Investing Basics Learning to Invest with Confidence Ray Henderson, CLTC Financial Representative
Volatility is a natural part of investing. Investing Basics
Risk and Reward
Investing Basics Investing is not difficult if you understand the fundamentals.
A Focus on Core Values Northwestern Mutual has a proven investing approach.
Avoid making emotional decisions. Market Declines Are To Be Expected Market Declines Are Normal Declines in the Dow (1900–3/31/07) “ Routine” Declines 357 Feb. 2007 39 days 3.3 per year 33% (5%+ Loss) “ Moderate” Declines 116 Nov. 2002 106 days 1.1 per year 49 (10%+ Loss) “ Severe” Corrections 57 Nov. 2002 211 days 0.5 per year 54 (15%+ Loss) “ Bear” Markets 31 Mar. 2002 367 days 0.3 per year N/A (20%+ Loss) The performance data quoted represents past performance, which does not guarantee future results. Source of chart data: Ned Davis Research. Data as of 3/31/07. Stocks are represented by the Dow Jones Industrial Average (DJIA), a widely used measure of stock market performance, without considering income, transaction costs or taxes. The index is unmanaged and cannot be purchased directly by investors. This chart is shown for illustrative purposes only and does not predict or depict the performance of any investment. Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. Number of Declines Last Occurred Average Length Frequency What % Gets Worse?
Hypothetical Value of $1 Investment in Stocks from 1987-2006
Asset Categories Different asset types perform differently to changes in the market. Small Company Stocks International Stocks
Bonds Large Company Stocks Certificates of Deposit Treasury Bills Money Market Funds
Your Personal Investor Profile The goal of asset allocation is to produce the highest level of returns for a given level of risk. Disclosure: Risk is measured by standard deviation. Return is measured by arithmetic mean. Risk and return are based on annual data over the period 1970-2005. Portfolios presented are based on modern portfolio theory. Asset Allocation Models Risk Return Equities Fixed Income Conservative Moderate Aggressive
Your portfolio should be a reflection of your goals, risk tolerance and time frame. Asset Allocation Conservative Asset Allocation Model Moderately Conservative Asset Allocation Model Balanced Asset Allocation Model Aggressive Asset Allocation Model Very Aggressive Asset Allocation Model 18% International 5% Small Cap 7% Mid Cap 25% Large Cap 5% Real Estate Securities 3% High Yield Bonds 37% Bonds 12% International 3% Small Cap 5% Mid Cap 17% Large Cap 3% Real Estate Securities 4% High Yield Bonds 56% Bonds 24% International 6% Small Cap 10% Mid Cap 34% Large Cap 6% Real Estate Securities 1% High Yield Bonds 19% Bonds 30% International 8% Small Cap 12% Mid Cap 42% Large Cap 8% Real Estate Securities 6% International 2% Small Cap 2% Mid Cap 8% Large Cap 2% Real Estate Securities 5% High Yield Bonds 15% Cash/Cash Equivalents 60% Bonds Portfolios presented are based on modern portfolio theory. This is for illustrative purposes only and not indicative of any investment.
Winner and Losers Can you predict next year’s winner? Source: Large-Cap S&P 500; Mid-Cap S&P 400; Small-Cap S&P 600; Real Estate NAREIT Equity; International MSCI EAFE; Core Bond LB U.S. Aggregate; High Yield Bond LB U.S. High Yield; Cash CITI 90 Day T-Bill This is for illustrative purposes only and not indicative of any investment. The data assumes reinvestment of all income and does not account for taxes or transactions costs. An investment cannot be made directly in an index, and past performance is no guarantee of future results. Highest Return Lowest Return
Investment time frame
Withdrawal time frame
Step 3: What’s Your Tolerance for Risk? Understanding your Personal Investor Profile will increase your confidence in evaluating risks in your portfolio.
Received the best possible insurance financial strength ratings from the four major rating agencies in 2006
Named “America’s Most Admired” company in its category for 23 years, according to 2006 Fortune magazine survey
About Northwestern Mutual Who we are…a company with a 150-year tradition Sources: A.M. Best (May 2006) for “largest direct provider”; Fortune magazine for “most admired” company. Ratings: A++ by A.M Best (5/06); AAA by Fitch (2006); AAA by S&P (5/06) AAA by Moody’s (3/06) March 6, 2006 FORTUNE® Magazine survey For further information, see our Annual Report on our Web site. Unless indicated otherwise, Northwestern Mutual and its annual statement are the sources for all statistics. Figures as of Dec. 31, 2005. The Northwestern Mutual Life Insurance Company. Dividends are not guaranteed. They are reviewed annually and are subject to change by the Company's Board of Trustees.
Customized Investment Plan
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The Value of Professional Guidance A trusted guide can lead the way to a sound investment program.
Hazardous to Your Wealth Return After Inflation Return After Inflation Return After Inflation Individual investors tend to under-perform the market. Source: The Journal of Finance, April 2000, Brad Barber and Terrance Odean, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors 25% 20% 15% 10% 5% 0 Gross Return Net Return Turnover Percentage Annual Return/Monthly Turnover 1 (Low Turnover) 5 (High Turnover) 2 3 4 Average Individual S&P 500 Index Fund
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Learning to Invest with Confidence Learning to Invest with Confidence The Northwestern Mutual Financial Network™ is a marketing name for the sales and distribution arm of The Northwestern Mutual Life Insurance Company, its affiliates and subsidiaries. The products and services referenced are offered and sold only by appropriately appointed and licensed entities and Financial Representatives. The Northwestern Mutual Life Insurance Company (Northwestern Mutual), Milwaukee, WI (life insurance, disability insurance and annuities) is neither a registered investment advisor nor a registered broker-dealer. Securities are offered through Northwestern Mutual Investment Services, LLC, member NASD and SIPC. 1-866-664-7737. Long-term care insurance is offered through Northwestern Long Term Care Insurance Company, a subsidiary of The Northwestern Mutual Life Insurance Company, Milwaukee, WI. Mutual funds are offered and sold by prospectus only. You should carefully consider the investment objectives, risks, expenses and charges of the investment company before you invest. Your Northwestern Mutual Investment Services Registered Representative can provide you with a contract and fund prospectus that will contain the information noted above, and other important information that you should read carefully before you invest or send money.
Learning to Invest With Confidence Learning to Invest with Confidence Investing Basics Thank You