There is a difference between volatility and risk. Volatility can certainly result in loss of principal invested. Let’s take a look at that.
Everything is volatile in the long run. Interest rates, housing prices, probably the most volatile would be the stock market. (click) It goes up and down.
Now, you can’t build your retirement on a house of cards. I’ve seen so many people invest their entire nest egg in one investment or in one company stock, usually the company they work for. What happens if that one investment doesn’t perform well? It can affect your entire retirement and may result in an irreversible mistake that could affect you for the rest of your life. Certainly, diversification is a more conservative strategy. Diversification does not eliminate investment risk and does not guarantee that you will not loose principal or make gains.
Lets say you want to diversify and you decide to use a mutual fund. Who knows how many mutual funds exist today? (wait for response) Yes, thousands. Well now the problem is how do you pick one that’s suitable for your needs and objectives? Here are just a few of the things you’ll need to know: how long has the portfolio manager been managing that fund, what is the Morningstar rating and what are the risk factors associated with that particular fund. I’m sure if you have a current advisor they are showing you these Morningstar reports on a regular basis. What used to be a 5 star fund could have certainly changed over time. I have access to a computer program that can sort through 1,000’s of funds in a matter of seconds and find the highest rated funds in any specific category. Morningstar has a 5 star system in rating mutual funds. One star is the lowest rating and 5 star is the highest. We can pull up a report on the funds that you own to see how they are rated by Morningstar. If you currently own any mutual funds you really need to have those funds looked at to see how they are rated. We do that all the time for our clients. The performance difference between the very best funds and even average funds is sometimes substantial. Now this is really important, if you own any mutual funds you should certainly mark that down on the worksheet. Just remember past performance does not guarantee future results Note to presenter: The resource used to get a Morningstar report is Morningstar instant x ray. The resource used to scan Mutual funds is the Morningstar screening program.
My job is to be my clients anchor to make sure they don’t make any irreversible mistakes.
It’s not only preservation of principal, It’s also preservation of spending power. Our job is to help our clients achieve this.
Let’s look back 50 years when Dwight D. Eisenhower was our president and see what things cost. The web site for updating the information on this slide and the following slide is: http:\dmarie.com imecap
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Has anyone been shopping CD rates recently? (Wait for response) What rate did you find? What is that after taxes? ( give them the number) What is that after inflation? Maybe a negative number, which means we lost some purchasing power. It’s not only preservation of principal that’s important, it’s also preservation of spending power. Our job is to help our clients achieve this.
We could leave our money in the bank and watch inflation and taxes eat away the earnings, but that really doesn’t make any sense, does it. Let’s say your earning 3% in a bank account and your tax bracket is 28%, your left with about 2% and lets say your personal inflation is 4%, now you've actually lost buying power. Now of course we all need money in the bank. The bank provides a great service for us keeping our money safe and available, but it’s not their responsibility to protect us from inflation. Ultimately the bank reports to the Board of Directors of that bank who in turn answer to the shareholders.
My services are different, there’s no shareholders or board of directors. (click) I work directly with my clients.
The lifespan of the average American born today is 77 years and if you are 65 today chances are you will live for more than 20 years. The benefits of a longer life are self evident but they come at a cost. One of the risks we face is inflation. Although we don’t know for sure what actual inflation will be; we need to consider this risk as part of our retirement planning. We also need to consider the cost of Long Term Health Care, which is certainly becoming more expensive every year. www.cdc.gov/nchs/pressroom/08newsreleases/mortality2006.htm
Seminar pm - retirement challenges withaudio28-40
VOLATILITY AND RISK? VOLATILITY VOLATILITY WHAT IS THE DIFFERENCE BETWEEN
VOLATILITY THIS IS GOING TO HAPPEN. IT’S THE NATURE OF INVESTMENTS. Volatility can result in loss of principal UP DOWN UP DOWN
ONE OF THE WAYS TO POTENTIALLY OBTAIN FINANCIAL SECURITY IS BY INVESTING IN QUALITY LONG-TERM FINANCIAL PRODUCTS EARLY ON DON’T LET YOUR RETIREMENT BE A HOUSE OF CARDS
WE CAN HELP YOU TO LOOK IN THE PROPER DIRECTION <ul><li>You should carefully consider investment objectives, risks, and charges and expenses of Mutual Funds before investing. This and other information can be found in the fund's prospectus, which can be obtained from your investment representative or by calling (Your Phone Number) Please read it carefully before you invest or send money </li></ul>Y O U D O N ’ T H A V E T O S E A R C H O N Y O U R O W N
OUR JOB IS TO BE YOUR ANCHOR AND TRY TO PREVENT CLIENTS FROM TAKING THE WRONG STEPS
OUR JOB IS TO HELP YOU TO ACHIEVE THIS NOW IT 's NOT ONLY PRESERVATION OF PRINCIPAL... IT ‘s ALSO PRESERVATION OF “PURCHASING POWER"
A RISK IS: EROSION OF PURCHASING POWER EROSION OF PURCHASING POWER EROSION OF PURCHASING POWER EROSION OF PURCHASING POWER EROSION OF PURCHASING POWER
50 YEARS AGO Dwight D. Eisenhower was the 34 th President of the United States.
Who’s Been Shopping CD Rates Recently CD’s are FDIC insured and offer a fixed rate of return, early withdrawal penalties will apply to redemptions prior to maturity.
YOU COULD LEAVE YOUR MONEY IN THE BANK BUT INTEREST EARNED MAY NOT KEEP UP WITH INFLATION What is the Banks Job? CD’s are FDIC insured and offer a fixed rate of return, early withdrawal penalties will apply to redemptions prior to maturity.
We’re Living Longer Now This example is provided for illustrative purposes only and is not intended to reflect an actual investment or predict future returns. It is designed to illustrate the mathematical concepts being discussed. Results will vary from client to client .