The Risk-Reward Tradeoff in a Volatile Market

Steven Halpern of MoneyShow.com welcomes Frank Holmes to talk about his recent blog post that asks investors: Can You Handle the Stress of Losing 40 Percent in the Market? Frank walks Steven through this hypothetical story of two men who invested their money in the year 2000 as they neared retirement age – one of them aggressive and the other conservative.

Since the two characters in the article live through volatile markets similar to the ones we are experiencing today, Frank thinks now is a great time for investors to take a look at this story.

Listen to the interview to hear Frank’s opinion on how much risk is worth the reward when it comes to investing, and how he uses the characters’ investment choices to stress the importance of portfolio diversity.

In this short video, Director of Research John Derrick expands on Frank’s thoughts by making a case for short-term municipal bonds.

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Morningstar ratings based on risk-adjusted return and number of funds
Category: Municipal National Short-term funds
Through: 11/30/2014

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Bond funds are subject to interest-rate risk; their value declines as interest rates rise. Though the Near-Term Tax Free Fund seeks minimal fluctuations in share price, it is subject to the risk that the credit quality of a portfolio holding could decline, as well as risk related to changes in the economic conditions of a state, region or issuer. These risks could cause the fund’s share price to decline. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local taxes and at times the alternative minimum tax. The Near-Term Tax Free Fund may invest up to 20% of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes.

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Diversification does not protect an investor from market risks and does not assure a profit.