Although most investors don't think in terms of standard deviation, it's an important tool for measuring risk. High standard deviations are indicative of volatility, and lower standard deviations are often associated with more stable assets. As the chart below illustrates, a diversified portfololio has a much lower standard deviation over the long term.

Source: Barclays, Bloomberg, Dow Jones, FactSet, MSCI Russell, Standard & Poor’s as of December 31, 2019. The indices are unmanaged, are not available for investment, and do not incur expenses. Click here for index definitions. Returns are not available for the MSCI ACWI ex USA SC from January 1990 to June 1994, so that index was removed from the Diversified Portfolio for the 1990s and 30-year total return periods. The weight was reallocated to MSCI World ex USA. Past performance is no guarantee of future results.

Investments in debt securities are subject to credit and interest rate risk. An increase in interest rates typically causes the value of bonds and other fixed income securities to fall.
Investments in international securities are subject to certain risks of overseas investing including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations. These risks are magnified in emerging markets.
Investments in small-capitalization companies are subject to greater price volatility, lower trading volume and less liquidity than investing in larger, more established companies.
Real estate investments are subject to factors such as changing general and local economic, financial, competitive and environmental conditions.
Alternative investments are speculative, subject to high return volatility and involve a high degree of risk including, but not limited to, the risks associated with leverage, derivative instruments such as options and futures, distressed securities, may be illiquid on a long term basis and short sales. There can be no assurance that these types of strategies will achieve their objectives or avoid substantial losses. Alternative investments may also be subject to significant fees and expenses.
Investments in emerging markets are subject to risks such as erratic earnings patterns, economic and political instability, changing exchange controls, limitations on repatriation of foreign capital and changes in local governmental attitudes toward private investment, possibly leading to nationalization or confiscation of investor assets.

Market Risk—Market prices of investments held by the Fund may fall rapidly or unpredictably due to a variety of economic or political factors, market conditions, disasters or public health issues, or in response to events that affect particular industries or companies.

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