The 1990s bull market left many investment portfolios unbalanced, with overweighted equity portions. Due to this, many investors have begun to reassess their portfolios in order to reduce exposure to volatile equity markets. This is Morgan Stanley's recommended Conservative Asset Allocation Model.

This Conservative Investing model takes into account the two major segments of the capital markets - bonds and stocks - as well as cash and cash equivalents. Using our analysts' current view of the markets and the associated risk/reward ratios, Asset Allocation models suggest how you might choose to invest, given current market conditions.

Bonds are an important part of a balanced portfolio. We offer conservative, moderate, aggressive and tax-advantaged fixed income model portfolios to let you determine which one will best meet your specific risk tolerance and financial objectives.

Keep in mind that this asset allocation model is just that - a model, and not a specific plan for all investors. It serves as a guideline and important reminder that a balanced portfolio designed to meet your financial goals should include the proper mix of assets. Ask your Morgan Stanley Financial Advisor about our most current asset allocation models.

The Check-A-Month Strategy. Many individuals need steady income to help meet their financial objectives. Retirees need to meet fixed living expenses, for instance, and baby boomers may need to cover the additional expenses of child care or aging parent care. Whatever your situation, your Morgan Stanley Financial Advisor can recommend a "Check-A-Month" ladder portfolio to generate monthly income. We can help you select fixed income securities for your portfolio that meet your specific income and credit quality requirements.

The Ladder Portfolio Strategy. Moderate investors looking for growth opportunities through capital appreciation can benefit from the Ladder Portfolio Strategy to meet future goals such as tuition payments. A common mistake in building bond portfolios is the failure to diversify by maturity. A portfolio structured with only short-term securities, although liquid, may limit your ability to generate a steady stream of income over time. As short-term securities are "rolled over" or reinvested, the maturing principal is frequently exposed to interest rate changes and reinvestment risk - that is, the risk of having to reinvest principal at potentially lower rates.

Since you can't predict exactly when or how interest rates will change, it can be to your benefit to employ the Ladder Portfolio Strategy. A ladder portfolio provides the flexibility to help you be effective in managing your bond investments in every interest rate environment. When maturing principal becomes available for reinvestment, you can choose to reinvest that portion of your ladder in either shorter- or longer-term bonds, depending on the existing interest rate scenario and your financial situation.

The Principal Guaranteed Strategy. The key to the Principal Guaranteed Strategy's effectiveness is zero coupon bonds. Since zeros are sold at a discount to their maturity value, an investor planning for future college expenses can purchase discounted zeros with a maturity value equal to the par value of the bond. As long as the zeros are held to maturity, the investor should receive all of the original principal. Typically, Treasury STRIPS are used as part of this strategy because they are backed by the full faith and credit of the U.S. Government.