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Investment presentation for beginners - Infinity Financial Planning

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Infinity Financial is a busy team of certified financial planners based in Cork City. We have 35+ years of experience in helping people just you to secure your financial future. We work with clients just like you to devise a plan to fill in any gaps or shortfalls to help you achieve your goals. We help our clients with 5 primary goals:

1. Establishing and achieving what you want.
2. Identifying and maintaining your desired lifestyle.
3. Analysis and assessment of your current financial positions.
4. Having the confidence and clarity to decide which direction your future should be going.
5. Making more time, more choices, more freedom, and hence being able to focus on the more exciting things in life.

You can reach us at https://infinityfinancial.ie/ or reach out to us directly at info@infinityfinancial.ie

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Investment presentation for beginners - Infinity Financial Planning

  1. 1. Diversification neither ensures a profit nor guarantees against loss in a declining market. Investment Solutions Focus on What You Can Control No one can reliably forecast the market’s direction or predict which stock or investment manager will outperform. A good financial adviser can help you create a plan and focus on actions that add value. Creating an investment plan to fit your needs and risk tolerance Structuring a portfolio around historical data Reducing expenses and turnover Diversifying broadly Minimising taxes
  2. 2. Important investment concepts: Compounding Compounding is critical, but it takes a long time Assumptions  Each investor contributes €2k annually over 25 years.  Investor A earns 4% annually on cash deposits.  Investor B generates the long-term average annual return from equity markets of 9% (8% after costs).  Impact of taxes ignored for the sake of simplicity.
  3. 3. Investing NOT Speculating Speculating leads to poor returns Speculating  Short-term bets  Active buying & selling  Market timing  Options trading  Charting/technical analysis  CFD accounts  Spread-betting Investing  Follow a consistent investment strategy  Stick to your investment strategy during market downturns  Invest regularly if saving for the long-term  Avoid market ‘noise’
  4. 4. Investing vs Speculating Seek to invest, rather than speculate  In the short-term the market can be like  A casino, betting, confusing, volatile  And it fulfils the gambling instinct in human nature  Decisions can be driven by emotion.  But in the medium & long-term  The markets reflect economic and business progress, which builds wealth  Economies grow, businesses therein grow – more profits, more cash flows  Rising profits & cash flows underpin rising dividends & hence rising share prices
  5. 5. Long-Term Investment Returns Equities provide the most compelling investment case for the long-term investor
  6. 6. Long-term Real Asset Returns Real returns are the investment returns after inflation  Equities, Commercial Property the best  Bank deposits: 1% per annum above inflation (past 100 years)  Fixed interest rate instruments  Long-dated government bonds: 1.5-2.0% per annum  Investment grade corporate bonds: 2.0-3.0% per annum  Non-investment grade corporate bonds: 4.0-5.0% per annum  Commodities have just about matched inflation longer-term  Gold has averaged just over 1% above inflation longer-term  Hedge & Absolute return strategies/funds have beaten inflation, but have done much worse than equities.
  7. 7. 8 Picking the right assets to invest in can determine long-term investment returns Why we think asset allocation is important • The most important decision investors make is the mix of assets they select (asset allocation), not the individual investments they purchase. Asset mix should be based on an investor's financial objectives, risk tolerance, and time horizon (which is often influenced by an investor's age). • Research shows how a portfolio is allocated among asset classes is the most significant determinant of long-term returns.* • In choosing an asset mix, investors should balance their need for asset growth against their willingness to accept the negative returns that a given mix could produce in some years. • Understanding the volatility of past returns associated with a given asset mix will help investors gauge their risk tolerance. Investors shouldn't expect future long-term returns to differ significantly from the markets' long-term historical averages. *Source: Vanguard Investment Counseling and Research ("A primer on tactical asset allocation strategy evaluation" 2010).
  8. 8. Annual returns (%): 2002–2018 Diversification neither assures a profit nor guarantees against loss in a declining market. Past performance is no guarantee of future results. In EUR. Chart is for illustrative purposes only. Indices are not available for direct investment. Their performance does not reflect expenses associated with the management of an actual portfolio. Developed Markets ex Europe Equities is the MSCI World ex Europe Index (gross div. EUR). Emerging Markets Equities is the MSCI Emerging Markets Index (gross div. EUR). Global Real Estate is the S&P Global REIT Index (gross div. EUR). European Equities is the MSCI Europe Index (gross div. EUR). Government Bonds (hedged) is the FTSE World Government Bond Index (hedged to EUR). Global Credit (hedged) is the Bloomberg Barclays Global Aggregate Credit Bond Index (hedged to EUR). Short Term Government Bonds (hedged) is the FTSE World Government Bond Index 1–5 Years (hedged to EUR). Euro Short Term Rate is the Euro Short Term Rate (EUR). MSCI data © MSCI 2019, all rights reserved. S&P data © 2019 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. FTSE fixed income indices © 2019 FTSE Fixed Income LLC. All rights reserved. Bloomberg Barclays data provided by Bloomberg. Euro Short-Term Rate from January 1999–present: One-month Libor returns in EUR. Prior to January 1999: German 3-Month Money Market Rate in Deutschmark. ICE BofAML index data copyright 2019 ICE Data Indices, LLC. Diversification Helps Take the Guesswork out of Investing You never know which markets will outperform from year to year. By holding a globally diversified portfolio, investors are positioned to capture returns wherever they occur. 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Higher Return 10.1 30.0 24.2 55.0 24.1 26.1 9.9 73.4 32.0 6.2 21.8 22.4 39.8 12.1 14.9 21.0 0.0 9.5 15.8 16.9 27.2 20.2 4.9 7.5 32.5 27.5 5.5 18.1 20.5 25.0 11.8 14.1 10.9 -0.2 6.7 15.6 12.6 26.8 18.6 4.3 4.6 29.5 24.0 5.1 16.8 0.4 11.8 8.8 10.1 7.3 -0.4 3.4 9.5 5.9 26.7 2.9 4.2 -3.1 24.2 11.7 2.9 13.5 0.1 8.4 1.0 4.1 3.3 -0.6 -8.5 6.7 5.5 4.0 2.7 3.2 -34.2 14.0 6.8 1.2 10.1 0.0 7.4 0.5 3.2 0.3 -1.6 -20.2 3.0 4.6 2.6 1.9 2.3 -42.2 2.5 3.5 0.4 4.4 -0.6 7.4 -0.1 2.3 -0.4 -3.2 Lower Return -30.5 2.9 3.3 2.2 1.3 -3.3 -43.3 1.1 2.1 -7.5 1.8 -1.6 1.8 -0.4 0.1 -0.8 -9.9 -32.3 2.5 2.1 1.9 0.9 -19.8 -50.8 1.1 0.6 -15.4 0.4 -6.5 0.1 -4.9 -0.3 -4.6 -10.0 Developed Markets ex Europe Equities Government Bonds (hedged) Emerging Markets Equities Global Credit (hedged) Global Real Estate Short Term Government Bonds (hedged) European Equities Euro Short Term Rate 9
  9. 9. Diversification neither assures a profit nor guarantees against loss in a declining market. Past performance is no guarantee of future results. The “All stocks” portfolio consists of all eligible stocks in all eligible Developed and Emerging Markets. The portfolio for January to December of year t includes stocks whose free float market capitalisation as of December t-1 is greater than $10mln in developed markets and $50mln in emerging markets and with non- missing price returns for December of year t-1. Annual portfolio returns are value-weighted averages of the annual returns on the included securities. The portfolios “Excluding the top 10%” and “Excluding the top 25%” are constructed similarly. Individual security data are obtained from Bloomberg, London Share Price Database, and Centre for Research in Finance. The eligible countries are: Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Republic of Korea, Malaysia, Mexico, Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal, Russia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, and the United States. Diversification May Prevent You from Missing Opportunity Attempting to identify that group of future winners is a guessing game. Diversification improves the odds of holding the best performers. 8.0% 3.6% -4.4% All stocks Excluding the top 10% of performers each year Excluding the top 25% of performers each year 10 Compound average annual returns: 1994–2017
  10. 10. 11 How you behave during market downturns is important Dealing with Volatility Peak-to-Trough Days Max Drawdown November 1919 - September 1921 455 -46.2% October 1929 - July 1932 679 -86.3% March 1937 - March 1938 272 -49.0% November 1938 - April 1942 871 -41.2% May 1946 - June 1949 767 -24.0% December 1961 - July 1962 135 -27.1% February 1966 - October 1966 168 -25.2% December 1968 - May 1970 373 -35.9% January 1973 - December 1974 483 -45.1% September 1976 - February 1978 368 -26.9% April 1981 - August 1982 328 -24.1% August 1987 - October 1987 38 -36.1% July 1990 - October 1990 61 -21.2% January 2000 - October 2002 685 -37.8% October 2007 - March 2009 355 -53.8% October 2018 - Dec 24th 2018 55 -16.3% Average 403 -38.7% Median 368 -36.1% Source: Bloomberg, returns in USD (local currency). "Bear Market" is typically defined as a decline of 20% or more. S+P 500 "Bear Market" Declines Temporary Declines are common Type of Decline Average Frequency Average Length Last Occurrence -5% or more About 3 times a year 46 days Jun-16 -10% or more About once a year 117 days Feb-16 -15% or more About once every 3 years 275 days Dec-18 -20% or more About once every 6 years 425 days Mar-09 Source: Capital Research and Management Co A History of Declines - S+P 500 (1948-December 2018)
  11. 11. Financial Planning Build it (Financial Planning) Fund it (Investment Management) Stick to it (Behavioural Coaching)
  12. 12. Disclaimer Any advice or recommendation rendered by us to you or the results of any research carried out on your behalf is provided solely for the purpose of this investment review and for your benefit. We do not accept any liability whatsoever for any direct or consequential loss arising from any use of material contained in this report. All estimates and opinions included in this report constitute our judgements as of the date of this report. By accepting this report you agree to be bound by the limitations set out herein and will not rely on it in making any investment decision with respect to any securities that may be referenced in the report. This report is confidential, is for information purposes only and is intended solely for the recipient to whom it is delivered. It may not be reproduced, photocopied or disseminated to any other person without express prior written consent This document does not constitute or form part of an offer to sell or subscribe, or the solicitation of an offer or invitation to purchase or subscribe, any security or instrument or to participate in any trading strategy. Past performance is not a predictor of future performance. The financial illustrations and illustrative returns and cash flows contained in this report do not constitute forecasts and should not be construed as such. The financial illustrations may not reflect current or future market expectations and the assumptions on which they are based are subject to many uncertainties. Some or all of these assumptions may turn out to be different from the actual position and the financial illustrations should not be relied upon as a guide to future financial performance but only as examples of possible outcomes. The information in this report is not intended to provide, and should not be relied upon for, accounting, inheritance, pension, legal or tax advice. Each recipient should consult its tax, legal and accounting or other advisers about the issues discussed herein and each recipient shall be solely responsible for evaluating the risks and merits involved in the investments which are the subject of this report. The information contained in this report is not intended to be complete and is subject to change and does not constitute all the information necessary to adequately evaluate the consequences of investing in securities or any other investments.

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