Where do investment risks come from?

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Identifying the types of investment risk

• Economic• Volatility • Business-specific• Interest rate• Loss of purchasing power • Liquidity risk• Falling short of your goals

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Economic riskThe chance of a bad economy hurting investments

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VolatilityThe chance of a sudden decrease or increase in value

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Each bar reflects the average annual return of the S&P 500 Stock Index through the year 2003. Source: Ibbotson Associates, Chicago. The S&P 500 is an unmanaged index generally considered representative of the U.S. stock market. Individuals cannot invest directly in an index. The historical performance of any unmanaged index is not indicative of the performance of a particular investment and does not take into consideration the fees and expenses associated with purchasing securities. If fees and expenses were included, performance would have been lower. Past performance is no guarantee of future results.

Business riskThe chance of businesses or entire sectors falling

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Interest rate risk

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Loss of purchasing powerThe possibility of earning less than inflation

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Liquidity risk

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Falling short of your goalsBeing too conservative or investing too little

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Summary: managing investment risk

– What would you do?• Evaluate your comfort level of risk & reward

– Why do investors take risks?• Identify your acceptable risks—don’t avoid them

– What’s next?• Let us help you manage your investment risk

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