Market Volatility

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  • Market Volatility

    1. 1. EO077 252783 9/08
    2. 2. No Bank Guarantee May Lose Value Not FDIC Insured
    3. 3. The stock market has been choppy Monthly stock market returns June 2007–June 2008 Source: Standard & Poor’s. Stocks are represented by the S&P 500 Index, an unmanaged index of common stock performance. You cannot invest directly in an index. Past performance does not guarantee future results. June 2008 June 2007
    4. 4. How to weather the storm <ul><li>Adjust your sails </li></ul><ul><li>Don’t abandon ship! </li></ul><ul><li>Keep an even keel </li></ul><ul><li>Keep your eyes on the horizon </li></ul>Diversification does not assure a profit or protect against loss. It is possible to lose money in a diversified portfolio.
    5. 5. Adjust your sails
    6. 6. When stocks were choppy, bonds were often stable U.S. stocks U.S. bonds Data is as of 12/31/07 and is historical. Past performance does not guarantee future results. Stocks are represented by the S&P 500 Index, which is an unmanaged index of common stock performance. Bonds are represented by the Lehman Aggregate Bond Index, an unmanaged index of U.S. investment-grade fixed-income securities. It is not possible to invest directly in an index. Annual market results (%)
    7. 7. Adding bonds can reduce volatility Data is from 12/31/97 to 12/31/07 and is based on the S&P 500 Index, an unmanaged index of common stock performance, and the Lehman Aggregate Bond Index, an unmanaged index of U.S. investment-grade fixed-income securities. Past performance does not guarantee future results. You cannot invest directly in an index. 100% stocks 75% stocks/ 25% bonds 25% stocks/ 75% bonds 100% bonds Portfolio performance, 1997–2007 Volatility Return
    8. 8. Don’t abandon ship!
    9. 9. Cash has barely kept pace with inflation Source: Ibbotson Associates, 2008, measuring the period 1926-2007. Returns are annualized and assume a historical average inflation rate of 3%. Stocks are represented by the S&P 500 Total Return Index. Bonds are represented by the Long-Term Government Bond Total Return Index. Cash is represented by the U.S. Treasury Bill Index. All indexes are unmanaged and measure common sectors of the stock and bond indexes. You cannot invest directly in an index. Past performance is not indicative of future results. Cash Bonds Stocks Returns for asset classes 1926–2007 3.7% 5.5% 10.4% 0.7% 2.5% 7.4% Returns after inflation
    10. 10. Investors who shifted in and out of the market have suffered Source: DALBAR, Quantitative Analysis of Investor Behavior , 2008. Study is based on data as of 12/31/07, the most current available. The average equity fund investor’s portfolio is composed of 95% domestic equity and 5% domestic fixed-income holdings. Past performance does not guarantee future results. There are no guarantees that prior markets will be duplicated. The S&P 500 Index is an unmanaged index of common stock performance. It is not possible to invest directly in an index. 11.8% 4.5% 20-year annualized returns 1987–2007 Average equity fund investor holding various funds for just over 3 years Buy and hold 20-year investment in the S&P 500
    11. 11. Missing even a few of the market’s best days can hurt Data is historical. Past performance is not a guarantee of future results. The best time to invest assumes shares are bought when market prices are low. The Dow Jones Industrial Average is an unmanaged index of common stock performance. Indexes assume reinvestment of all distributions and do not have a sales charge. It is not possible to invest directly in an index. The securities in the Putnam funds will differ from those in the index, and the funds’ performance will differ. Investing $10,000 in the Dow Jones Industrial Average 25-year period, 6/30/83–6/30/08 If you stayed fully invested for 25 years If you missed the market’s 10 best days If you missed the market’s 20 best days
    12. 12. Keep an even keel
    13. 13. Diversify to own more of each year’s winners Past performance does not indicate future results. Indexes are unmanaged and show broad market performance. It is not possible to invest directly in an index. Highest return Lowest return Changes in market performance, 1987–2007 2007 2002 1997 1992 1987 U.S. Large-Cap Value Stocks | Russell 1000 Value Index Cash | Merrill Lynch 91-day T-Bill Index U.S. Small-Cap Value Stocks | Russell 2000 Value Index U.S. Bonds | Lehman Aggregate Bond Index U.S. Large-Cap Growth Stocks | Russell 1000 Growth Index International stocks | MSCI EAFE Index U.S. Small-Cap Growth Stocks | Russell 2000 Growth Index
    14. 14. <ul><li>Small-Cap Growth Stocks are represented by the Russell 2000 Growth Index, which is an unmanaged index of those companies in the Russell 2000 Index chosen for their growth orientation. </li></ul><ul><li>Large-Cap Growth Stocks are represented by the Russell 1000 Growth Index, which is an unmanaged index of capitalization-weighted stocks chosen for their growth orientation. </li></ul><ul><li>Small-Cap Value Stocks are represented by the Russell 2000 Value Index, which is an unmanaged index of those companies in the Russell 2000 Index chosen for their value orientation. </li></ul><ul><li>Large-Cap Value Stocks are represented by the Russell 1000 Value Index, which is an unmanaged index of capitalization-weighted stocks chosen for their value orientation. </li></ul><ul><li>International Stocks are represented by the MSCI EAFE Index, which is an unmanaged index of international stocks from Europe, Australasia, and the Far East. </li></ul><ul><li>U.S. Bonds are represented by the Lehman Aggregate Bond Index, which is an unmanaged index used as a general measure of fixed-income securities. </li></ul><ul><li>Government bonds and Treasury bills are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and fixed principal value. </li></ul><ul><li>Cash is represented by the Merrill Lynch 91-Day T-Bill Index, which is an unmanaged index used as a general measure for money market or cash instruments. </li></ul>
    15. 15. Diversify to own fewer of each year’s losers Average annual total return on $10,000, 1987–2007 Chasing the winners Investing in last year’s best -performing asset class Investing with the losers Investing in last year’s worst -performing asset class Asset allocation Investing consistently across several asset classes Diversification does not assure a profit or protect against loss. It is possible to lose money in a diversified portfolio. Past performance does not guarantee future results.
    16. 16. Keep your eyes on the horizon
    17. 17. The storm has always passed Markets are represented by the S&P 500 Index. Data is as of 6/30/08, is historical, and reflects reinvested dividends. Each bull or bear market is determined by at least four consecutive months of continuous gain or decline. Past performance does not guarantee future results. There are no guarantees that prior markets will be duplicated. The S&P 500 Index is an unmanaged index of common stock performance. It is not possible to invest directly in an index. Bull market Bear market June 2008 January 1973
    18. 18. Markets have always recovered from crisis U.S. invades Iraq September 11 Terrorist Attacks Russian Ruble Devaluation Long-Term Capital Management Collapse World Trade Center Bombing Gulf War Ultimatum Gorbachev Coup Invasion of Panama Financial Panic of 1987 U.S. Invades Grenada U.S.S.R. in Afghanistann Nixon Resigns U.S. Bombs Cambodia John F. Kennedy Assassination Cuban Missile Crisis Eisenhower Heart Attack Korean War Pearl Harbor Fall of France 12/31/07 12/31/40 Graph is plotted on a logarithmic scale so that comparable percentage changes appear similar and represents a hypothetical $10,000 investment in the S&P 500 Index, an unmanaged index of common stock performance. You cannot invest directly in an index. Indexes do not have sales charges and do not represent the performance of any Putnam fund or product. Past performance does not indicate future results and prior markets may not be duplicated. Growth of $10,000 in the S&P 500 Index December 1940–December 2007 $19,276,429 $10,000
    19. 19. Markets have not been rocked by elections Annual returns of S&P 500 Index during presidential election years Source: Standard & Poor's, 2008. * 2008 figure is YTD through August 31, 2008. 2008 * 2004 2000 1996 1992 1988 1984 1980 1976 1972 -11.39% +10.88 -9.10 +22.96 +7.62 +16.61 +6.27 +32.50 +23.93 +18.99
    20. 20. Stocks are attractively priced today Price to normal earnings ratio of the U.S. stock market * * As measured by the S&P 500 Index. 2008 data as of 6/30/08. 1998 35.1 2008 18.6
    21. 21. Bond yields are higher today Data is as of 6/30/03 and 6/30/08, respectively, is historical, and reflects yield to maturity. Mortgage bonds are represented by the Lehman GNMA Index. Corporate bonds are represented by the Lehman U.S. Credit Index, and global bonds are represented by the Lehman Global Aggregate Index. It is not possible to invest directly in an index. Past performance does not guarantee future results. 6.06% 4.02% Corporate bonds (investment grade) 4.56% 2.97% Global bonds 5.62% 4.31% Mortgage bonds 2008 2003
    22. 22. Municipal bond yields are unusually high As of June 30, 2008. Past performance is not indicative of future results. Based on the 10-year-on-the-run (most recently issued) AAA non-callable municipal bond versus the 10-year-on-the-run Treasury bond. Unlike municipal bonds, income from Treasury bonds is subject to federal taxes. Sources: MMD, Putnam Investments. Municipal bond yields as a percent of Treasury bond yields Equal to U.S. Treasury bond yields June 2008 June 1998
    23. 23. International markets offer attractive opportunities * Source: International Monetary Fund, World Economic Outlook Database, April 2008. ** Data is based on the Morgan Stanley Capital International (MSCI) World Index, an unmanaged index of equity securities from developed countries, as of 12/31/07. It is not possible to invest directly in an index. Past performance is not indicative of future results. There are no guarantees that prior markets will be duplicated. Faster growth 176 economies are growing faster than the U.S.* Abundant choices Globally, 68% of stocks are outside the U.S.** World-leading companies Toyota – Japan Nestl é – Switzerland Bayer – Germany
    24. 24. Put more wind in your sails Data is as of 12/31/07 and is historical. Past performance does not guarantee future results. There are no guarantees that prior markets will be duplicated. The S&P 500 Index is an unmanaged index of common stock performance. MSCI EAFE Index is an unmanaged index of equity securities from developed countries in Western Europe, the Far East, and Australasia. It is not possible to invest directly in an index. International investing involves certain risks, such as currency fluctuations, economic instability, and political developments. Additional risks may be associated with emerging-market securities, including illiquidity and volatility. 11.17 21.59 8.66% International stocks 12.83 5 years 5.49 1 year 5.91% 10 years U.S. stocks Performance as of 12/31/07
    25. 25. Benefit from those who have gone before you <ul><li>Market volatility is inevitable </li></ul><ul><li>There are ways to lessen the impact </li></ul><ul><li>Abandoning your plan is counterproductive </li></ul><ul><li>Remember, bull markets have always returned </li></ul><ul><li>Take advantage of today’s opportunities to improve your portfolio </li></ul>
    26. 26. Hire an experienced crew <ul><li>Your financial advisor </li></ul><ul><li>Putnam Investments </li></ul>
    27. 27. The Putnam difference <ul><li>A time-honored tradition in money management </li></ul><ul><li>A prudent approach to investing </li></ul><ul><li>Funds for every investment goal </li></ul><ul><li>A commitment to doing what’s right for investors </li></ul><ul><li>Industry-leading service </li></ul>
    28. 28. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. For a prospectus containing this and other information for any Putnam fund or product, call your financial representative or call Putnam at 1-800-225-1581. Please read the prospectus before investing. Putnam Retail Management www.putnam.com EO077 252783 9/08

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