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Learning Center > Strategies for Investors > Risks   Printer Friendly VersionPrinter Friendly Version
Risks

There is no such thing as a risk-free investment. Here are some of the more common types of risk to consider when choosing fixed-income securities.

  • Credit Risk:
    The risk that the issuer will default on its payments of interest and principal on its debt. You can help manage this risk by choosing only investment-grade bonds (rated BBB or higher) or by diversifying among several issues of high yield bonds. Or you can purchase bonds that are insured, a guarantee that interest and principal will be paid in the event of a default by the issuer. The insurance does not guarantee the original price if sold before maturity, or current market value.

  • Market or Interest Rate Risk:
    The market value of bonds will fluctuate with changes in the level of interest rates. When interest rates drop, bond prices generally rise, because the market is willing to pay more for a higher coupon on outstanding bonds. When interest rates rise, bond prices generally fall because the market will pay less for a lower coupon on outstanding bonds. Therefore, your investment, if sold prior to maturity, may be worth more or less than its original cost.

  • Reinvestment Risk:
    The possibility that you will reinvest coupon income from a bond at interest rates that are considerably lower than expected.

  • Call Risk:
    The possibility that an issuer will retire a bond (pay back the principal) before its scheduled maturity date when interest rates decline, leaving you to reinvest your bond proceeds at lower interest rates.

  • Inflation Risk:
    The possibility that the value of your investment may not grow enough to keep up with inflation, reducing your purchasing power as a result.
 
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0171023-00001-00 Ed. 2/2010

Your clients should consider a fund’s investment objectives, risks, charges, and expenses carefully before investing. The prospectus contains this and other information about the fund. Your clients should read it carefully before investing. Contact the JennisonDryden Sales Desk at (800) 257-3893 to obtain a copy of the prospectus.

An investment in our money market funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.  Although the funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the funds. 

Mutual fund investing involves risk.  The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.  There is no assurance the funds’ objectives will be achieved.  Asset allocation and diversification do not assure a profit or protect against loss in declining markets.
 
Your clients should consult with their attorney, accountant, and/or tax professional for advice concerning their particular situation.

JennisonDryden, Prudential Financial, and the Rock Prudential logo are registered service marks of The Prudential Insurance Company of America, Newark, NJ, and its affiliates. Prudential Fixed Income Management and Prudential Real Estate Investors are business units of Prudential Investment Management, Inc (PIM). Quantitative Management Associates, Jennison Associates and PIM are Registered Investment Advisers and Prudential Financial companies. Funds are distributed by Prudential Investment Management Services LLC, a Prudential Financial company, member SIPC.

Mutual Funds: Are not insured by the FDIC or any other federal government agency, may lose value, and are not a deposit of or guaranteed by any bank or any bank affiliate.

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