Still keeping your money on the sidelines because you are nervous about the market? Take a look at this article to see some of the unintended risks of inaction.

1. When it comes to investing, being patient is
generally a good thing. Being passive may not
be. When conditions are uncertain and markets
are volatile, it can be easy to confuse the two.
Today, Morgan Stanley Smith Barney's Global
Investment Committee believes there are signs
that investors may be too passive. Some are
choosing so-called safe strategies—loading up
on cash, for example, or backing away from
investing overseas—that in reality may be
fraught with risk. Often, times like these
present significant opportunities to those
who are proactive about defining and meet-
ing their needs. Knowing where you stand and
putting the appropriate strategies in place can
create value for you now and in the future.
september 2010
summary in brief
The Power
of ProactivityThe Unintended Risks of Inaction
Waiting Until the Time Is Just Right
Timing the market can be an alluring trap. Market rallies
historically record an impressive 45% average return in the
first year coming off recession-related market bottoms.
Fewer Stocks Equal Less Risk
The American Association of Individual Investors reports
that individuals’ allocation to stocks and stock funds in
July 2010 stood at 51.7% of their holdings—below the
historical average of 60%.
When in Doubt, Stay Home
A home-country bias persists even though growth in
global markets has dramatically expanded investment
opportunity.
One Portfolio Brings Retirement Security
The traditional approach treats money that will be
spent in 10 years in just the same way as money you
will need in 10 months.
Watch for these four signs of investor passivity:

2. 2 morgan stanley smith barney | 2010
the power of proactivity
Unfortunately, what often happens is
that investors suffer the worst of the
market decline and then miss out on
much of the recovery, which typically
kicks off with a steep upturn. Market
rallies historically record an im-
pressive 45% average return in the
first year coming off recession-
related market bottoms. Signifi­
cantly, 10% of that return happens
in the first month and 28% hap­pens in
the first six months.
Fewer Stocks Equal Less Risk.
In an effort to reduce exposure to a
volatile stock market, some investors
may have overloaded their portfolios
with perceived safe haven assets. The
American Association of Individual
Investors reports that individuals’ allo-
cation to stocks and stock funds in July
2010 stood at 51.7% of their holdings
—below the historical average of 60%.
Bond holdings came in at 24% of the
total—significantly above the historical
average of 15%.
Are investors shielding themselves
from risk effectively? That depends.
Investors who have upped their bond
I t’s worth taking a close look at
the strategies investors are using in
the hope of mitigating risk. Most often,
the temptation is to focus on short-
term market moves rather than the
longer, more comprehensive view that
is vital to the creation and preservation
of wealth over time. For those who
are willing to be proactive, we believe
times like these are full of opportunity.
WaitING Until the Time Is Just
Right. Many people are waiting
for the stock market to stabilize
and gather upward momentum be-
fore jumping back in. Timing the
market can be an alluring trap.
Time To Rethink
What Risk Is All About
*MSCI All Country World Index used after 1987. MSCI The World Index (excludes emerging markets) used for period before 1987. For MSCI
The World Index, only monthly data are available before 1980. Local currency, price index used in all cases. Daily data used where available.
From the Morgan Stanley Smith Barney Global Investment Committee Chartbook, July 2010. Data as of August 2010.
Source: Ibbotson Associates, Standard and Poor's and Bloomberg. Analysis: Morgan Stanley Smith Barney Global Investment Committee.
The indexes shown are not available for direct investment. The performance depicted does not reflect the deduction of any investment-
related fees or expenses. Past performance is not indicative of future results. For index definition, refer to page 4.
Strong Recoveries
Follow Steep Troughs
Market rallies historically record impressive
returns—45% on average—in the first
year coming off recession-related market
bottoms, with 10% of it occurring in the
first month and 28% coming in the first
six months.
S&P 500 Index
Returns
125%
100%
75%
50%
25%
0%
1 Month
After Trough
6 Months
After Trough
12 Months
After Trough
6/32 3/38 4/42 6/49 9/53 10/57 10/60 5/70 10/74 3/80 8/82 10/90 10/02
10%
28%
45%
Avg 3/09
Date
of Market
Bottom

3. morgan stanley smith barney | 2010 3
holdings after evaluating both their
risk preferences and their long-term
goals have probably made the appro-
priate decision. If the shift only reflects
a desire to flee from the stock market,
however, or if you’ve made a move
into bonds without understanding
just what you own, you may well have
raised rather than lowered the risk in
your portfolio.
When in Doubt, Stay Home. In
times of uncertainty, investors often
take refuge in their own market, and
Americans are no exception. This
home-country bias persists even
though growth in global markets has
dramatically expanded investment
opportunity in faster-growing parts
of the world, particularly the emerg-
ing market economies.
Staying away from the emerging
markets may be a costly mistake. In
fact, the 10% annualized return for the
MSCI Emerging Markets Index over
the past decade eclipsed the slightly
negative return for U.S. stocks, accord-
ing to research from the Global Invest-
ment Committee. Looking ahead, we
expect continued strong growth in
emergingmarketeconomiesandacon-
current expansion in their share of the
global equity market. By 2020, these
markets could account for one-third
of the global equity market value—up
from just 2% in 1990 and more than
double their current 15% share, ac-
cording to projections from the Global
Investment Committee.
One Portfolio Brings Retire-
ment Security. A single portfolio
that is frequently rebalanced has long
been viewed as the smartest, safest
way to prepare for your income needs
in retirement. The problem is that this
approach treats money that will be
spent in 10 years in just the same way
as money you will need in 10 months.
An alternative, comprehensive ap-
proach looks at income needs over the
span of your retirement and seg­ments
your investments accordingly. The
money you need in 20 years is invested
for growth, and the money you need
in the first few years of retirement is
invested conservatively. This approach
may help you avoid having to make ill-
timed sales in your portfolio to meet
immediate cash needs.
Avoiding the Perils. Investor un-
certainty appears to be as high as it has
ever been. It is tempting to go on the
defense—or simply freeze in place. We
encourage you to be proactive about
wealth creation and preservation.
Create—or revisit—a comprehensive
wealth plan that may help meet the
goalsthatareimportanttoyouandyour
family over time. Step back and evalu-
ate whether your investment strategy is
appropriately diversified. Ask whether
your retirement portfolio is invested to
meet your needs now and in the future.
Maybe you’ll decide to hold more
bonds but strategically structure the
portfolio to capture better returns—
or you could raise your exposure to
emerging market economies but focus
on the countries that seem to repre-
sent the least risk. You might even con-
clude that your portfolio is positioned
just the way it should be.
Morgan Stanley Smith Barney has
the intellectual capital and a full range
of planning and investment resources
to help you manage your wealth. Just
as important, the advice you will
receive is informed by the experi-
ence of millions of clients operating in
every major market of the world. We
understand both the temptation to be
passive—and the potential rewards of
being proactive.
Looking ahead,
we expect
continued strong
growth in emerging
market economies
and a concurrent
expansion in their
share of the global
equity market.

4. Morgan Stanley Smith Barney is a global leader in wealth management, providing
essential investment advice to individuals, families and institutions. Operating in
locations around the world, the firm’s 18,000 Financial Advisors employ one of the
industry’s broadest and most objective set of offerings to help clients meet their most
important financial goals. The securities/instruments discussed in this material may
not be suitable for all investors. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Morgan
Stanley Smith Barney recommends that investors independently evaluate specific
investments and strategies, and encourages investors to seek the advice of a Financial
Advisor.
International investing entails greater risk, as well as greater potential rewards
compared to U.S. investing. These risks include political and economic uncertainties of
foreign countries as well as the risk of currency fluctuations. These risks are magnified
in countries with emerging markets, since these countries may have relatively unstable
governments and less established markets and economies.
Bonds are subject to interest rate risk. When interest rates rise, bond prices fall;
generally the longer a bond’s maturity, the more sensitive it is to this risk. Bonds may
also be subject to call risk, which is the risk that the issuer will redeem the debt at its
option, fully or partially, before the scheduled maturity date. The market value of debt
instruments may fluctuate, and proceeds from sales prior to maturity may be more or
less than the amount originally invested or the maturity value due to changes in market
conditions or changes in the credit quality of the issuer. Bonds are subject to the credit
risk of the issuer. This is the risk that the issuer might be unable to make interest and/
or principal payments on a timely basis. Bonds are also subject to reinvestment risk,
which is the risk that principal and/ or interest payments from a given investment may be
reinvested at a lower interest rate.
The SP 500 Index is designed to measure the performance of 500 large cap common
stocks actively traded in the U.S.
MSCI World is a stock market index of 1,500 'world' stocks and is often used as a
common benchmark for 'world' or 'global' stock funds. The index includes a collection of
stocks of all the developed markets in the world, as defined by MSCI.
MSCI EMERGING MARKETS INDEX. This free-float-adjusted market capitalization-
weighted index is designed to measure the performance of 22 emerging equity markets.
The indices are unmanaged. An investor cannot invest directly in an index. They are shown
for illustrative purposes only and do not represent the performance of any specific
investment.
Growth investing does not guarantee a profit or eliminate risk. The stocks of these
companies can have relatively high valuations. Because of these high valuations, an
investment in a growth stock can be more risky than an investment in a company with
more modest growth expectations.
Equity securities may fluctuate in response to news on companies, industries, market
conditions and general economic environment.
Asset allocation and rebalancing do not protect against a loss in declining financial
markets. There may be a potential tax implication with a rebalancing strategy. Please
consult your tax advisor before implementing such a strategy.
Morgan Stanley Smith Barney and its Financial Advisors do not provide tax or legal
advice. Individuals should consult their personal tax and legal advisors before making any
tax or legal related decisions.
Diversification does not guarantee a profit or protect against a loss.
Past performance is not a guarantee of future results.
© 2010 Morgan Stanley Smith Barney LLC. Member SIPC.
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