Why Investors Underperform

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Why Investors Underperform

  1. 1. Why Investors Under-Perform NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  2. 2. “…I wish we had a retirement plan that didn’t require matching six numbers.” NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  3. 3. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  4. 4. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  5. 5. Major Asset Classes - Fixed Income - Investment Grade - High Yield - REITs - U.S. Equities - Large Cap - Value - Mid Cap - Core - Small Cap - Growth - International - Global Equities - International NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  6. 6. Characteristics of Asset Classes - Behave Randomly - Behave Independently - Volatile (in varying degrees) NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  7. 7. Source: Russell, MSCI, Standard & Poor’s, Lehman Brothers, Barclays Capital NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  8. 8. Large Cap Value Vs Large Cap Growth: 1975 - 2007 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  9. 9. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  10. 10. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  11. 11. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  12. 12. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  13. 13. Bull Market Performance Source: Phoenix Investments Standard Deviation (%) NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  14. 14. Bear Market Performance Source: Phoenix Investments Standard Deviation (%) NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  15. 15. Potential Individual Pitfalls Vs Institutional Strategies for Success NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  16. 16. Investment Asset Classes Traditional Investments vs. Alternative Investments Cash Alternative Assets Stocks Real Estate Domestic and International Energy Large, Small and Mid-Cap Timber Value, Core and Growth Private Equity Bonds Alternative Strategies Treasury Hedge Funds Corporate Relative Value Convertible Event Driven Mortgage Directional Municipal Managed Futures High Yield Fund of Funds International Exchange Funds NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  17. 17. Why consider Alternative Investments? Diversification through low correlation Attractive absolute return potential provides the opportunity for Reduced risk and increased return in a traditional portfolio NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  18. 18. Efficient Frontier: Stocks/Bonds 11.00% January 1990 – March 2008 10.00% Real Estate Hedge Funds Stocks (Annualized) Return Alternatives 9.00% Managed Futures 8.00% 50% Bonds 50% Stocks Bonds 7.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% Risk (Annualized Standard Deviation) Stocks are represented by the Standard & Poor’s 500 Stock Index including dividends. Bonds are represented by the Lehman Brothers Aggregate Index. Hedge Funds are represented by the HFRI FOF Composite Index. Managed Futures are represented by the Stark 300 Trader Index. Real Estate is represented by a 50/50 allocation to NAREIT - All and NCREIF - National Indices. Alternatives is represented by equal allocations to Hedge Funds, Managed Futures, and Real Estate. Source: Phoenix Investments NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  19. 19. Efficient Frontier: Stocks/Bonds/10% Alternatives 11.00% January 1990 – March 2008 Adding 10% 10.00% Real Estate Alternatives Hedge Funds Stocks (Annualized) Return Alternatives 9.00% Managed Futures 8.00% 50% Bonds 50% Stocks Bonds 7.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% Risk (Annualized Standard Deviation) Stocks are represented by the Standard & Poor’s 500 Stock Index including dividends. Bonds are represented by the Lehman Brothers Aggregate Index. Hedge Funds are represented by the HFRI FOF Composite Index. Managed Futures are represented by the Stark 300 Trader Index. Real Estate is represented by a 50/50 allocation to NAREIT - All and NCREIF - National Indices. Alternatives is represented by equal allocations to Hedge Funds, Managed Futures, and Real Estate. Source: Phoenix Investments NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  20. 20. Efficient Frontier: Stocks/Bonds/20% Alternatives 11.00% January 1990 – March 2008 Adding 20% Adding 10% Alternatives Alternatives 10.00% Real Estate Hedge Funds (Annualized) Stocks Return Alternatives 9.00% Managed Futures 8.00% 50% Bonds 50% Stocks Bonds 7.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% Risk (Annualized Standard Deviation) Stocks are represented by the Standard & Poor’s 500 Stock Index including dividends. Bonds are represented by the Lehman Brothers Aggregate Index. Hedge Funds are represented by the HFRI FOF Composite Index. Managed Futures are represented by the Stark 300 Trader Index. Real Estate is represented by a 50/50 allocation to NAREIT - All and NCREIF - National Indices. Alternatives is represented by equal allocations to Hedge Funds, Managed Futures, and Real Estate. Source: Phoenix Investments NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  21. 21. “Investors Generally Want To Take The Smallest Risk To Secure The Greatest Possible Return” Dr. Harry Markowitz Winner, Nobel Prize in Economics NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  22. 22. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  23. 23. The Importance of Asset Allocation •It is the primary determinant of overall return •It maximizes the probability of achieving your target return within your specific risk tolerance levels •It helps control risk through broad diversification •It increases the possibility of generating your desired level of income Disclosure: Asset allocation does not assure or guarantee better performance and cannot eliminate the risk of investment loss. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  24. 24. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  25. 25. Disclosure: This hypothetical example does not represent the performance of a specific security nor does it reflect the effects of taxation, fees, and inflation. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  26. 26. “You’ll find how to live on Social Security over there in the fiction section.” NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  27. 27. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  28. 28. Source: Ibbotson Associates NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  29. 29. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  30. 30. *This hypothetical example does not reflect the effects of taxation, fees, and inflation. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  31. 31. Source: Phoenix Investments NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  32. 32. Source: Phoenix Investments NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  33. 33. Source: Ibbotson Associates NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC
  34. 34. How We Are Unique: 1. Avoid the 3 Greatest Risk Factors of Investing  Deconstruction Analysis 2. Highly selective universe of recommended products  Select List 3. Careful monitoring and maintenance of your investments  “Green Screen” 4. Due diligence of investment products by dedicated team  Due Diligence Committee Due Deconstruction MK Select “Green Diligence Analysis List Screen” Committee NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  35. 35. Due Deconstruction MK Select “Green Diligence Analysis List Screen” Committee Hypothetical Asset Allocation Analysis NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  36. 36. Due Deconstruction MK Select “Green Diligence Analysis List Screen” Committee Covered Product Categories include: (166 total products) Equity Mutual Funds Exchange-Traded Funds (ETFs) Separate Account Managers (SMAs) Alternative Investments Annuity Information NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  37. 37. Due Deconstruction MK Select “Green Diligence Analysis List Screen” Committee Hypothetical “Green Screen” Analysis rWh NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  38. 38. Due Deconstruction MK Select “Green Diligence Analysis List Screen” Committee DDG Due Diligence „Touches‟ in 2008 Q4/2008 All/2008 Travel Miles 27,222 122,112 Travel Days 22 138 Onsite Visits 28 155 Conference Calls 274 649 Visits to Memphis 69 160 Emails 168 681 Total Contacts 539 1,645 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  39. 39. Morgan Keegan Ranks Among Top Ten Underwriters in Nation for 2008* Regional Rankings: AL, AR, KY, LA, MS, TN Ranked #1 for the 16th consecutive year as senior manager on 219 issues with a value of $4.9 billion; 24.8 percent market share, up from 15 percent in 2007. State Rankings: Alabama Ranked #1 as senior manager of 22 issues with a par amount of $651 million; 29.7 percent market share in 2008 compared to 4.8 percent in 2007. Bank Qualified and Small Issues: Ranked #1 as underwriter of 198 issues with a par amount of $1.2 billion. Ranked #1 as underwriter of 147 issues with a par amount of $922 million. Ranked #1 as underwriter of 271 issues with a par amount of $1.6 billion. *Thomson Reuters, one of the leading municipal bond information services in the country NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  40. 40. Financial Planning Process 1. Set Goals & Objectives o Future, feelings, and family dynamics o Taxes, inflation, and risk 2. Take Inventory of Existing Assets o Investments o Benefits o Social Security 3. Develop & Follow A Retirement Plan o Investment Policy Statement o Monitoring o Communication NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  41. 41. Morgan Keegan & Company • Founded in 1969 in Memphis, Tennessee • Full service investment banking and securities brokerage firm Our firm’s entrepreneurial • Serving the diverse financial needs of individual investors in the culture promotes United States and corporate and institutional clients throughout the US innovation and dedication and abroad to serving every financial • 350 offices in 19 states need of our clients. • Member FINRA, SIPC • Wholly owned subsidiary of Regions Financial Corporation Regions Financial Corporation • Among top 10 largest financial services companies in the nation • $140 billion in assets • Over $27 billion market capitalization • 5 million households • 2,000 locations in 16 states • Listed on NYSE (symbol:RF) • Member FDIC • Member of the S&P 100 Index and Forbes’ “Platinum 400” list of America’s best big companies NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  42. 42. We believe the most rewarding investment experience comes from focusing on the investor rather than the market. Investors, unlike markets, have goals. We can position your investments relative to your goals, while taking into account the inevitable market fluctuations which will occur along the way. This approach has been shown to increase your likelihood of success. Our Management Program Our Professional Discipline Investor-Centered Investments based on client’s clearly defined goals, vs. Market-Centered consistent with their values, understood within their total life-plan Reason vs. Emotion Responsive to changes in goals or life events, rather than reactive to market events Long-term Process vs. Investing and Investment decisions understood within Short-term Event the context of a life and a life time rather than a single day or event Relational vs. Transactional Investment decisions based on comprehensive knowledge of the client and their interests, achieved through ongoing consultation NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  43. 43. Our Commitment to You As Morgan Keegan financial advisors, we have the resources, personnel, and backing of one of the nations largest full service investment firms. It is our responsibility to create, grow, protect, preserve, or utilize your wealth regardless of the prevailing investing environment. We can also help you plan for the distribution of your wealth in a tax-advantaged way both during your life and beyond. This is done by building a plan specific to your family’s dynamics, hopes, and dreams. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  44. 44. The Padawer Bratton Financial Group • Gerald “Jerry” Padawer • Michael Bratton, CFP® Managing Director Vice President Morgan Keegan Morgan Keegan 314-889-4207 314-889-4207 866-671-8366 866-671-8366 Fax: 314-725-1482 Fax: 314-725-1482 8182 Maryland Ave 8182 Maryland Ave Ste 400 Ste 400 St Louis, MO 63105 St Louis, MO 63105 NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC
  45. 45. Morgan Keegan & Company Members NYSE, SIPC 50 N. Front Street Memphis, Tennessee 38103 800-366-7426 Disclaimer: The information and opinions expressed are intended for general information only. Morgan Keegan & Company, Inc. does not assume liability for any loss, which may result from the reliance of any person upon any such information or opinions. Such information and opinions are subject to change without prior notice. The general information is not intended as an offer or solicitation with respect to the purchase or sale of any security or offering, nor is it deemed individual or personalized advice. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC Members NYSE, SIPC

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