Cornerstones of Investing Building a long-term investment strategy September 2009 Diane Farber, CFP® CIMA® – First Vice Pr...
Professional profile <ul><li>Education </li></ul>Diane Farber, CFP ® , CIMA ® , First Vice President- Investments Birmingh...
” Benjamin Graham The intelligent investor is likely to need  considerable willpower to keep from  following the crowd. “
Cornerstones of Investing Define specific goals Diversify among investment types Stay invested Periodically review your po...
How does inflation affect your purchasing power? $100,000 today will be worth less tomorrow Source: Karen Stevenson Brown,...
Ibbotson® SBBI® Past performance is no guarantee of future results. Hypothetical value of S1 invested at the beginning of ...
Inflation impacts the returns of stocks, bonds and cash Average annual returns before and after adjusting for inflation So...
Investing in stocks and bonds <ul><li>Stocks </li></ul><ul><li>Ownership in a corporation </li></ul><ul><li>Voting rights ...
Growth through global investing Past performance is no guarantee of future results. Returns expressed in U.S. dollars. Thi...
World stock market capitalization Capitalization calculated at year-end 2007 . Total market capitalization is 539.1 trilli...
The risks of international investing Investing in foreign securities presents certain unique risks not associated with dom...
SECTION 1 Portfolio Diversification
The case for style diversification 1  Estimated Table source: Russell Mellon Analytical Services. Data as of 12/31/08. The...
Reduction of risk over time 1926 – 2008 1-year 5-year 20-year 1-year 5-year 20-year 1-year 5-year 20-year 1-year 5-year 20...
Stocks and bonds: Risk versus return 1970 – 2008 Past performance is no guarantee of future results. Risk and return are m...
The myth of the success of the average investor How can investments do so well and the average investor do so  relatively ...
Feast or Famine: “Average” returns rarely occur  year-by-year S&P 500 Index year-by-year total returns from 1926 to 2008 1...
” Professor Jeremy Siegel Stocks for the Long Run Fear has a greater grasp on human action than does the impressive weight...
Historically, markets recover from crises Source: Underlying data is from the  Stocks, Bonds, Bills, and Inflation ®  (SBB...
SECTION 2 Integrated Planning
Your goal, our focus
Regardless of market conditions, here’s what you should do Revisit your financial plan periodically Create a financial pla...
A 360° view of your financial life A financial plan can Coordinate all your goals and finances Evaluate where you stand to...
A financial goal analysis can help determine the  likelihood of reaching your goals What happens if you get  average retur...
Lessons learned … investment disciplines to follow  <ul><li>Lessons Learned </li></ul><ul><li>Emotion is the biggest obsta...
Take Away  <ul><li>Write down your short-term and long-term goals to provide a clear sense of direction </li></ul><ul><li>...
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Financial Portfolio v3_Farber Sept 26 2009

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Financial Portfolio v3_Farber Sept 26 2009

  1. 1. Cornerstones of Investing Building a long-term investment strategy September 2009 Diane Farber, CFP® CIMA® – First Vice President – Investments Advisory & Brokerage Services 325 North Old Woodward Ave, Ste. 200 Birmingham, MI 48009-6169 248-645-7048 [email_address]
  2. 2. Professional profile <ul><li>Education </li></ul>Diane Farber, CFP ® , CIMA ® , First Vice President- Investments Birmingham, MI <ul><li>Certified Investment Management Analysis </li></ul><ul><ul><li>Wharton School of Business, University of Pennsylvania </li></ul></ul><ul><li>Certified Financial Planner™ </li></ul><ul><ul><li>College for Financial Planning </li></ul></ul><ul><li>School of Social Work: Master of social work </li></ul><ul><ul><li>University of Michigan </li></ul></ul><ul><li>Bachelor of Arts in history and political science </li></ul><ul><ul><li>Boston University </li></ul></ul>Professional Background <ul><li>UBS Financial Services Inc. </li></ul><ul><li>Prudential Securities, Inc. </li></ul>Current licenses and registration <ul><li>General Securities Representative, Series 7 </li></ul><ul><li>Uniform State Securities, Series 63 </li></ul><ul><li>Investment Advisor Representatives, Series 65 </li></ul><ul><li>Life and variable annuity licensed </li></ul>CFP ® and CERTIFIED FINANCIAL PLANNER™ are certification marks owned by Certified Financial Planner Board of Standards, Inc. CIMA ® is a registered certification mark of the Investment Management Consultants Association, Inc. in the United States of America and worldwide.
  3. 3. ” Benjamin Graham The intelligent investor is likely to need considerable willpower to keep from following the crowd. “
  4. 4. Cornerstones of Investing Define specific goals Diversify among investment types Stay invested Periodically review your portfolio
  5. 5. How does inflation affect your purchasing power? $100,000 today will be worth less tomorrow Source: Karen Stevenson Brown, CPA, Retirement Changes Dramatically Over the Years, www.elderweb.com. 1 Average number of years in retirement were estimated by using average life expectancies at the average retirement age. Average life expectancies were obtained from the Center for Disease Control. Average retirement age is calculated by using data from the U.S. Office of Personnel Management. Years 2% 3% 4% 5% Assuming an inflation rate of: Between 1970 and 2004, the average amount of time spent in retirement increased by 48% (from 13 to 19.2 years). 1 5 $90,392 $85,873 $81,537 $77,378 10 $81,707 $73,742 $66,483 $59,874 15 $73,857 $63,325 $54,209 $46,329 20 $66,761 $54,379 $44,200 $35,849
  6. 6. Ibbotson® SBBI® Past performance is no guarantee of future results. Hypothetical value of S1 invested at the beginning of 1926. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Small stocks in this example are represented by the fifth capitalization quintile of stocks on the NYSE for 1926–1981 and the performance of the Dimensional Fund Advisors, Inc. (DFA) U.S. Micro Cap Portfolio thereafter. Large stocks are represented by the Standard & Poor's 500 ® , which is an unmanaged group of securities and considered to be representative of the stock market in general. Government bonds are represented by the 20-year U.S. government bond, Treasury bills by the 30-day U.S. Treasury bill, and inflation by the Consumer Price Index. Underlying data is from the Stocks, Bonds, Bills, and Inflation ® (SBBI ® ) Yearbook, by Roger G. Ibbotson and Rex Sinquefield, updated annually. Government bonds and treasury bills are guaranteed by the full faith and credit of the U.S. government as to the timely payment of principal and interest, while corporate bonds are not guaranteed. Stocks represent ownership in a corporation, while bonds, if held to maturity, offer a fixed rate of return and fixed principal value. Small company stocks are generally more volatile than large company stocks. © 2009 Morningstar, Inc. All rights reserved. 3/1/2009 Stocks, Bonds, Bills, and Inflation 1926 – 2008
  7. 7. Inflation impacts the returns of stocks, bonds and cash Average annual returns before and after adjusting for inflation Source: Ned Davis Research; used with permission. Stocks represented by Standard & Poor’s (S&P) 500 Index, long-term government bonds by 20-year U.S. Treasury bonds, T-Bills by 90-day US Treasury bills and inflation by the Consumer Price Index, which was 3.05% from 1926 – 12/31/07. The S&P 500 Index is an unmanaged, weighted index comprised of 500 widely held common stocks varying in composition and is not available for direct investment. The chart is shown for illustrative purposes only. Returns consist of income, capital appreciation (or depreciation) and currency gains (or losses), and do not guarantee or indicate future results. Certain markets have experienced significant year-to-year fluctuations and negative returns from time to time. Stocks are more volatile and subject to greater risks than other asset classes. Past performance does not guarantee future results.
  8. 8. Investing in stocks and bonds <ul><li>Stocks </li></ul><ul><li>Ownership in a corporation </li></ul><ul><li>Voting rights </li></ul><ul><li>Historically higher returns </li></ul><ul><li>More risk </li></ul>Bonds <ul><li>Debt holder </li></ul><ul><li>Fixed time </li></ul><ul><li>Fixed rate </li></ul><ul><li>Historically lower risk </li></ul>
  9. 9. Growth through global investing Past performance is no guarantee of future results. Returns expressed in U.S. dollars. This is for illustrative purposes only and not indicative of any investment . An investment cannot be made directly in an index. Equities or each country are represented by Morgan Stanley Capital International Indexes and the U.S. stock market by the Standard & Poor's 500 ® , which is an u managed group of securities a d considered to be representative of the stock market in general. The data assumes reinvestment of dividends and is expressed in U.S. dollars. Unlike domestic returns, foreign market returns consist of two main components: market performance and currency fluctuations. Also, all returns are compounded annual returns for the periods shown. Investing in foreign securities presents certain unique risks not associated with domestic investments such as currency fluctuations and political and economic changes. This may result in greater share price volatility. © 2009 Morningstar. Inc. All rights reserved. 3/1/2009 Annual returns of top-performing developed global stock markets United States 5% Denmark 25% Japan 26% Norway 26% Canada 29% 2005 United States 16% Singapore 47% Ireland 48% Portugal 48% Spain 50% 2006 United States 5% Greece 33% Germany 36% Hong Kong 41% Finland 50% 2007 United States -37% Spain -40% United States -37% Switzerland -30% Japan -29% 2008
  10. 10. World stock market capitalization Capitalization calculated at year-end 2007 . Total market capitalization is 539.1 trillion. Estimates are not guaranteed . Investing in foreign securities presents certain unique risks not associated with domestic investments such as currency fluctuations and political and economic changes. This may result in greater share price volatility. World Market Capitalization by Country is from the Morgan Stanley Capital International Blue Book&quot; &quot; and includes the following developed countries: Australia, France, Japan, Spain, Austria, Germany, Netherlands, Sweden, Belgium, Greece. New Zealand, Switzerland, Canada, Hong Kong, Norway, United Kingdom, Denmark, Ireland, Portugal, United States, Finland, Italy, Singapore. The data is expressed in U.S. dollars. Stock market capitalization is calculated at year-end 2007 and is calculated by multiplying the price per share by t he number of outstanding shares and then summing all of the equities traded in a country or region. © 2009 Morningstar, Inc. All rights reserved. 3/1/2009 Year-end 2008
  11. 11. The risks of international investing Investing in foreign securities presents certain unique risks not associated with domestic investments such as currency fluctuations and political and economic change s. This may result in greater share price volatility. © 2009 Morningstar, Inc. All rights reserved. 3/1/2009 Currency risk Economic/political risk Market liquidity risk Differences in accounting standards Costs of investing internationally
  12. 12. SECTION 1 Portfolio Diversification
  13. 13. The case for style diversification 1 Estimated Table source: Russell Mellon Analytical Services. Data as of 12/31/08. The indexes used are the following: Large Cap Growth – Russell 1000 Growth Index; Large Cap value – Russell 1000 Value Index; Mid Cap Growth – Russell Mid Cap Growth Index; Mid Cap Value – Russell Mid Cap Value Index; Small Cap Growth – Russell 2000 Growth Index; Small Cap Value – Russell 2000 Value Index; International Equity – Morgan Stanley Capital International Europe, Australasia, Far East Index (EAFE) Net; US Bonds – Barclays Capital Aggregate Bond Index; S&P 200 – Standard & Poor’s 500 Index; HFRI – HFRI Equity Hedge Index. The past performance of an index is not a guarantee of how your portfolio will perform. Indexes are not available for direct investment and reflect an unmanaged universe of securities, which does not take into account advisory or transaction fees, all of which will reduce the overall return. Prepared by UBS Financial Services Inc. Manager Research Group. All rights reserved. Used with permission. cation does not assure profits or prevent against losses in declining markets. Historical Review of Market Leadership – Year by Year: 1992 – 2008 Mid Growth -44.3% Int’l -43.4% Small Growth -38.5% Mid Value -38.4% Large Growth -38.4% S&P 500 -37.0% Large value -36.9% Small value -28.9% HFRI 1 -26.4% U.S. Bonds 5.2% 2008 Small Value -9.8% U.S. Bonds 4.3% U.S. Bonds 2.4% U.S. Bonds 4.3% U.S. Bonds 4.1% Small Growth -30.3% Int’l -21.4% Small Growth -22.4% Small Value -1.5% Small Value -6.5% Int’l 1.8% U.S. Bonds 3.6% Int’l 11.2% U.S. Bonds -2.9% Large Growth 2.9% Int’l -12.2% Mid Value -1.4% Large Growth 9.1% Small Growth 4.2% Large Growth 6.3% HFRI 20.5% Large Growth -27.9% Large Growth -20.4% Large Growth -22.4% U.S. Bonds -0.8% Small Growth 1.2% U.S. Bonds 9.7% Int’l 6.1% U.S. Bonds 18.5% Small Growth -2.4% U.S. Bonds 9.8% Large Growth 5.0% Large Value -0.2% Mid Growth 10.7% Small Value 4.7% HFRI 7.7% S&P 500 28.7% Mid Growth -27.4% Mid Growth -20.2% Int’l -14.2% Mid Value -0.1% Mid Value 5.1% Small Growth 13.0% Small Growth 11.3% Small Value 25.8% Mid Growth -2.2% S&P 500 10.1% U.S. Bonds 7.4% S&P 500 5.5% HFRI 11.7% S&P 500 4.9% S&P 500 10.9% Large Growth 29.8% S&P 500 -22.1% S&P 500 -11.9% Mid Growth -11.8% Large Value 7.4% U.S. Bonds 8.7% Mid Growth 22.5% Mid Growth 17.5% HFRI 31.0% Mid Value -2.1% Mid Growth 11.2% S&P 500 7.6% U.S. Bonds 7.0% Small Growth 13.4% Large Growth 5.3% Small Growth 14.3% Large Value 30.0% Int’l -15.9% Small Growth -9.2% S&P 500 -9.1% S&P 500 21.0% Large Value 15.6% HFRI 23.4% Mid Value 20.3% Small Growth 31.0% Large Value -2.0% Small Growth 13.4% Small Growth 7.8% Small Growth 7.1% S&P 500 15.8% Large Value 7.1% Mid Growth 15.5% Mid Value 38.1% Large Value -15.5% Large Value -5.6% Large Value 7.0% Int’l 27.0% HFRI 16.0% Large Growth 30.5% Small Value 21.4% Mid Growth 34.0% Small Value -1.6% Mid Value 15.6% Mid Growth 8.7% HFRI 10.5% Mid Value 20.2% HFRI 10.6% Large Value 16.5% Int’l 38.6% Small Value -11.4% HFRI 0.4% HFRI 9.1% Large Growth 33.2% Mid Growth 17.9% Small Value 31.8% Large Value 21.6% Mid Value 34.9% S&P 500 1.3% Large Value 18.1% Large Value 13.8% Int’l 11.2% Large Value 22.3% Mid Growth 12.1% Int’l 20.3% Mid Growth 42.7% Mid Value -9.7% Mid Value 2.3% U.S. Bonds 11.6% Small Growth 43.1% Int’l 20.0% S&P 500 33.4% HFRI 21.8% Large Growth 37.2% HFRI 2.6% Small Value 23.8% HFRI 21.3% Mid Growth 11.4% Small Value 23.5% Mid Value 12.7% Small Value 22.3% Small Value 46.0% HFRI -4.7% U.S. Bonds 8.4% Mid Value 19.2% HFRI 44.2% S&P 500 28.6% Mid Value 34.4% S&P 500 23.0% S&P 500 37.6% Large Growth 2.7% HFRI 27.9% Mid Value 21.7% Large Growth 11.8% Int’l 26.3% Int’l 13.5% Mid Value 23.7% Small Growth 48.5% U.S. Bonds 10.3% Small Value 14.0% Small Value 22.8% Mid Growth 51.3% Large Growth 38.7% Large Value 35.2% Large Growth 23.1% Large Value 38.4% Int’l 7.8% Int’l 32.6% Small Value 29.1% 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992
  14. 14. Reduction of risk over time 1926 – 2008 1-year 5-year 20-year 1-year 5-year 20-year 1-year 5-year 20-year 1-year 5-year 20-year Small Stocks Large Stocks Government bonds Treasury bills Compound Annual return: 11.7% 9.6% 5.7% 3.7% Holding period Past performance is no guarantee of future results. Each bar shows the range of compound annual returns for each asset class over the period 1926 – 2006. This is for illustrative purpose only and not indicative of any investment. An investment cannot be made directly in an index ©2009 Morningstar. Inc. All rights reserved 3/1/2009 Source Small company stocks in this example are represented by the fifth capitalization quintile of stocks on the NYSE for 1926 – 1981 and the performance of the Dimensional Fund Advisors, Inc. IDFA) U.S. Micro Cap Portfolio thereafter. Large-company stocks are represented by the Standard & Poor’s 500 ® , which is an unmanaged group of securities and considered to be representative of the stock market in general Government bonds are represented by the 20-year U.S. government bond, and Treasury bills by the 30-day U.S. Treasury bill The data assumes reinvestment of all income and does not account for taxes or transaction costs Stocks represent ownership in a corporation, while bonds, if held to maturity, offer a fixed rate of return and fixed principal value Small company stocks are generally more volatile than large company stocks Government bonds and treasury bills are guaranteed by the full faith and credit of the U.S. government as to vie timely payment of principal and interest, while corporate bonds are not guaranteed 150% 120 90 60 30 0 -30 -60
  15. 15. Stocks and bonds: Risk versus return 1970 – 2008 Past performance is no guarantee of future results. Risk and return are measured by standard deviation and arithmetic mean, respectively. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Stocks in this example are represented by the Standard & Poor’s 500 ® , which is an unmanaged group of securities and considered to be representative of the stock market in general and bonds by the 20-year U.S. government bond. Risk and return are based on annual data over the period 1970 – 2007 and are measured by standard deviation and arithmetic mean, respectively. Standard deviation measures the fluctuation of returns around the arithmetic average return of the investment. The higher and standard deviation, the greater the variability ( and thus risk) of the investment returns. An investment cannot be made directly in an index. The data assumes reinvestment of all income and does not account for taxes or transaction costs. The portfolio is rebalanced annually. Stock represent ownership in a corporation, while bonds, if held to maturity, offer a fixed rate of return and fixed principal value. © 2009 Morningstar, Inc. All rights reserved. 3/1/2009
  16. 16. The myth of the success of the average investor How can investments do so well and the average investor do so relatively poorly? Source: Lipper, Inc. and Dalbar; used with permission. For illustrative purposes only. Past performance does not guarantee future results . Performance calculated assuming reinvestment of all dividends and capital gains. The S&P 500 Index is an unmanaged, weighted index comprising 500 widely held common stocks varying in composition and is unavailable for direct investment. The Dalbar Average Equity Fund Investor is the rate or return investors earned, based on the length of time shareholders actually remain invested in equity mutual funds. Over the time period 1988-2007, the equity mutual fund shareholders held their mutual funds for an average of 3.1 years. Mutual fund sales, redemptions, exchanges, reinvested dividends and assets under management are based on monthly data provided by the Investment Company Institute. The average annual return of the Dalbar Average Equity Investor is based on all equity funds, represented by the Dalbar Equity Index which was comprised of the S&P 500 Index and the Ibbotson Small Company stock Index. Average annual total returns: 1988-2007
  17. 17. Feast or Famine: “Average” returns rarely occur year-by-year S&P 500 Index year-by-year total returns from 1926 to 2008 1 (all values shown in percentages) Source: Ibbotson Associates and Standard & Poor’s; used with permission. Ibbotson data beginning 12/31/26 through 12/31/70. Standard and Poor’s data beginning 1/1/71 through 12/31/07. The S&P 500 Index is comprised of 500 widely held common stocks varying in composition and is not available for direct investment. Past performance does not guarantee future results. Performance is calculated assuming reinvestment of all dividends and capital gains on a daily basis. 1 As of 10/21/08. <ul><li>8% to 12% </li></ul><ul><li>1926 11.62 </li></ul><ul><li>1959 11.96 </li></ul><ul><li>1968 11.06 </li></ul><ul><li>10.08 </li></ul><ul><li>2004 10.88 </li></ul>Less than-20% 1930 -24.90 1931 -43.34 1937 -35.03 1974 -26.47 2002 -22.10 2008 1 -33.83 -20% to -12% 1973 -14.69 -12% to -8% 1929 -8.42 1932 -8.19 1940 -9.78 1941 -11.59 1946 -8.07 1957 -10.78 1962 -8.73 1966 -10.06 1969 -8.50 2000 -9.10 2001 -11.89 -8% to 0 1934 -1.44 1939 -0.41 1953 -0.99 1977 -7.16 1981 -4.92 1990 -3.10 <ul><li>0 to 8% </li></ul><ul><li>1947 5.71 </li></ul><ul><li>1948 5.50 </li></ul><ul><li>1956 6.56 </li></ul><ul><li>1960 0.47 </li></ul><ul><li>1970 4.01 </li></ul><ul><li>1978 6.57 </li></ul><ul><li>1984 6.27 </li></ul><ul><li>1987 5.25 </li></ul><ul><li>1992 7.62 </li></ul><ul><li>1.32 </li></ul><ul><li>2005 4.91 </li></ul><ul><li>2007 5.49 </li></ul>12% to 20% 1944 19.75 1949 18.79 1952 18.37 1964 16.48 1965 12.45 1971 14.30 1972 18.99 1979 18.61 1986 18.67 1988 16.61 2006 15.80 <ul><li>More than 20% </li></ul><ul><li>1927 37.49 </li></ul><ul><li>1928 43.61 </li></ul><ul><li>1933 53.99 </li></ul><ul><li>1935 47.67 </li></ul><ul><li>1936 33.92 </li></ul><ul><li>1938 31.12 </li></ul><ul><li>1942 20.34 </li></ul><ul><li>1943 25.90 </li></ul><ul><li>1945 36.44 </li></ul><ul><li>1950 31.71 </li></ul><ul><li>1951 24.02 </li></ul><ul><li>1954 52.62 </li></ul><ul><li>1955 31.56 </li></ul><ul><li>1958 43.36 </li></ul><ul><li>1961 26.89 </li></ul><ul><li>1963 22.80 </li></ul><ul><li>1967 23.98 </li></ul><ul><li>1975 37.23 </li></ul><ul><li>1976 23.93 </li></ul><ul><li>1980 32.50 </li></ul><ul><li>1982 21.55 </li></ul><ul><li>1983 22.56 </li></ul><ul><li>1985 31.73 </li></ul><ul><li>1989 31.69 </li></ul><ul><li>1991 30.47 </li></ul><ul><li>1995 37.58 </li></ul><ul><li>1996 22.96 </li></ul><ul><li>1997 33.36 </li></ul><ul><li>1998 28.58 </li></ul><ul><li>21.04 </li></ul><ul><li>2003 28.68 </li></ul>The S&P 500 Index has grown at about its average rate of return of 10.30% only 5 times in 82 years. 8%<x<12% 1926 11.62 1959 11.96 1968 11.06 1993 10.08 2004 10.88
  18. 18. ” Professor Jeremy Siegel Stocks for the Long Run Fear has a greater grasp on human action than does the impressive weight of historical evidence. “
  19. 19. Historically, markets recover from crises Source: Underlying data is from the Stocks, Bonds, Bills, and Inflation ® (SBBI ® ) Yearbook, by Roger G. Ibbotson and Rex Sinquefield, updated annually. Past performance is no guarantee of future results. Hypothetical value of $1 invested at the beginning of 1926. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2009 Morningstar, Inc. All rights reserved. 3/1/2009 Large stocks are represented by the Standard & Poor’s 500, which is an unmanaged group of securities and considered to be representative of the stock market in general. Government bonds are represented by the 20-year U.S. government bond, Treasury bills by the 30-day U.S. Treasury bill, and inflation by the Consumer Price Index. Underlying data is from the Stocks, Bonds, Bills, and Inflation ® (SBBI ® ) Yearbook, by Roger G. Ibbotson and Rex Sinquefield, updated annually. Stocks represent ownership in a corporation, while bonds, if held to maturity, offer a fixed rate of return and fixed principal value. Small company stocks are generally more volatile than large company stocks. Government bonds and treasury bills are guaranteed by the full faith and credit of the U.S. government as to the timely payment of principal and interest, while corporate bonds are not guaranteed. $9,549 $2,049 $99 $21 $12 Great Depression Sept 1929 – June 1932 WWII Oct 1939 – Dec 1941 1970s Oil Crisis Jan 1973 – Oct 1974 1987 Crash Oct 5 – Oct 19 1987 Dot com and 9/11 March 2000 – Oct 2002 0.10 1 10 100 1,000 $10,000 1926 1936 1946 1956 1966 1976 1986 1996 2006 Compound annual return 1926 – 2008: Small company stocks 11.7% Government bonds 5.7% Inflation 3.0% Large company stocks 9.6% Treasury bills 3.7%
  20. 20. SECTION 2 Integrated Planning
  21. 21. Your goal, our focus
  22. 22. Regardless of market conditions, here’s what you should do Revisit your financial plan periodically Create a financial plan to guide your decisions Discuss and outline your short- and long-term goals
  23. 23. A 360° view of your financial life A financial plan can Coordinate all your goals and finances Evaluate where you stand today versus your goals Identify potential insurance needs Assess your cash flow needs Review your investments and asset allocation strategy Address estate planning needs A financial plan is not set in stone
  24. 24. A financial goal analysis can help determine the likelihood of reaching your goals What happens if you get average returns? What happens if you experience bad market conditions? What is your probability of success? Are you in your confidence zone? Important: The projections or other information generated by FGA regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Likelihood of funding all goals Estimated % of goals funded Average return ?% Bad timing ?% Probability of success ?% ? Confidence zone
  25. 25. Lessons learned … investment disciplines to follow <ul><li>Lessons Learned </li></ul><ul><li>Emotion is the biggest obstacle to investor success </li></ul><ul><li>Periodic and painful declines are part of equity investing </li></ul><ul><li>Diversification is never out of style </li></ul><ul><li>Investment Disciplines </li></ul><ul><li>Build a balanced portfolio: </li></ul><ul><ul><li>Based on your time horizon and risk tolerance </li></ul></ul><ul><ul><li>Strategically and insightfully constructed </li></ul></ul><ul><ul><li>Diversified by asset class, region, sector, and security </li></ul></ul><ul><li>Review your portfolio at least once a year; rebalance when your portfolio’s asset allocation shifts away from your original investment goals </li></ul><ul><li>Have a plan, stick with it </li></ul>
  26. 26. Take Away <ul><li>Write down your short-term and long-term goals to provide a clear sense of direction </li></ul><ul><li>Complete a financial plan through an online vendor or your financial advisor and review annually </li></ul><ul><li>Maximize your annual retirement contribution in a 401(k), 403(b), 457, Traditional IRA, or Roth IRA </li></ul>

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