No investment strategy can guarantee a profit or protect against loss
The Select Variable Annuity includes two fixed investment options, the Guaranteed Interest Fund 1 and Guaranteed Interest Fund 8, where available. The general assets of The Northwestern Mutual Life Insurance Company (Northwestern Mutual) solely back the principal and income of the Guaranteed Interest Funds.
The following are some risks associated with investments in various Divisions. The assets of each of the Divisions of the Separate Account are invested exclusively in the shares of one of the portfolios of the underlying funds.
Bonds and other debt obligations are affected by changes in interest rates, inflation risk and the creditworthiness of their issuers. Bond funds have the same interest rate, inflation and credit risks that are associated with the underlying bonds owned by the fund. High yield bonds generally have greater price swings and higher default risks than investment grade bonds. Return of principal is not guaranteed. With a fixed income fund, when interest rates rise, the value of the fund’s existing bonds drops, which could negatively affect overall fund performance. In contrast to owning individual bonds, there are ongoing fees and expenses associated with owning shares of bond funds. The potential leverage created by the use of derivatives by Long-Term U.S. Government Bond Portfolio may cause the Portfolio to be more sensitive to interest rate movements and thus more volatile than other long-term U.S. Government bond funds that do not use derivatives.
Stocks of smaller or newer or mid-sized companies are more likely to realize more substantial growth as well as suffer more significant losses than larger or more established issuers.
Investments in such companies can be both more volatile and more speculative. Investing in small company stocks involves a greater degree of risk than investing in medium or large company stocks. Their securities may also trade less frequently and in lower volumes, making their market prices more volatile.
Equity REITs may be affected by changes in the value of the underlying property owned by the trust, while mortgage REITs may be affected by the quality of any credit extended. Such funds are subject to some of the risks associated with direct ownership of real estate, including market value declines, risks related to general and local economic conditions and increases in interest rates. Investing in special sectors, such as real estate, can be subject to different and greater risks than more diversified investing.
Investors should be aware of the risks of investments in foreign securities, particularly investments in securities of companies in developing nations. These include the risks of currency fluctuation, of political and economic instability and of less well-developed government supervision and regulation of business and industry practices, as well as differences in accounting standards. Emerging and developing markets may be less liquid and more volatile because they tend to reflect economic structures that are generally less diverse and mature and political systems that may be less stable than those in more developed countries.
Each of the Divisions identified as a Russell LifePoints Variable Target Portfolio Series Fund (“LifePoints Fund”) is a fund of funds and diversifies its assets by investing, at present, in other mutual funds (the “Underlying Funds”). Each LifePoints Fund seeks to achieve a specific investment objective by investing in different combinations of the Underlying Funds.
An investment in a Money Market Portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a Money Market Portfolio seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a Money Market Portfolio.
Funds that follow social policies may underperform similar funds that do not have such policies.
Greater liquidity and volatility can also be inherent in investments in complex securities. Funds with a limited number of holdings, including newer funds, may be more greatly affected by any single event or market development than funds that include more holdings.
Exposure to the commodities markets may subject the Portfolio to greater volatility than investments in securities, particularly if the investments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in the overall market movements, commodity index volatility, changes in interest rates or sectors affecting a particular industry or commodity and international economic, political and regulatory developments. The use of leveraged commodity-linked derivatives creates an opportunity for increased return, but also creates the possibility for a greater loss.
Changes in the value of a hedging instrument may not match those of the investment being hedged.
The Dow Jones-UBS Commodity Index Total Return is composed of futures contracts on 20 physical commodities. Investors cannot invest directly in an index.