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Investing 101: A Beginner’s Guide


By: Jan Paul Ferrer


Investing can be complicated and overwhelming, especially if you’re trying to do it on your own. Understanding the fundamentals can help you make sense of the risks and opportunities associated with investing. It can also help you make more informed—and more confi dent—decisions about your portfolio, so you can put your money to work toward achieving your fi nancial goals.

Understanding the Major Asset Classes

There are four major asset classes, each of which behaves differently in a variety of market situations and is associated with different levels of expected investment return and risk:

• Cash and cash equivalents provide liquidity within a portfolio. This asset class includes CDs, money market accounts and U.S. Treasury bills, which typically provide higher yields than a savings account and can easily be converted into cash, if necessary. While cash and cash equivalents tend to have the lowest risk among the major asset classes, their returns may not keep up with inflation over the long term.

• Bonds, which may also be referred to as fixed income, represent loans to a corporation, financial institution, government or municipality. In return for the money it borrows, a bond issuer promises to make regular interest payments and to return the bond’s par value on a stated maturity date. Historically, bonds have been less risky than stocks, but tend to be more sensitive to interest rate fluctuations and have a lower return on investment. Investors often use bonds to provide a steady fl ow of income.

• Stocks, also known as equity, represent a share of ownership in a company. If you own a stock, the value of your shares may fluctuate over time. Historically, stocks have provided the highest return among the asset classes. They typically form the basis for growth in an investment portfolio.

• Alternatives are assets that fall outside of the traditional markets, such as real estate and private investments. These are generally the highest risk but may offer qualified investors the opportunity to diversify their portfolios and help reduce overall portfolio volatility.

Asset allocation –the process of combining different asset classes in your portfolio—is the most important determining factor of risk exposure and investment returns.

Getting Started

If you’re interested in investing, there are three things you should remember:

1. Time is money. The earlier you start investing, the more opportunity you will have to grow your investments due to the power of compound interest.

2. Don’t let your emotions get in the way. Even the savviest investors fall prey to emotional decision-making. Market movements may make you uncomfortable or anxious but developing a plan and having the discipline to stay the course can help you avoid common mistakes such as buying and selling at the wrong time.

3. Having a plan—and professional advice—can help. Working with a Financial Advisor can help keep you focused on your long-term goals, taking emotions out of the equation.

When you work with a Financial Advisor, you get the best of both worlds—the freedom to make your own investment choices with the guidance of a professional who understands and cares about your goals. And remember, investments are just one aspect of your fi nancial life. An experienced Financial Advisor can help add value not just to your portfolio, but also to other aspects of your overall wealth management strategy, from saving for college and planning for retirement to creating a meaningful legacy.


AArticle by Morgan Stanley and provided courtesy of Morgan Stanley Financial Advisor.

Jan Paul C. Ferrer is a Financial Advisor in Chicago, IL at Morgan Stanley Smith Barney LLC (“Morgan Stanley”). He can be reached by email at janpaul.ferrer@ morganstanley.com or by telephone at 312 312-419-3535

This article has been prepared for informational purposes only. The information and data in the article has been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be suitable for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Asset Allocation does not assure a profit or protect against loss in declining financial markets.

Alternative investments often are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. Alternative investments are suitable only for eligible, long-term investors who are willing to forgo liquidity and put capital at risk for an indefinite period of time. They may be highly illiquid and can engage in leverage and other speculative practices that may increase the volatility and risk of loss. Alternative Investments typically have higher fees than traditional investments. Investors should carefully review and consider potential risks before investing.

Jan Paul C. Ferrer.may only transact business, follow-up with individualized responses, or render personalized investment advice for compensation, in states where [he/she] is registered or excluded or exempted from registration, http://www.morganstanleyfa. com/ferrer.

© 2018 Morgan Stanley Smith Barney LLC. Member SIPC. CRC 2159747 07/2018

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