Concentration risk — The degree of diversification varies significantly from one ETP to another. Certain ETPs target a small universe of securities, such as a specific region or market sector. These ETPs are generally subject to greater market volatility, as well as to the specific risks associated with that sector, region, or other focus.
Correlation risk — Asset classes that have been historically uncorrelated could become positively correlated. This could produce unexpected results for investors and might lead to a decrease in the overall level of diversification in an investor’s portfolio.
Derivatives risk — Certain ETPs use derivatives to track an underlying index or other benchmark, such as a particular commodity or currency. The prices of derivatives’ contracts are inherently volatile, and even small price movements might result in large losses to the ETP.
Foreign investment risk — Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks. All these risks are magnified in emerging markets.
Liquidity risk — The liquidity of an ETP is not only a function of the trading of the ETP itself, but is also directly linked to the liquidity of its underlying securities. Therefore, the degree of liquidity can vary significantly from one ETP to another. An investor’s losses might be exacerbated if no liquid market exists for the ETP’s shares at the time the investor wishes to sell them.
Market risk — ETPs are subject to market volatility and the risks of their underlying securities, which might include the risks associated with investing in smaller companies, foreign securities, commodities, and fixed income investments. Yield and investment return vary; therefore, an investor’s shares, when redeemed or sold, might be worth more or less than their original cost. Diversification and asset allocation might not protect against market risk.
Secondary-market risk — Secondary-market trading in ETP shares might be halted by a stock exchange because of market conditions, extreme market volatility, or other reasons. Further, investors have no assurance that the ETP will continue to meet the requirements necessary to maintain the listing or trading of its shares or that these requirements will remain unchanged.
Spread risk — An ETP might sometimes trade at a premium or discount to its net asset value (NAV). The premium or discount to NAV can lead to differences between the bid and ask of the ETP, referred to as the spread. The ETP’s premium or discount to NAV and its bid and ask spread might be the result of factors such as supply and demand in the market, the lack of liquidity for the ETP of some of its underlying securities, or the bid and ask spreads of the ETP’s underlying securities. For exchange-traded notes, the discount or premium is relative to their indicative value.
Tracking error risk — The return of an index-based ETP is usually different from that of the index it tracks. The difference can be small or large and might result from the cost of managing and operating the ETP, the timing of the ETP’s trades, the ETP’s holding a smaller basket of securities than the complete set of securities held by the index, or the ETP’s holding securities in a different proportion from the index.
The Retiree Health Care Cost Estimate is based on a single person retiring in 2024, 65-years-old, with life expectancies that align with Society of Actuaries’ RP-2014 Healthy Annuitant rates projected with Mortality Improvements Scale MP-2021 as of 2022. Actual assets needed may be more or less depending on actual health status, area of residence, and longevity. Estimate is net of taxes. The Fidelity Retiree Health Care Cost Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, original Medicare. This calculation takes into account Medicare Part B base premiums and cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by original Medicare. This estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care.
