Rising Inflation and Interest Rate Strategies
Inflation fluctuates dramatically over time and remains a potential threat to your long-term purchasing power.
Investment Edge offers a Charter Portfolio constructed to help address inflation concerns.
U.S. inflation exhibited dramatic swings from 1940-2014. While subdued during the past 20 years, inflation may accelerate again.
Source: U.S. Department of Labor, Consumer Price Index — All Urban Consumer (CPI - U).
Will interest rates rise from historically low levels?
Investment Edge offers Charter Portfolios that seek to generate total return (income plus growth of capital) by investing in assets that may benefit from interest rate fluctuations.
The 10-year Treasury Interest Rate has been unusually low since 2008. There could be a reversion to more historical levels, depending upon economic growth, inflation and other market dynamics.
Source: Board of Governors of the Federal Reserve System.
Annual interest rate is the average of the average of each calendar month
Consider these well-diversified portfolios.
Individual Investment Options
See Important Information On Specific Investment Risks.
Important Information on Specific Investment Risks:
Alternative funds use investment strategies that differ from the buy-and-hold strategy typical in the mutual fund industry. Compared to a traditional mutual fund, an alternative fund typically holds more aggressive non-traditional investments and employs more complex trading strategies. Alternative investments can be less liquid and more volatile than traditional investments and often lack longer term track records. Investors considering alternative funds should be aware of their unique characteristic and risks as described in the prospectus before investing.
Correlation is a statistical measure of how two investments more in relation to each other. Low correlation suggests that two investments are less likely to more in the same direction in terms of performance.
Certain Asset Allocation Portfolios are structured as a “fund of funds” which is portfolio that specializes in buying shares of other portfolios rather than individual securities. The “fund of funds” structure may have a higher cost than if you invest directly in the underlying portfolios.
For investment options in the International, Emerging Market and Global categories, international securities carry additional risks including currency exchange fluctuation and different government regulations, economic conditions and accounting standards.
High yield bonds, commonly known as “junk bonds”, are subject to high level of credit and market risks.
For investment options in the Small/Mid Cap categories, stocks of small and middle size companies may have less liquidity than those of larger companies and may be subject to greater price volatility than the overall stock market. Small and middle company stocks involve greater risk than is customarily associated with more established companies.
For the non-diversified portfolios, more of the portfolios’ assets may be focused in a smaller number of issues or one sector of the market, which may make the value of the portfolios’ shares more susceptible to certain risks than shares of a diversified portfolio. Investing in stock of new and unseasoned companies may provide the potential for greater returns, but is generally more volatile and the risks of loss of principle may be greater than portfolios investing in stocks of larger, more established companies.
Bond investments are subject to interest rate risk so that when interest rates rise, the price of bonds can decrease and the investor can lose principal value.
Unlike other fixed-income securities, the value of inflation-protected securities are not significantly impacted by inflation expectations because their interest rates are adjusted for inflation. Generally, the value of inflation-protected securities will fall when real interest rates rise and rise when real interest rates fall. Even though large cap stocks are perceived to be less risky than smaller cap companies, they still involve risks, i.e., they will fluctuate in value and you can lose money.
Investments in commodity-related instruments are subject to the risk that the performance of the overall commodities market declines and that weather, disease, political, tax, and other regulatory developments adversely impact the value of commodities, which may result in a loss of principal and interest. Commodity-linked investments face increased price volatility, credit, and issuer risks compared with their underlying measures.
Investing in value stock is based upon a portfolio’s manager subjective assessment of fundamentals of the companies he believes are undervalued. The style of investing may increase the volatility of the portfolio and may not produce the intended results over short of long time periods
Whether you're selecting from stocks, bonds, or alternatives, it's important to weigh the potential risks and rewards of any investment. Because alternatives tend to be less familiar than traditional investments like equities and fixed income, below are some of the unique risks that could be associated with the alternative options in our investment line up. Please see detailed alternatives section for features, potential benefits and risks associated with individual funds.
For the purpose of this website, we have highlighted many non-traditional (alternative) investments that use a different approach to investing than do traditional investments. Some of these strategies are available for direct investment through standalone investment options or indirectly, through certain Asset Allocation Portfolios which offer exposure to these investments. While many of these investments are generally accepted as non-traditional (alternative) investments, this may not be an all-inclusive list from the perspective of other industry sources and investment management professionals.
Commodities Regulatory and Tax-The U.S. Commodity Futures Trading Commission (the "CFTC”) and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including the retroactive implementation of speculative position limits or higher margin requirements, establishment of daily limits, and the suspension of trading, which could adversely affect the portfolios. Future regulatory developments may impact the portfolios' ability to invest in commodity linked derivatives.
Commodity- Commodities investments and/or commodity-linked derivative instruments, especially if leveraged, may entail greater volatility from a variety of causes than traditional securities.
Commodity-linked Derivatives-The value of commodity-linked derivatives will fluctuate based on changes in the underlying commodity or related index and may entail greater volatility from causes, including drought, floods, weather, livestock disease, embargoes, tariffs, and international economic, political, and regulatory developments. The portfolios may also be subject to counterparty risk due to the limited number of counterparties.
Commodity-linked Notes-Commodity-linked notes involve substantial risks, including commodity risk, general derivatives risk, loss of interest and principal, lack of secondary market, and greater volatility that do not affect traditional securities.
Convertible Securities-Convertible securities have both debt and equity characteristics. Equities may have greater potential growth, but also higher volatility. The value of the convertible and debt securities may fall when interest rates rise. Longer duration securities may be more volatile and sensitive to interest rate changes than the underlying common stock.
Currency- A portfolio's net asset value could decline as a result of changes in the exchange rates between foreign currencies and the U.S. Dollar. Certain countries may impose restrictions that block principal and interest payments to investors outside the country.
Derivatives-The portfolios may invest in derivative instruments such as swaps, options, futures contracts, forward currency contracts, indexed and asset-backed securities, to be announced (TBAs) securities, interest rate swaps, credit default swaps, and certain exchange-traded funds that involve risks including liquidity, interest rate, market, currency, counterparty, credit and management risks, mispricing or improper valuation, low correlation with the underlying asset, rate, or index and could lose more than originally invested.
Distressed Debt-The portfolios may invest in securities of issuers that are, or will be, involved in reorganizations, financial restructurings, or bankruptcy (also known as "distressed debt"). The portfolios may lose a portion or all or its investment and incur higher expenses trying to protect its interests in distressed debt.
Forward and Futures Contracts-Successful use of futures and forwards is dependent upon the subadvisors' skill and experience with those instruments and include risks such as imperfect correlation, potentially unlimited losses, inability to predict movements or direction, counterparty default and margin requirements resulting in a disadvantageous sale.
Forward Foreign Currency Exchange Contracts-Forward foreign currency exchange contracts allow the portfolios to establish a fixed rate of exchange for a future point in time and do not eliminate fluctuations in the value of non-U.S. securities, which can minimize returns.
Gold-The portfolios may be concentrated in one industry and susceptible to financial, economic, political, or market events, as well as government regulation, impacting the gold industry. Fluctuations in the price of gold often dramatically affect the profitability of companies in the gold industry.
Hedging-The portfolios may attempt to hedge (protect) against currency risks using forward foreign currency exchange contracts where available and advantageous to the portfolios. The portfolios may also use futures, swaps, and other derivative instruments to hedge risk and may invest a small amount relative to the amount of risk assumed.
Illiquid Securities-Illiquid securities may be difficult to quickly sell and may have to be sold below current value.
Infrastructure Companies Investments-Infrastructure companies securities are more susceptible to adverse economic or regulatory occurrences affecting their industries, including capital construction interest rate, high leverage, regulatory costs, surplus capacity, increased competition, reasonable fuel prices, energy conservation policies, service interruption, tariffs and taxes, innovations in technology, market demand, terrorist acts, and environmental damage.
Natural Resources-This type of portfolio is more vulnerable to the price movements of natural resources and factors that particularly affect the oil, gas, mining, energy, chemicals, paper, steel, or agriculture sectors than a more broadly diversified portfolio.
Options-Writing call options can reduce the risk of owning equity securities, but it limits the opportunity to profit from an increase in the market value of stocks. Unusual market conditions may reduce the effectiveness of the portfolio's option strategies and may not reduce the portfolio's volatility to the extent desired.
Precious Metals-related Securities-Prices of precious metals and of precious metal related securities historically have been very volatile, which may adversely affect the financial condition of companies involved with precious metals. Inflation and changes in demand may affect the prices of precious metals and related securities.
Real Estate Investment-This investment may be closely linked to the performance of the real estate markets and may rise and fall more than the value of shares of a fund invested in a broader range of companies.
Regulation of Derivatives-It is possible that government regulation of various types of derivative instruments, including futures and swap agreements, may limit or prevent a fund from using such instruments as part of its investment strategy, which could negatively impact a fund.
Repurchase Agreements, Purchase and Sale Contracts-If the counterparty defaults on its obligation, the portfolios may suffer delays, incur costs, or lose money in exercising its rights under the agreement. If the seller fails to repurchase the security in either situation and the market value of the security declines, the portfolios may lose money
Reverse Repurchase Agreements-Reverse repurchase agreements involve the sale of securities held by the fund with an agreement to repurchase the securities at an agreed-upon price, date, and interest payment. The other party may fail to return the securities in a timely manner or at all, resulting in a loss to the fund.
Sectors-Securities held by the portfolios could underperform other funds investing in similar asset classes or comparable benchmarks because of the portfolio managers' choice of securities or sectors for investment.
Sovereign Debt-These investments are subject to the risk that a governmental entity may delay or refuse to pay interest or repay principal on its sovereign debt, due, for example, to cash flow problems, insufficient foreign currency reserves, political considerations, the relative size of the governmental entity's debt position in relation to the economy or the failure to put in place economic reforms required by the International Monetary Fund or other multilateral agencies. There is no legal process to collect all or part of the principal or interest due.
Swaps-Swap agreements have default risk with the counterparty and risk that a portfolio will not be able to meet its obligations to pay the other party to the agreement.
Important Note AXA believes that education is a key step toward addressing your financial goals, and we've designed this material to serve simply as an informational and educational resource. Accordingly, the information on this website does not offer or constitute investment advice and makes no direct or indirect recommendation of any particular product or of the appropriateness of any particular investment-related option. Your needs, goals and circumstances are unique, and they require the individualized attention of your financial professional.
“Tax-efficient distributions” refers to options where a portion of the distribution is a return of cost basis and thus excludable from taxes.
What is a variable annuity?
A variable annuity is a tax-deferred financial product designed to allow investors to invest for growth potential and provide income for retirement or other long-term life goals. In essence, an annuity is a contractual agreement in which payment(s) are made to an insurance company, which agrees to pay out income or a lump sum amount at a later date. Variable annuities are subject to market risk including loss of principal. There are fees and charges associated with a variable annuity contract, which include, but are not limited to, operations charges, sales and withdrawal charges and administrative fees. The withdrawal charge declines from 6% to 3% over five years for Investment Edge. Earnings are taxable as ordinary income when distributed and may be subject to an additional 10% federal tax if withdrawn before age 59 1/2.
This content is not a complete description of all material provisions of the variable annuity contract. Please click here for the Investment Edge prospectus. The prospectus contains more complete information, including investment objectives, risks, charges, expenses, limitations and restrictions.
There are certain contract limitations and restrictions associated with an Investment Edge contract. For costs and complete details of coverage, speak to your financial professional/insurance licensed registered representative. Certain types of contracts, features and benefits may not be available in all jurisdictions. AXA Equitable offers other variable annuity contracts with different fees, charges and features.
If you are purchasing an annuity contract to fund an Individual Retirement Account (IRA) or employer sponsored retirement plan, you should be aware that such annuities do not provide tax-deferral benefits beyond those already provided by the Internal Revenue Code. Before purchasing one of these annuities, you should consider whether its features and benefits beyond tax deferral meet your needs and goals. You may also want to consider the relative features and benefits of these annuities with any other investments that you may use in connection with your retirement plan or arrangement.
Not every contract is available through the same selling broker/dealer.
This website was prepared to support the promotion and marketing of AXA Equitable variable annuities. AXA Equitable, its distributors and their respective representatives do not provide tax, accounting or legal advice. Any tax statements contained herein were not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state or local tax penalties.
Please consult your own independent advisors as to any tax, accounting or legal statements made herein.
The Investment Edge 15 variable annuity is issued by AXA Equitable Life Insurance Company, New York, NY 10104. Co-distributed by affiliates AXA Advisors, LLC and AXA Distributors, LLC. (Members FINRA, SIPC.)
Contract form # ICC13IEBASE1, ICC13IEBASE2 and any state variations.
“AXA” is the brand name of AXA Equitable Financial Services, LLC and its family of companies, including AXA Equitable Life Insurance Company, AXA Advisors, LLC and AXA Distributors, LLC. AXA S.A. is a French holding company for a group of international insurance and financial services companies, including AXA Equitable Financial Services, LLC. The obligations of AXA Equitable Life Insurance Company are backed solely by their claims-paying ability.