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AN INVESTOR'S RETURN Investor  Return Investor  Behavior Investment Results = X Investors and Financial Professionals Inve...
THE STOCK MARKET, FUNDS & FUND OWNERS 12/31/81 – 12/31/02 Davis Large Cap Composite  15.73%  19.34%  3.53%  12.02%  13.66%...
TIMING THE MARKET IS A LOSER'S GAME Hypothetical Value of $10,000 Invested in the S&P 500® from 12/31/25 – 12/31/04 Source...
BEHAVING EMOTIONALLY WITH YOUR MONEY CAN DESTROY INVESTMENT RESULTS... . For illustrative purposes only.  This is neither ...
FILTER OUT THE NOISE “  Pessimism is the most common cause of low prices.  We want to do business in such an environment, ...
FILTER OUT THE NOISE RANGE BOUND MARKET   HIGH ENERGY PRICES ECONOMIC UNCERTAINTY   TENSION IN THE MIDDLE EAST 1972-1981 R...
ANNUAL RETURNS FOR THE S&P 500 <ul><ul><li>1975 +37.20 </li></ul></ul><ul><ul><li>1976 +23.80 </li></ul></ul><ul><ul><li>1...
WHAT IF THE STOCK MARKET DOESN'T GO UP? 2500 2000 1500 1000 500 0 $25,000 20,000 15,000 10,000 5,000 0 1972  1973  1974  1...
=  Profits for    $ $ $ $ ≠  Profits for Viewers  =  Emotional Investor
...ENCOURAGE YOUR CLIENTS TO CAREFULLY EVALUATE SOURCES OF FINANCIAL INFORMATION... NASDAQ 1971-2000   Percent Intra-Day P...
AS SEEN ON CNBC, FEBRUARY 12, 2004 “ Crawford’s accuracy has remained amazingly consistent. From May 1977 to early 1981, h...
...BECAUSE FOLLOWING MEDIA &quot;ADVICE&quot; CAN BE DISASTROUS Fortune’s  Year 2000 Guide to Retiring Rich The slide shou...
THE FUTILITY OF FORECASTS Average Forecasted DJIA Close vs. Actual DJIA Close:  1999 – 2003* Forecasted Close Actual Close...
DON’T FALL IN LOVE My Company Stock ☺ $500,000 GE: Down 19% (11/00~ 12/05) $405,000  (GE was down 51% from 11/00 ~ 1/03) G...
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  1. 1. AN INVESTOR'S RETURN Investor Return Investor Behavior Investment Results = X Investors and Financial Professionals Investment Managers
  2. 2. THE STOCK MARKET, FUNDS & FUND OWNERS 12/31/81 – 12/31/02 Davis Large Cap Composite 15.73% 19.34% 3.53% 12.02% 13.66% Past performance is not a guarantee of future results. Davis Large Cap Composite returns are net of hypothetical 3% maximum wrap fee. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Source: John C. Bogle speech “Back to the Future,” January 14, 2003. The Stock Market is represented by the S&P 500® Index. “Fund Return” is the average equity fund. “Return is for the period 12/31/81 – 12/31/02. 13.1% 10.0% 2.0% $1.50 $6.70 $11.50 100% 75% 50% 25% 0% MARKET RETURN AVERAGE FUND RETURN INVESTOR RETURN DAVIS LARGE CAP COMPOSITE COMPOUNDED AT 16.25% THE TIMING AND SELECTION THE TIMING AND SELECTION PENALTY PENALTY As of September 30, 2005 1 Year 3 Years 5 Years 10 Years Inception (1969)
  3. 3. TIMING THE MARKET IS A LOSER'S GAME Hypothetical Value of $10,000 Invested in the S&P 500® from 12/31/25 – 12/31/04 Source: Ibbotson. As of 12/31/04. For illustrative purposes only. The graphs and charts in this presentation are used to illustrate specific points. No graph, chart, formula or other device can, by itself, guide an investor as to what securities should be bought or sold or when to buy or sell them. See endnotes for definitions of S&P 500®. Treasury Bills are backed by the U.S. Government and as such are considered a riskless investment. In Millions $30 $25 $20 $15 $10 $5 $0 $25,330,000 $177,500 $178,700 S&P 500® S&P 500® minus Treasury Bills best 40 months
  4. 4. BEHAVING EMOTIONALLY WITH YOUR MONEY CAN DESTROY INVESTMENT RESULTS... . For illustrative purposes only. This is neither a graph of actual performance nor a guarantee of future price appreciation. “ APPREHENSION” FEAR” “ PANIC” “ EXCITEMENT” “ EXHILIRATION” “ EUPHORIA” SELL HERE BUY HERE
  5. 5. FILTER OUT THE NOISE “ Pessimism is the most common cause of low prices. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It’s optimism that is the enemy of the rational buyer.” WARREN BUFFETT The Essential Buffett
  6. 6. FILTER OUT THE NOISE RANGE BOUND MARKET HIGH ENERGY PRICES ECONOMIC UNCERTAINTY TENSION IN THE MIDDLE EAST 1972-1981 RANGE BOUND MARKET HIGH ENERGY PRICES ECONOMIC UNCERTAINTY TENSION IN THE MIDDLE EAST
  7. 7. ANNUAL RETURNS FOR THE S&P 500 <ul><ul><li>1975 +37.20 </li></ul></ul><ul><ul><li>1976 +23.80 </li></ul></ul><ul><ul><li>1977 -7.20 </li></ul></ul><ul><ul><li>1978 +6.60 </li></ul></ul><ul><ul><li>1979 +18.40 </li></ul></ul><ul><ul><li>1980 +32.40 </li></ul></ul>Source: Morningstar These years were chosen to show an example of an increasing market during uncertain times. Past performance is not a guarantee of future results. See the endnotes for a definition of the S&P 500® Index. 1975 - 1980 <ul><ul><li>2000 -9.10 </li></ul></ul><ul><ul><li>2001 -11.08 </li></ul></ul><ul><ul><li>2002 -22.09 </li></ul></ul><ul><ul><li>2003 +28.70 </li></ul></ul><ul><ul><li>2004 +10.90 </li></ul></ul>2000 - 2004 Source: Morningstar Past performance is not a guarantee of future results. See the endnotes for a definition of the S&P 500® Index.
  8. 8. WHAT IF THE STOCK MARKET DOESN'T GO UP? 2500 2000 1500 1000 500 0 $25,000 20,000 15,000 10,000 5,000 0 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 DJIA index Dollar value 11/14/72 10/12/82 *Dow Jones Industrial Average is a price-weighted average of 30 actively traded industrial and service-oriented blue chip stocks. ICA vs. the Dow* A $10,000 investment in a “flat” stock market (Nov 14, 1972 – Oct 12, 1982) The Dow at 1003 The Dow at 1004 The Dow with Dividends reinvested Investment in ICA (dividend Reinvested) $23,273
  9. 9. = Profits for $ $ $ $ ≠ Profits for Viewers = Emotional Investor
  10. 10. ...ENCOURAGE YOUR CLIENTS TO CAREFULLY EVALUATE SOURCES OF FINANCIAL INFORMATION... NASDAQ 1971-2000 Percent Intra-Day Price Change Average Daily Household Viewership of CNBC (In Thousands) 2.5 2.0 1.5 1.0 0.5 0.0 350 300 250 200 150 100 50 0 1971 1975 1980 1985 1990 1995 2000 Source: Union Bank of Switzerland. This was a “one-time” study conducted for the period from 1971 – 2000. AVERAGE DAILY VOLATILIY 1971 – 2000 = 0.67% AVERAGE DAILY HOUSEHOLD VIEWERSHIP OF CNBC
  11. 11. AS SEEN ON CNBC, FEBRUARY 12, 2004 “ Crawford’s accuracy has remained amazingly consistent. From May 1977 to early 1981, he was correct on Buy and Sell points 9 times out of 10” – Chicago Tribune, 1981 Crawford Perspectives is a financial markets advisory service utilizing technical analysis and planetary cycles research to determine effective market-timing strategy. Since 1977, its founder, Arch Crawford , has edited Crawford Perspectives, a comprehensive market-timing monthly newsletter for subscribers that has earned praise from investors around the world. “… a financial markets advisory service utilizing technical analysis and planetary cycles to determine effective market-timing strategy.”
  12. 12. ...BECAUSE FOLLOWING MEDIA &quot;ADVICE&quot; CAN BE DISASTROUS Fortune’s Year 2000 Guide to Retiring Rich The slide should not be considered a recommendation to buy, sell or hold any of the securities mentioned. Past performance is not a guarantee of future results. -57% $ 43,179 $ 100,000 TOTAL INVESTMENT -53% $ 36.39 $ 68.38 Viacom -74% $ 29.27 $ 51.77 Univision -64% $ 13.72 $ 42.03 Oracle -95% $ 3.49 $ 68.23 Nortel Networks -67% $ 15.67 $ 50.50 Nokia -28% $ 55.52 $ 83.25 Morgan Stanley +26% $ 54.44 $ 42.97 Genentech -100% - $ 64.50 ENRON -64% $ 11.96 $ 33.63 Charles Schwab -85% $ 32.28 $ 218.94 Broadcom % RETURN DEC 31, 2004 PRICE JULY 1, 2000 PRICE COMPANY
  13. 13. THE FUTILITY OF FORECASTS Average Forecasted DJIA Close vs. Actual DJIA Close: 1999 – 2003* Forecasted Close Actual Close 1999 2000 2001 2002 2003 “… An economic forecaster is like a cross-eyed javelin thrower: they don’t win many accuracy contests, but they keep the crowd’s attention.” ANONYMOUS *Source: Barron’s Online.
  14. 14. DON’T FALL IN LOVE My Company Stock ☺ $500,000 GE: Down 19% (11/00~ 12/05) $405,000 (GE was down 51% from 11/00 ~ 1/03) General Motors & Amerigroup: Down 51% $245,000 Charles Schwab: Down 57% (9/00 ~ 12/05) $215,000 Ford: Down 69% (5/99 ~ 12/05) $155,000 Tyco: Down 83% (11/01~3/02) $85,000 Worldcom: Down 100% $0 $500,000 @4% = $1667/mo A loss of 19% = $1350/mo A loss of 51% = $816/mo A loss of 57% = $716/mo A loss of 69% = $517/mo A loss of 83% = $283/mo Worldcom = Back to work @ Age 65
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