ETF risk, Assets

Downside risk of asset classes

Equities

  • Decline of market price from multiple causes
  • Principal and dividends are not guaranteed

REITs

  • Loss of rental income, interest income, or property value

Bonds

  • Loss of income from early repayment of debt
  • Delayed or missed payment of principal or interest
  • Decline in market price

Bonds nontaxable

  • Delayed, terminated, or diminished payments from multiple causes

Precious metals

  • Decline of market price
  • Theft from safe keeping

Commodities

  • Decline of market price
  • Commodity pool futures contracts may not correlate with commodity price (e.g., the price of a futures contract may unexpectedly fall toward the spot price of the commodity upon approaching the expiration date, tending to lower the net asset value of the portfolio).

Derivatives

  • Loss from derivatives may exceed loss from the underlying assets.
  • Collateral assets may be illiquid

Currencies

  • Currency exchange rates fluctuate
  • Currency futures contracts may diverge from the underlying currency
  • Risks related to holding bonds or derivatives

Cash equivalents

  • Loss of income from declining interest rate
  • Decline of short-term bond price from rising interest rate
  • Borrower default
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