significantly affected by rapid obsolescence and patent expiration.
Value investment does not guarantee profit and does not eliminate risk. Not all companies whose stocks are considered value stocks are able to turn their business around or successfully apply corrective strategies, which would result in stock prices not rising as originally expected.
Growth investments does not guarantee profit and does not eliminate risk. The stocks of these companies can have relatively high valuations. Because of these high valuations, investing in a growth stock can be riskier than investing in a company with more modest growth expectations.
Rebalancing does not protect against loss in falling financial markets. A rebalancing strategy can potentially have tax implications. Investors should consult their tax advisor before implementing such a strategy.
The Indices are not managed. An investor cannot invest directly in an index. They are for illustrative purposes only and do not represent the performance of any particular investment.
The Indices selected by Morgan Stanley Wealth Management to measure performance are representative of broad asset classes. Morgan Stanley Wealth Management reserves the right to change representative indices at any time.
Disclosure
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