Why Investors Underperform

Why Investors Under-Perform

NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
Copyright © 2005 Morgan Keegan & Company, Inc Members NYSE, SIPC

“…I wish we had a retirement plan that didn’t require matching six numbers.”

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


Characteristics of Asset Classes

- Behave Randomly

- Behave Independently

- Volatile (in varying degrees)

Copyright © 2005 Morgan Keegan & Company, Inc Members FINRA, SIPC
Members NYSE, SIPC

Source: Russell, MSCI, Standard & Poor’s, Lehman Brothers, Barclays Capital

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Large Cap Value Vs Large Cap Growth: 1975 - 2007


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Bull Market Performance

Source: Phoenix Investments Standard Deviation (%)

Bear Market Performance

Source: Phoenix Investments Standard Deviation (%)

Potential Individual Pitfalls Vs Institutional Strategies for Success


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


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


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

Efficient Frontier: Stocks/Bonds/10% Alternatives
11.00%

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
Estate.

Efficient Frontier: Stocks/Bonds/20% Alternatives
11.00%

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
Estate.

“Investors Generally Want To Take
The Smallest Risk To Secure The
Greatest Possible Return”

Dr. Harry Markowitz
Winner, Nobel Prize
in Economics


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.


Disclosure: This hypothetical example does not represent the performance of a specific security nor does it
reflect the effects of taxation, fees, and inflation.

“You’ll find how to live on Social Security over there in the fiction section.”

Source: Ibbotson Associates NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE

*This hypothetical example does not reflect the
effects of taxation, fees, and inflation.
Members NYSE, SIPC

Source: Phoenix Investments

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

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Due
Diligence
Committee

Hypothetical Asset Allocation Analysis

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Due
Diligence
Committee

Covered Product Categories include: (166 total products)
Equity Mutual Funds
Exchange-Traded Funds (ETFs)
Separate Account Managers (SMAs)
Alternative Investments
Annuity Information

Members NYSE, SIPC

Due
Diligence
Committee

Hypothetical “Green Screen” Analysis
rWh

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Due
Diligence
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

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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
Members NYSE, SIPC

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

Members NYSE, SIPC

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
Members NYSE, SIPC

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

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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.

Members NYSE, SIPC

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

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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.

Members NYSE, SIPC

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