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This article has been prepared for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Individuals need to make their own decisions based on their specific investment objectives, financial circumstances, and tolerance for risk. Please contact your financial, tax, and legal advisors regarding your specific situation and for information on planning for retirement.
Tax-loss harvesting involves certain risks, including, among others, the risks that the new investment could perform worse than the original investment and that transaction costs could offset the tax benefit. There may also be unintended tax implications. Wells Fargo & Company and its affiliates are not legal or tax advisors. Investors should consult their own legal or tax advisor before taking any action that may involve tax consequences. Tax laws or regulations are subject to change at any time and can have a substantial impact on an individual’s situation.
Diversification strategies do not guarantee investment returns or eliminate risk of loss. Each asset class has its own risk and return characteristics. The level of risk associated with a particular investment or asset class generally correlates with the level of return the investment or asset class might achieve. Both stocks and bonds involve risk and their returns and risk levels can vary depending on prevailing market and economic conditions. Small-cap stocks are generally more volatile, subject to greater risks, and less liquid than large-company stocks. Bonds are subject to market, interest rate, price, credit/default, call, liquidity, inflation, and other risks. Prices tend to be inversely affected by changes in interest rates. High-yield (junk) bonds have lower credit ratings and are subject to greater risk of default and greater principal risk.
Alternative investments, such as private capital funds, are not suitable for all investors and are available only to persons who are “accredited investors” or “qualified purchasers” within the meaning of U.S. securities laws. While investors may potentially benefit from the ability of private capital funds to potentially improve the risk-reward profiles of their portfolios, the investments themselves can carry significant risks. Private capital funds use complex trading strategies, including hedging and leveraging through derivatives and short selling. These funds often demand long holding periods to allow for a turnaround and exit strategy. Investing in private capital funds involves other material risks including capital loss and the loss of the entire amount invested. A fund’s offering documents should be carefully reviewed prior to investing.