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
