Investment decisions often come with a myriad of risks that demand careful consideration. In this article, we delve deep into the various aspects of risks associated with different investment vehicles. From actively managed funds to inflation-indexed bonds and derivatives, understanding these risks is crucial for making informed investment choices.
Navigating the Perils of Investment - A Comprehensive Guide
Risks in Actively Managed Funds
The fund under consideration is actively managed, which means its characteristics are subject to change. The holdings shown do not serve as a recommendation to buy or sell securities. Bond values are highly volatile and can fluctuate based on market conditions. Fixed income risks, such as interest-rate and credit risk, play a significant role. When interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer may default on principal and interest payments. This highlights the importance of carefully assessing the creditworthiness of bond issuers.Moreover, principal of mortgage- or asset-backed securities can be prepaid at any time, reducing their yield and market value. Obligations of U.S. government agencies have varying degrees of credit support and may not be fully backed by the government. Non-investment-grade debt securities (high-yield/junk bonds) are particularly risky, as they are subject to greater market fluctuations, default risk, and loss of income and principal compared to higher-rated securities.Risks in Inflation-Indexed Bonds
If the index measuring inflation falls, the principal value of inflation-indexed bonds will decrease, and the interest payable will be reduced. However, for U.S. Treasury inflation-indexed bonds, the repayment of the original bond principal upon maturity (adjusted for inflation) is guaranteed. In contrast, for bonds that do not provide such a guarantee, the adjusted principal value repaid at maturity may be less than the original principal. This emphasizes the need to understand the specific terms and conditions of each bond.Risks in Derivatives
The fund may use derivatives to hedge investments or seek enhanced returns. Derivatives entail risks related to liquidity, leverage, and credit. These risks can reduce returns and increase volatility. It is essential to understand the nature and implications of using derivatives in investment strategies.The opinions expressed by the fund's portfolio management team as of September 30, 2024, are based on certain assumptions and may change as subsequent conditions vary. Information and opinions are derived from reliable sources but are not all-inclusive and may not be accurate.BlackRock provides compensation in connection with obtaining or using third-party ratings and rankings. For example, the Bloomberg U.S. TIPS Index comprises inflation-protected public obligations of the U.S. Treasury. The Morningstar Rating™ for funds is calculated based on a risk-adjusted return measure that considers variation in monthly excess performance. The top 10% of products receive 5 stars, the next 22.5% receive 4 stars, and so on. The fund was rated against a certain number of U.S.-domiciled Inflation-Protected Bond funds over different time periods. With respect to these funds, the fund received specific star ratings for different periods.When considering investing in any fund, it is essential to carefully assess the investment objectives, risks, charges, and expenses. The prospectus and summary prospectus contain detailed information about the fund and other BlackRock funds. These documents can be obtained by calling 800–882–0052 or from a financial professional. Reading the prospectus carefully is crucial before making an investment decision.©2024 BlackRock, Inc. or its affiliates. All Rights Reserved. BLACKROCK is a trademark of BlackRock, Inc. or its affiliates. All other trademarks are those of their respective owners.Prepared by BlackRock Investments, LLC, member FINRA.Not FDIC Insured • May Lose Value • No Bank Guarantee10/24 – Inflation Protected Bond Fund
