http://www.lagerco.com/manage-your-401k-with-point-figure Manage your 401k with Ric Lager, using point and figure technical analysis

1. Since April 2, 2003: Did You Catch The Last Move? Or Were You Watching For The Weapons Of Mass Destruction on CNN? April 2003-March 2004 Lager & Company, Inc. Case Study

3. Am I the only stock market investor—and Financial Advisor—who remembers when the stock markets went down from very high levels beginning in March of 2000? In recent conversation with my current clients, I am hearing much too often the same stock market investor attitudes that lost millions of dollars of retirement plan values just four years ago…

4. Does This Sound Familiar? “ Everything I hear and read says that the economy and stock markets are going to continue to do well.” “ I think we can get back to a buy-and-hold philosophy with the stock market now. We should have all of our money in the stock market now.” “ This is an election year. There is no way that the economy and the stock market will go down prior to the election.”

5. In January 2000, you were 45 years old and your retirement plan is worth $500,000. Your contributions are the maximum of $15, 000 per year and you want to retirement at age 65. Back then, a conservative annual return was 11% per year. At that rate of return, when you retired in 20 years, you would have a whopping $4,000,000. Even if you pull out just 3% of your principal every year, your annual retirement income would be $120,000 per year. Even I would sign up for that deal! The math has not changed…only the dates!

6. The Buy-and-Hold Myth The reality of the S&P 500 Annual returns: 2000 down 10.13% 2001 down 13.04% 2002 down 23.37% 2003 gain 26.40% Forget just for a minute that 85% of all the US mutual funds you can buy NEVER beat the S&P 500 returns for three years in a row. Let me finish the point on the next slide….

7. The Buy-and-Hold Myth In January of 2004, your $500,000 retirement plan account was worth $460,297. Yes, that includes the $60,000 in contributions over the 4 years from 2000 to 2003. What happened to your projected $4,000,000 retirement nest egg and $120,000 per year annual income? The updated numbers are: nest egg of $2,345,263 and annual income from that of $70,358.

8. The Buy-and-Hold Myth I am not trying to be a jerk about it, but those are the numbers. Not any economic forecasts or asset allocation pie charts. Those are the real numbers. And I almost forgot. You are four years closer to retirement.

11. We have had a good stock market, beginning in mid March 2003. The following slides will show you what it looked like when it began. First, for those of you that have not looked at a Point & Figure chart in a while, here is a review of all you need to know in order to read a chart: Wealth Preservation (O’s) vs. Wealth Accumulation (X’s)

13. NYSE Bullish Percent Historically, the area on this chart above 70% is a Defensive and Higher Risk area. Reversals into O‘s at levels above 70% mean the stock market risk is high. The area on the chart below 30% is an Offensive and Low Risk area. Reversals into X‘s from near or below 30% means the stock market risk is low.

16. This is the chart for the percentage of stock in the S&P 500 that are on a technical BUY signal. Click to the next slide to see why this indicator is so important….

17. The average US mutual fund has an 87% correlation to the return of the S&P 500. Said another way, if you know the risk level and direction of this indicator, you are a long way towards managing your retirement plan menu of mutual funds.

18. March 2004 March 2003 At the GREEN ARROW in March 2003, less than 30% of the stocks in the S&P 500 were on a BUY signal.

19. March 2004 March 2003 At the RED ARROW in March 2004, more than 88% of the stocks in the S&P 500 were on a BUY signal.

20. To the right, the percentage of all US stock market mutual funds on a BUY signal. A historically low 5% in March of 2003. That is just 5% of all US stock market mutual funds on a BUY signal. Not very good odds of making money in your retirement plan mutual fund menu. A historically high 95% in March 2004. The same historic highs reached in May 2003 and September 2003.

21. Here is the last fun fact for you. Over 42% of all the money invested in US stock mutual funds is invested in the same 100 companies. Here is the chart of those 100 companies, and the percentage of those stocks on a BUY signal.

22. March 2003 March 2004 The picture here is the same. Up from very low levels in March of 2003 to very high levels in March 2004. From under 20% to over 88% in less than one year.

23. In March of 2003, the stock market began to have a favorable risk-reward tradeoff. Stock prices were depressed and the risk of investing in the stock market was very low. When the short-term indicators reversed up, it was time to GO.

24. March of 2004 is a time of high risk in the stock markets. Patience, discipline, and learning from our past mistakes (like March 2000) demand that we strike a balance between participating in upside potential and over-participating in potential downside decline.

25. Since July of 2003, stock market investors with the most aggressive strategies (whether those investors realize how much risk they are taking or not), have outperformed those stock market investors whose primary focus is on stock market risk management. It has been extremely difficult to participate in the upward movement of the stock markets since that time with any degree of safety.

26. Another way to look at the low stock market risk levels of Spring 2003, is the above Sector Bell Curve. On the next slide…..

27. … ..this picture showed the same thing a different way. Historically, sector bullish percent levels in the mid 30’s suggest low levels of stock market risk. Anyone who wanted to sell their stock has already sold them.

28. Historically, chart readings above 70% indicate that everyone who wants to own stocks already owns them. Future demand to move stocks higher is limited.

29. The stock market risk level is high. Not predicting a stock market crash here, just an accurate assessment of the current stock market conditions. The stock market risk level was low. When the indicators began to move high, there was not much risk associated with buying stocks. March 2004 March 2003