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- 1. 1 © 2018 Primerica/55205/518116/6.18
- 2. Endnote text – 10pt. 2 Investing in mutual funds entails some risk. Investment return and principal may fluctuate. Shares, when redeemed, may be worth more or less than their original value. Investments Offered By: PFS Investments Inc. 1 Primerica Parkway Duluth, GA 30099-0001 770-381-1000 NOTE TO REGISTERED REPRESENTATIVE: You must use the speaker’s notes included with this presentation. Also, this presentation should accompany the client-approved Asset Management Brochure (Item #A8864). Primerica and PFS Investments are affiliated companies. An investor should carefully consider a fund’s risks, investment objectives, charges, and expenses before investing. The prospectus contains this and other information about the fund. You can obtain a prospectus from your PFSI Registered Representative. Please read and consider the prospectus carefully before investing.
- 3. Who We Are 3 • The largest independent financial services marketing organization in North America • Listed on the New York Stock Exchange (PRI) • In business since 1977 • More than 5 million lives insured and more than 2 million client investment accounts • Named one of America’s 50 Most Trustworthy Financial Companies (Forbes, August 3, 2015) • Investment clients have more than $61 billion in asset values in their Primerica investment accounts. Numbers reflect the combined totals or daily average, as indicated above, as of, or for the year ended, December 31, 2017, for the following affiliated companies: Life Insurance: National Benefit Life Insurance Company (Home Office: Long Island City, NY) in New York; Primerica Life Insurance Company (Executive Offices: Duluth, GA) in all other U.S. jurisdictions; Primerica Life Insurance Company of Canada (Head Office: Mississauga, ON) in Canada. Securities: In the United States, securities are offered by PFS Investments Inc. (PFSI), 1 Primerica Parkway, Duluth, Georgia 30099-0001; In Canada, mutual funds are offered by PFSL Investments Canada Ltd., mutual fund dealer, and segregated funds are offered by Primerica Life Insurance Company of Canada, Head Office: Mississauga, Ontario. Each company is responsible for its own financial obligations.
- 4. Why Now Is Always a Good Time to Invest Presentation Overview 4 Market Cycles & Historical Perspectives Proven Investment Fundamentals Investment Solutions
- 5. Endnote text – 10pt. 5 “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” – Sir John Templeton
- 6. The Cycle Of Market Emotions 6 Optimism Optimism Excitement Thrill Euphoria Anxiety Denial Fear Desperation Panic Skepticism Hope Relief Capitulation Pessimism Point of Maximum Financial Opportunity Point of Maximum Financial Risk “Wow, am I smart!” “Temporary set back – I’m a long-term investor.” “How could I have been so wrong?”
- 7. Endnote text – 10pt. 7 “You make most of your money in a bear market, you just don’t realize it at the time.” – Shelby Cullom Davis
- 8. History Is a Great Teacher 8 The S&P 500, which is an unmanaged group of securities, is considered to be representative of the stock market in general. Because these indices are not managed portfolios, there are no advisory fees, taxes or internal management expenses reflected in their performance. If these were included, the performance would be lower. An investor cannot invest directly in an index. The next five years following the last 6 bear markets: Market Lows 1-Year Return 5-Year Return 5-Year Annualized Sep 1974 + 38% + 118% + 17% Jan 1980 + 59% + 266% + 30% Nov 1987 + 23% + 122% + 17% Oct 1990 + 34% + 122% + 17% Sep 2002 + 24% + 105% + 15% Mar 2009 + 49% + 161% + 21%
- 9. Endnote text – 10pt. 9 It’s time, not timing, that matters The average investor earned just 2.6% over this same time frame! Example: In the market high scenario, the first $10,000 contribution is made immediately following the last trading day of the month of Dec. 1998. *January dates denoted with an asterisk indicate $10,000 was invested immediately prior to the first trading day of the year. Invest Near Market Highs Date Cumulative Investment Year End Account Value Dec. ‘98 $10,000 $10,000.00 Dec. ‘99 $20,000 $22,104.15 Aug. ‘00 $30,000 $28,822.63 Jan. ‘01 $40,000 $33,906.33 Mar. ‘02 $50,000 $34,181.45 Dec. ‘03 $60,000 $53,986.23 Dec. ‘04 $70,000 $69,861.04 Dec. ‘05 $80,000 $83,292.57 Dec. ‘06 $90,000 $106,448.03 Oct. ‘07 $100,000 $121,811.70 May. ‘08 $110,000 $83,293.38 Dec. ‘09 $120,000 $115,336.53 Dec. ‘10 $130,000 $142,710.10 Apr. ‘11 $140,000 $155,087.04 Sep. ‘12 $150,000 $189,868.66 Dec. ‘13 $160,000 $261,363.61 Nov. ‘14 $170,000 $307,115.21 Jul. ‘15 $180,000 $321,174.72 Dec. ‘16 $190,000 $369,586.97 Dec. ‘17 $200,000 $460,273.60 Annualized Compound Return (Dec. ‘98-Dec. ‘17): 9.00% Invest Near Market Lows Date Cumulative Investment Year End Account Value Aug. ‘98 $10,000 $10,000.00 Feb. ‘99 $20,000 $24,095.14 Nov. ‘00 $30,000 $31,950.36 Sep. ‘01 $40,000 $39,221.30 Sep. ‘02 $50,000 $41,396.94 Feb. ‘03 $60,000 $66,687.37 Jul. ‘04 $70,000 $85,030.31 Apr. ‘05 $80,000 $100,135.76 May. ‘06 $90,000 $127,241.07 Feb. ‘07 $100,000 $144,831.20 Nov. ‘08 $110,000 $101,353.19 Feb. ‘09 $120,000 $143,632.01 Jun. ‘10 $130,000 $177,594.39 Sep. ‘11 $140,000 $192,526.42 Jan. ‘12* $150,000 $234,937.72 Jan. ‘13* $160,000 $324,268.51 Jan. ‘14* $170,000 $380,024.90 Sep. ‘15 $180,000 $395,988.08 Feb. ‘16 $190,000 $455,144.45 Jan. ‘17* $200,000 $566,692.78 Annualized Compound Return (Aug. ‘98-Jan. ‘17): 10.45% One $10,000 investment is made in the S&P 500 in each year immediately following market high (or market low) month end date.
- 10. Proven Investment Fundamentals The “Three D’s” • Dollar-Cost Averaging • Discipline • Diversification 10
- 11. Endnote text – 10pt. 11 “Bad news is an investor’s best friend. It lets you buy a slice of American future at a marked-down price.” – Warren Buffett
- 12. Two investors • $100/month • Different Markets Systematic Investing: A Proven Method 12 Systematic Investing allows you to use dollar-cost averaging to build wealth over the long term. Dollar-cost averaging is a technique for lowering the average cost per share over time. While a continuous program of dollar-cost averaging can reduce cost per share over time, it cannot assure a profit or protect against loss in declining markets. Since dollar-cost averaging involves continuous investments over time, the investor should consider his or financial ability to continue purchases through low price levels. The values shown are hypothetical, not intended to reflect any specific market period but to demonstrate the effect of a fluctuating market. $20 18 16 14 12 10 8 6 4 2 0 SharePrice Months 1 2 3 4 5 6 Investor A Investor B Investor A Invests $100 a month in a rising market Investor B Invests $100 a month in a fluctuating market Which example would you prefer?
- 13. Systematic Investing: A Proven Method 13 Systematic Investing allows you to use dollar-cost averaging to build wealth over the long term. Put your investment program on autopilot. Enroll in Pre-Authorized Checking (PAC). Set up regularly scheduled automatic money transfers from your bank account to your investment account. Dollar-cost averaging is a technique for lowering the average cost per share over time. While a continuous program of dollar-cost averaging can reduce cost per share over time, it cannot assure a profit or protect against loss in declining markets. Since dollar-cost averaging involves continuous investments over time, the investor should consider his or her financial ability to continue purchases through low price levels. The values shown are hypothetical, not intended to reflect any specific market period but to demonstrate the effect of a fluctuating market. Investor A Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Number of Shares AccumulatedInvests $100 Per Month Per Share $10 $12 $14 $16 $18 $20 # 0f Shares 10.00 8.33 7.14 6.25 5.56 5.00 42 Investor B Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Number of Shares AccumulatedInvests $100 Per Month Per Share $10 $7 $4 $2 $6 $10 # 0f Shares 10.00 14.29 25.00 50.00 16.67 10.00 126 Amount Invested in 6 Months Number of Shares Accumulated Average Cost Per Share A $600 42.28 $14.19 B $600 125.95 $4.76
- 14. Endnote text – 10pt. 14 “Let me be clear on one point, I can’t predict the short- term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. – Warren Buffet “What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up.”
- 15. Invest With Your Head, Not the Headlines 15 There have been plenty of reasons not to invest in the stock market over the years, but for the long-term investors, the results have generally been positive over time. $210,974 This chart illustrates an investment in the S&P 500 total return index. An investor cannot invest directly in an index. See endnotes 1 and 2 for further details. MarketCrash BosnianWar OklahomaCityBombing AsianMarketCrash TerroristsAttackU.S. AsianTsunami MortgageCrisis GreeceBailout DataBreaches EquifaxDataBreach Brexit If you invested $10,000 in the stock market on December 31, 1988 and left it in the market, even when the news was bad… 30 years later (December 31, 2017), your investment would have grown to $210,974 (10.69% average annual total return).
- 16. Invest With Your Head, Not the Headlines 16 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 $ Market Value 11,661 15,356 14,879 19,412 20,891 22,797 23,300 32,056 39,416 52,567 Total % Return 16.61 31.69 -3.10 30.47 7.62 10.08 1.32 37.58 22.96 33.36 Events Insider Trading Market Crash Airline Bankruptcy Persian Gulf War Bosnian War WTC Bombing Interest Rate Hikes Oklahoma City Bombing Budget Crisis Taliban Take Kabul 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 $ Market Value 67,590 81,812 74,363 65,524 51,053 65,685 72,833 76,410 88,478 93,339 Total % Return 28.58 21.04 -9.10 -11.89 -22.10 28.68 10.88 4.91 15.79 5.49 Events Asian Market Crash Y2K Fears Tech Stocks Fall Terrorists Attack U.S. Accounting Scandals Iraq Invaded Asian Tsunami Hurricane Katrina Rising Gas Prices Mortgage Crisis 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $ Market Value 58,806 74,368 85,571 87,378 101,361 134,191 152,559 154,670 173,169 210,974 Total % Return -37.00 26.46 15.06 2.11 16.00 32.39 13.69 1.38 11.96 10.69 Events Financial Crisis Double-digit Job Loss Greece Bailout EU Debt Crisis Fiscal Cliff Iraq Invaded Data Breaches Ebola Breakout Int’l Tensions U.S. Elections Source: Morningstar. Past performance is no guarantee of future results. This chart illustrates a hypothetical investment of $10,000 in an investment which performed similarly to the S&P 500 total return index. Dates reflected are from January 1 through December 31 of each year, respectively. This chart is for illustrative purposes and does not represent an actual investment. The returns do not reflect the past or future performance of any specific investment. All investments involve risk including loss of principal. The figures in the chart above assume reinvestments of dividends. They do not reflect any fees, expenses or tax consequences, which would lower results. The Standard & Poor’s 500®, which is an unmanaged group of securities, is considered to be representative of the stock market in general. The data assumes reinvestment of all income and does not account for taxes or transaction costs which may lower results. Because these indices are not managed portfolios, there are no advisory fees or internal management expenses reflected in their performance and investors cannot invest directly in any index. See next slide for additional notes. Average Annual Total Return: 10.69% Do you see how, over time, you can achieve your investing goals regardless of the headlines?
- 17. Invest With Your Head, Not the Headlines 17 1. The figures represent an initial investment of $10,000. The Standard & Poor’s 500®, which is an unmanaged group of securities, is considered to be representative of the stock market in general. Bonds are represented by the Barclays Capital Aggregate Bond Index is an intermediate term market capitalization — weighted index, meaning the securities in the index are weighted according to the market size of each bond type. Most U.S. traded investment grade bonds are represented. Municipal bonds and treasury inflation- protected securities are excluded, due to tax treatment issues. The index includes treasury securities, government agency bonds, mortgage-backed bonds, corporate bonds, and a small amount of foreign bonds traded in U.S. The U.S. 30-Day T-bills are government backed short-term investments considered to be risk-free and as good as cash because the maturity is only one month. Morningstar collects yields on the T-bill on a weekly basis from The Wall Street Journal. Treasury Bills are secured by the full faith and credit of the U.S. Government and offer a fixed rate of return, while an investment in the stock market offers no such guarantee. Inflation history is gathered from the Ibbotson Stocks, Bonds, Bills and Inflation module. 2. An investment such as stocks represented by the S&P Index may not be appropriate for an investor seeking a short-term investment or who is unwilling to experience the volatility, including the potential loss of principal. Source: PFS Investments Inc. and Morningstar. The chart above illustrates a hypothetical investment of $10,000 invested in the S&P 500 TR Index on August 31, 1987, near the market high, and then the subsequent financial impact of various investment strategies on a portfolio implemented on October 31, 1987, after the market crash on October 19,1987 through December 31, 2016. Investors 4 & 5’s monthly contributions began November 30, 1987. The Standard & Poor’s 500®, which is an unmanaged group of securities, is considered to be representative of the stock market in general. An investor cannot invest directly in an index. Systematic investing cannot assure a profit or protect against loss in declining markets. Since systematic investing involves continuous investments over time regardless of fluctuating price levels, the investor should consider his or her ability to continue to invest in periods of low price levels. A money market fund is an investment company that invests in commercial paper, banker’s acceptances, repurchase agreements, government securities, certificates of deposit and other highly liquid securities, and pays money market rates of interest. Money markets are not FDIC-insured, may lose money, and are not guaranteed by a bank or other financial institution. Although the money market seeks to preserve a stable per share value (i.e., $1.00 per share), it is possible to lose money by investment in the fund. Principal value and investment returns will fluctuate and, when redeemed, may be worth more or less than the original investment amount. 3. An investment such as stocks represented by the S&P Index may not be appropriate for an investor seeking a short-term investment or who is unwilling to experience the volatility, including the potential loss of principal. The Standard & Poor’s 500®, which is an unmanaged group of securities, is considered to be representative of the stock market in general. The data assumes reinvestment of all income and does not account for taxes or transaction costs. Because these indices are not managed portfolios, there are no advisory fees or internal management expenses reflected in their performance and investors cannot invest directly in any index. Government bonds and Treasury bills are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than the other asset classes. Furthermore, small company stocks are more volatile than large company stocks and are subject to significant price fluctuations, business risks and are thinly traded. International investments involve special risks such as fluctuations in currency, foreign taxation, economic and political risks, liquidity risks and differences in accounting and financial standards. The data assumes reinvestment of all income and does not account for taxes or transaction costs. Because these indices are not managed portfolios, there are no advisory fees or internal management expenses reflected in their performance and investors cannot invest directly in any index.
- 18. Diversification Is a Time-Tested Principle 18 Spread out your investment dollars to protect against market risk. 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Small Stocks 60.7% Int’l Stocks 20.7% Int’l Stocks 14.0% Int’l Stocks 26.9% Int’l Stocks 11.6% LT Gov’t Bonds 25.9% Int’l Stocks 32.5% Small Stocks 31.3% LT Gov’t Bonds 28.2% Small Stocks 18.2% Small Stocks 45.1% Lt Gov’t Bonds 23.9% Large Stocks 1.4% Small Stocks 25.6% Int’l Stocks 25.62% Int’l Stocks 39.2% Small Stocks 18.4% LT Gov’t Bonds 7.8% Small Stocks 16.2% LT Gov’t Bonds 9.9% 30-Day T-Bills 1.7% Small Stocks 28.1% Large Stocks 15.1% Large Stocks 2.1% Int’l Stocks 17.9% Large Stocks 32.4% Large Stocks 13.7% 30-Day T-Bills 0.0% Large Stocks 12.0% Large Stocks 21.8% Large Stocks 28.7% Large Stocks 10.9% Small Stocks 5.7% Large Stocks 15.8% Large Stocks 5.5% Small Stocks -36.7% Large Stocks 26.5% LT Gov’t Bonds 10.1% 30-Day T-Bills 0.0% Large Stocks 16.0% Int’l Stocks 23.3% Small Stocks 2.9% Int’l Stocks 0.4% Lt Gov’t Bonds 1.8% Small Stocks 11.2% LT Gov’t Bonds 1.5% LT Gov’t Bonds 8.5% Large Stocks 4.9% 30-Day T-Bills 4.8% 30-Day T-Bills 4.7% Large Stocks -37.0% 30-Day T-Bills 0.1% Int’l Stocks 8.2% Small Stocks -3.3% LT Gov’t Bonds 3.3% 30-Day T-Bills 0.0% 30-Day T-Bills 0.0% Lt Gov’t Bonds -0.7% Int’l Stocks 1.5% Lt Gov’t Bonds 6.2% 30-Day T-Bills 1.0% 30-Day T-Bills 1.2% 30-Day T-Bills 3.0% LT Gov’t Bonds 1.2% Small Stocks -5.2% Int’l Stocks -43.1% LT Gov’t Bonds -14.9% 30-Day T-Bills 0.1% Int’l Stocks -11.7% 30-Day T-Bills 0.1% Lt Gov’t Bonds -11.4% Int’l Stocks -4.5% Small Stocks -3.6% 30-Day T-Bills 0.2% 30-Day T-Bills 0.8% LOWERRETURN HIGHERRETURN Although diversification does not assure a profit or protect against loss, diversification may help spread out the risk in your portfolio. This chart shows how the returns in different asset classes have varied from one year to the next. Source: Morningstar. Past performance is no guarantee of future results. This chart is for illustrative purposes only and does not represent an actual investment or the performance of any specific investment. All investments involve risk including loss of principal. Small Company Stocks—Russell 2000 Index; Large Company Stocks—Standard & Poor’s 500®, which is an unmanaged group of securities, is considered to be representative of the stock market in general; Long-Term Government Bonds—20-year U.S. Government Bond; Treasury Bills—30-day U.S. Treasury Bill; International Stocks—Morgan Stanley Capital International Europe, Australasia, and Far East (EAFE) Index. Government bonds and Treasury bills are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than the other asset classes. As interest rates rise, bond prices fall. Bond funds do not carry the same guarantees as bonds themselves. Furthermore, small company stocks are more volatile than large company stocks and are subject to significant price fluctuations, business risks and are thinly traded. International investments involve special risks such as fluctuations in currency, foreign taxation, economic and political risks, liquidity risks and differences in accounting and financial standards. The data assumes reinvestment of all income and does not account for taxes or transaction costs which may lower results. Because these indices are not managed portfolios, there are no advisory fees or internal management expenses reflected in their performance and investors cannot invest directly in any index. What is the ideal asset mix?
- 19. Volatility of Small Cap Stocks 19 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Small Stocks 60.7% Int’l Stocks 20.7% Int’l Stocks 14.0% Int’l Stocks 26.9% Int’l Stocks 11.6% LT Gov’t Bonds 25.9% Int’l Stocks 32.5% Small Stocks 31.3% LT Gov’t Bonds 28.2% Small Stocks 18.2% Small Stocks 45.1% Lt Gov’t Bonds 23.9% Large Stocks 1.4% Small Stocks 25.6% Int’l Stocks 25.62% Int’l Stocks 39.2% Small Stocks 18.4% LT Gov’t Bonds 7.8% Small Stocks 16.2% LT Gov’t Bonds 9.9% 30-Day T-Bills 1.7% Small Stocks 28.1% Large Stocks 15.1% Large Stocks 2.1% Int’l Stocks 17.9% Large Stocks 32.4% Large Stocks 13.7% 30-Day T-Bills 0.0% Large Stocks 12.0% Large Stocks 21.8% Large Stocks 28.7% Large Stocks 10.9% Small Stocks 5.7% Large Stocks 15.8% Large Stocks 5.5% Small Stocks -36.7% Large Stocks 26.5% LT Gov’t Bonds 10.1% 30-Day T-Bills 0.0% Large Stocks 16.0% Int’l Stocks 23.3% Small Stocks 2.9% Int’l Stocks 0.4% Lt Gov’t Bonds 1.8% Small Stocks 11.2% LT Gov’t Bonds 1.5% LT Gov’t Bonds 8.5% Large Stocks 4.9% 30-Day T-Bills 4.8% 30-Day T-Bills 4.7% Large Stocks -37.0% 30-Day T-Bills 0.1% Int’l Stocks 8.2% Small Stocks -3.3% LT Gov’t Bonds 3.3% 30-Day T-Bills 0.0% 30-Day T-Bills 0.0% Lt Gov’t Bonds -0.7% Int’l Stocks 1.5% Lt Gov’t Bonds 6.2% 30-Day T-Bills 1.0% 30-Day T-Bills 1.2% 30-Day T-Bills 3.0% LT Gov’t Bonds 1.2% Small Stocks -5.2% Int’l Stocks -43.1% LT Gov’t Bonds -14.9% 30-Day T-Bills 0.1% Int’l Stocks -11.7% 30-Day T-Bills 0.1% Lt Gov’t Bonds -11.4% Int’l Stocks -4.5% Small Stocks -3.6% 30-Day T-Bills 0.2% 30-Day T-Bills 0.8% LOWERRETURN HIGHERRETURN Source: Morningstar. Past performance is no guarantee of future results. This chart is for illustrative purposes only and does not represent an actual investment or the performance of any specific investment. All investments involve risk including loss of principal. Small Company Stocks—Russell 2000 Index; Large Company Stocks—Standard & Poor’s 500®, which is an unmanaged group of securities, is considered to be representative of the stock market in general; Long-Term Government Bonds—20-year U.S. Government Bond; Treasury Bills—30-day U.S. Treasury Bill; International Stocks—Morgan Stanley Capital International Europe, Australasia, and Far East (EAFE) Index. Government bonds and Treasury bills are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than the other asset classes. As interest rates rise, bond prices fall. Bond funds do not carry the same guarantees as bonds themselves. Furthermore, small company stocks are more volatile than large company stocks and are subject to significant price fluctuations, business risks and are thinly traded. International investments involve special risks such as fluctuations in currency, foreign taxation, economic and political risks, liquidity risks and differences in accounting and financial standards. The data assumes reinvestment of all income and does not account for taxes or transaction costs which may lower results. Because these indices are not managed portfolios, there are no advisory fees or internal management expenses reflected in their performance and investors cannot invest directly in any index. Diversification does not assure a profit or protect against loss. See how returns vary from year to year?
- 20. Volatility of International Stocks 20 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Small Stocks 60.7% Int’l Stocks 20.7% Int’l Stocks 14.0% Int’l Stocks 26.9% Int’l Stocks 11.6% LT Gov’t Bonds 25.9% Int’l Stocks 32.5% Small Stocks 31.3% LT Gov’t Bonds 28.2% Small Stocks 18.2% Small Stocks 45.1% Lt Gov’t Bonds 23.9% Large Stocks 1.4% Small Stocks 25.6% Int’l Stocks 25.62% Int’l Stocks 39.2% Small Stocks 18.4% LT Gov’t Bonds 7.8% Small Stocks 16.2% LT Gov’t Bonds 9.9% 30-Day T-Bills 1.7% Small Stocks 28.1% Large Stocks 15.1% Large Stocks 2.1% Int’l Stocks 17.9% Large Stocks 32.4% Large Stocks 13.7% 30-Day T-Bills 0.0% Large Stocks 12.0% Large Stocks 21.8% Large Stocks 28.7% Large Stocks 10.9% Small Stocks 5.7% Large Stocks 15.8% Large Stocks 5.5% Small Stocks -36.7% Large Stocks 26.5% LT Gov’t Bonds 10.1% 30-Day T-Bills 0.0% Large Stocks 16.0% Int’l Stocks 23.3% Small Stocks 2.9% Int’l Stocks 0.4% Lt Gov’t Bonds 1.8% Small Stocks 11.2% LT Gov’t Bonds 1.5% LT Gov’t Bonds 8.5% Large Stocks 4.9% 30-Day T-Bills 4.8% 30-Day T-Bills 4.7% Large Stocks -37.0% 30-Day T-Bills 0.1% Int’l Stocks 8.2% Small Stocks -3.3% LT Gov’t Bonds 3.3% 30-Day T-Bills 0.0% 30-Day T-Bills 0.0% Lt Gov’t Bonds -0.7% Int’l Stocks 1.5% Lt Gov’t Bonds 6.2% 30-Day T-Bills 1.0% 30-Day T-Bills 1.2% 30-Day T-Bills 3.0% LT Gov’t Bonds 1.2% Small Stocks -5.2% Int’l Stocks -43.1% LT Gov’t Bonds -14.9% 30-Day T-Bills 0.1% Int’l Stocks -11.7% 30-Day T-Bills 0.1% Lt Gov’t Bonds -11.4% Int’l Stocks -4.5% Small Stocks -3.6% 30-Day T-Bills 0.2% 30-Day T-Bills 0.8% LOWERRETURN HIGHERRETURN Source: Morningstar. Past performance is no guarantee of future results. This chart is for illustrative purposes only and does not represent an actual investment or the performance of any specific investment. All investments involve risk including loss of principal. Small Company Stocks—Russell 2000 Index; Large Company Stocks—Standard & Poor’s 500®, which is an unmanaged group of securities, is considered to be representative of the stock market in general; Long-Term Government Bonds—20-year U.S. Government Bond; Treasury Bills—30-day U.S. Treasury Bill; International Stocks—Morgan Stanley Capital International Europe, Australasia, and Far East (EAFE) Index. Government bonds and Treasury bills are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than the other asset classes. As interest rates rise, bond prices fall. Bond funds do not carry the same guarantees as bonds themselves. Furthermore, small company stocks are more volatile than large company stocks and are subject to significant price fluctuations, business risks and are thinly traded. International investments involve special risks such as fluctuations in currency, foreign taxation, economic and political risks, liquidity risks and differences in accounting and financial standards. The data assumes reinvestment of all income and does not account for taxes or transaction costs which may lower results. Because these indices are not managed portfolios, there are no advisory fees or internal management expenses reflected in their performance and investors cannot invest directly in any index. Diversification does not assure a profit or protect against loss. See how returns vary from year to year?
- 21. Volatility of Large Cap Stocks 21 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Small Stocks 60.7% Int’l Stocks 20.7% Int’l Stocks 14.0% Int’l Stocks 26.9% Int’l Stocks 11.6% LT Gov’t Bonds 25.9% Int’l Stocks 32.5% Small Stocks 31.3% LT Gov’t Bonds 28.2% Small Stocks 18.2% Small Stocks 45.1% Lt Gov’t Bonds 23.9% Large Stocks 1.4% Small Stocks 25.6% Int’l Stocks 25.62% Int’l Stocks 39.2% Small Stocks 18.4% LT Gov’t Bonds 7.8% Small Stocks 16.2% LT Gov’t Bonds 9.9% 30-Day T-Bills 1.7% Small Stocks 28.1% Large Stocks 15.1% Large Stocks 2.1% Int’l Stocks 17.9% Large Stocks 32.4% Large Stocks 13.7% 30-Day T-Bills 0.0% Large Stocks 12.0% Large Stocks 21.8% Large Stocks 28.7% Large Stocks 10.9% Small Stocks 5.7% Large Stocks 15.8% Large Stocks 5.5% Small Stocks -36.7% Large Stocks 26.5% LT Gov’t Bonds 10.1% 30-Day T-Bills 0.0% Large Stocks 16.0% Int’l Stocks 23.3% Small Stocks 2.9% Int’l Stocks 0.4% Lt Gov’t Bonds 1.8% Small Stocks 11.2% LT Gov’t Bonds 1.5% LT Gov’t Bonds 8.5% Large Stocks 4.9% 30-Day T-Bills 4.8% 30-Day T-Bills 4.7% Large Stocks -37.0% 30-Day T-Bills 0.1% Int’l Stocks 8.2% Small Stocks -3.3% LT Gov’t Bonds 3.3% 30-Day T-Bills 0.0% 30-Day T-Bills 0.0% Lt Gov’t Bonds -0.7% Int’l Stocks 1.5% Lt Gov’t Bonds 6.2% 30-Day T-Bills 1.0% 30-Day T-Bills 1.2% 30-Day T-Bills 3.0% LT Gov’t Bonds 1.2% Small Stocks -5.2% Int’l Stocks -43.1% LT Gov’t Bonds -14.9% 30-Day T-Bills 0.1% Int’l Stocks -11.7% 30-Day T-Bills 0.1% Lt Gov’t Bonds -11.4% Int’l Stocks -4.5% Small Stocks -3.6% 30-Day T-Bills 0.2% 30-Day T-Bills 0.8% LOWERRETURN HIGHERRETURN Source: Morningstar. Past performance is no guarantee of future results. This chart is for illustrative purposes only and does not represent an actual investment or the performance of any specific investment. All investments involve risk including loss of principal. Small Company Stocks—Russell 2000 Index; Large Company Stocks—Standard & Poor’s 500®, which is an unmanaged group of securities, is considered to be representative of the stock market in general; Long-Term Government Bonds—20-year U.S. Government Bond; Treasury Bills—30-day U.S. Treasury Bill; International Stocks—Morgan Stanley Capital International Europe, Australasia, and Far East (EAFE) Index. Government bonds and Treasury bills are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than the other asset classes. As interest rates rise, bond prices fall. Bond funds do not carry the same guarantees as bonds themselves. Furthermore, small company stocks are more volatile than large company stocks and are subject to significant price fluctuations, business risks and are thinly traded. International investments involve special risks such as fluctuations in currency, foreign taxation, economic and political risks, liquidity risks and differences in accounting and financial standards. The data assumes reinvestment of all income and does not account for taxes or transaction costs which may lower results. Because these indices are not managed portfolios, there are no advisory fees or internal management expenses reflected in their performance and investors cannot invest directly in any index. Diversification does not assure a profit or protect against loss. See how returns vary from year to year?
- 22. Volatility of Long-Term Government Bonds 22 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Small Stocks 60.7% Int’l Stocks 20.7% Int’l Stocks 14.0% Int’l Stocks 26.9% Int’l Stocks 11.6% LT Gov’t Bonds 25.9% Int’l Stocks 32.5% Small Stocks 31.3% LT Gov’t Bonds 28.2% Small Stocks 18.2% Small Stocks 45.1% Lt Gov’t Bonds 23.9% Large Stocks 1.4% Small Stocks 25.6% Int’l Stocks 25.62% Int’l Stocks 39.2% Small Stocks 18.4% LT Gov’t Bonds 7.8% Small Stocks 16.2% LT Gov’t Bonds 9.9% 30-Day T-Bills 1.7% Small Stocks 28.1% Large Stocks 15.1% Large Stocks 2.1% Int’l Stocks 17.9% Large Stocks 32.4% Large Stocks 13.7% 30-Day T-Bills 0.0% Large Stocks 12.0% Large Stocks 21.8% Large Stocks 28.7% Large Stocks 10.9% Small Stocks 5.7% Large Stocks 15.8% Large Stocks 5.5% Small Stocks -36.7% Large Stocks 26.5% LT Gov’t Bonds 10.1% 30-Day T-Bills 0.0% Large Stocks 16.0% Int’l Stocks 23.3% Small Stocks 2.9% Int’l Stocks 0.4% Lt Gov’t Bonds 1.8% Small Stocks 11.2% LT Gov’t Bonds 1.5% LT Gov’t Bonds 8.5% Large Stocks 4.9% 30-Day T-Bills 4.8% 30-Day T-Bills 4.7% Large Stocks -37.0% 30-Day T-Bills 0.1% Int’l Stocks 8.2% Small Stocks -3.3% LT Gov’t Bonds 3.3% 30-Day T-Bills 0.0% 30-Day T-Bills 0.0% Lt Gov’t Bonds -0.7% Int’l Stocks 1.5% Lt Gov’t Bonds 6.2% 30-Day T-Bills 1.0% 30-Day T-Bills 1.2% 30-Day T-Bills 3.0% LT Gov’t Bonds 1.2% Small Stocks -5.2% Int’l Stocks -43.1% LT Gov’t Bonds -14.9% 30-Day T-Bills 0.1% Int’l Stocks -11.7% 30-Day T-Bills 0.1% Lt Gov’t Bonds -11.4% Int’l Stocks -4.5% Small Stocks -3.6% 30-Day T-Bills 0.2% 30-Day T-Bills 0.8% LOWERRETURN HIGHERRETURN Source: Morningstar. Past performance is no guarantee of future results. This chart is for illustrative purposes only and does not represent an actual investment or the performance of any specific investment. All investments involve risk including loss of principal. Small Company Stocks—Russell 2000 Index; Large Company Stocks—Standard & Poor’s 500®, which is an unmanaged group of securities, is considered to be representative of the stock market in general; Long-Term Government Bonds—20-year U.S. Government Bond; Treasury Bills—30-day U.S. Treasury Bill; International Stocks—Morgan Stanley Capital International Europe, Australasia, and Far East (EAFE) Index. Government bonds and Treasury bills are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than the other asset classes. As interest rates rise, bond prices fall. Bond funds do not carry the same guarantees as bonds themselves. Furthermore, small company stocks are more volatile than large company stocks and are subject to significant price fluctuations, business risks and are thinly traded. International investments involve special risks such as fluctuations in currency, foreign taxation, economic and political risks, liquidity risks and differences in accounting and financial standards. The data assumes reinvestment of all income and does not account for taxes or transaction costs which may lower results. Because these indices are not managed portfolios, there are no advisory fees or internal management expenses reflected in their performance and investors cannot invest directly in any index. Diversification does not assure a profit or protect against loss. See how returns vary from year to year?
- 23. Volatility of 30-Day Treasury Bills 23 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Small Stocks 60.7% Int’l Stocks 20.7% Int’l Stocks 14.0% Int’l Stocks 26.9% Int’l Stocks 11.6% LT Gov’t Bonds 25.9% Int’l Stocks 32.5% Small Stocks 31.3% LT Gov’t Bonds 28.2% Small Stocks 18.2% Small Stocks 45.1% Lt Gov’t Bonds 23.9% Large Stocks 1.4% Small Stocks 25.6% Int’l Stocks 25.62% Int’l Stocks 39.2% Small Stocks 18.4% LT Gov’t Bonds 7.8% Small Stocks 16.2% LT Gov’t Bonds 9.9% 30-Day T-Bills 1.7% Small Stocks 28.1% Large Stocks 15.1% Large Stocks 2.1% Int’l Stocks 17.9% Large Stocks 32.4% Large Stocks 13.7% 30-Day T-Bills 0.0% Large Stocks 12.0% Large Stocks 21.8% Large Stocks 28.7% Large Stocks 10.9% Small Stocks 5.7% Large Stocks 15.8% Large Stocks 5.5% Small Stocks -36.7% Large Stocks 26.5% LT Gov’t Bonds 10.1% 30-Day T-Bills 0.0% Large Stocks 16.0% Int’l Stocks 23.3% Small Stocks 2.9% Int’l Stocks 0.4% Lt Gov’t Bonds 1.8% Small Stocks 11.2% LT Gov’t Bonds 1.5% LT Gov’t Bonds 8.5% Large Stocks 4.9% 30-Day T-Bills 4.8% 30-Day T-Bills 4.7% Large Stocks -37.0% 30-Day T-Bills 0.1% Int’l Stocks 8.2% Small Stocks -3.3% LT Gov’t Bonds 3.3% 30-Day T-Bills 0.0% 30-Day T-Bills 0.0% Lt Gov’t Bonds -0.7% Int’l Stocks 1.5% Lt Gov’t Bonds 6.2% 30-Day T-Bills 1.0% 30-Day T-Bills 1.2% 30-Day T-Bills 3.0% LT Gov’t Bonds 1.2% Small Stocks -5.2% Int’l Stocks -43.1% LT Gov’t Bonds -14.9% 30-Day T-Bills 0.1% Int’l Stocks -11.7% 30-Day T-Bills 0.1% Lt Gov’t Bonds -11.4% Int’l Stocks -4.5% Small Stocks -3.6% 30-Day T-Bills 0.2% 30-Day T-Bills 0.8% LOWERRETURN HIGHERRETURN Source: Morningstar. Past performance is no guarantee of future results. This chart is for illustrative purposes only and does not represent an actual investment or the performance of any specific investment. All investments involve risk including loss of principal. Small Company Stocks—Russell 2000 Index; Large Company Stocks—Standard & Poor’s 500®, which is an unmanaged group of securities, is considered to be representative of the stock market in general; Long-Term Government Bonds—20-year U.S. Government Bond; Treasury Bills—30-day U.S. Treasury Bill; International Stocks—Morgan Stanley Capital International Europe, Australasia, and Far East (EAFE) Index. Government bonds and Treasury bills are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than the other asset classes. As interest rates rise, bond prices fall. Bond funds do not carry the same guarantees as bonds themselves. Furthermore, small company stocks are more volatile than large company stocks and are subject to significant price fluctuations, business risks and are thinly traded. International investments involve special risks such as fluctuations in currency, foreign taxation, economic and political risks, liquidity risks and differences in accounting and financial standards. The data assumes reinvestment of all income and does not account for taxes or transaction costs which may lower results. Because these indices are not managed portfolios, there are no advisory fees or internal management expenses reflected in their performance and investors cannot invest directly in any index. Diversification does not assure a profit or protect against loss. Do you understand the importance of diversification?
- 24. What’s an Effective Long-Term Investment Vehicles? – Mutual Funds 24 What is a mutual fund? Did you know? The typical mutual fund holds more than 150 stocks on average.** Note: Each mutual fund invests differently. Read the mutual fund’s prospectuses to determine how a fund may invest and to determine its current holdings. Mutual funds are actively managed portfolios and incur advisory fees and internal management costs. Investment in mutual funds does not assure a profit. The value of funds fluctuates, and, when redeemed, may be worth less than their original value. List of companies does not constitute a recommendation to buy or sell securities. Source: Morningstar. Average based on 3,276 U.S. domestic equity open-end funds. If mutual funds are the investment source of a qualified retirement account, withdrawals prior to age 59 1/2 may be subject to ordinary income tax and early withdrawal penalties. Professionally Managed MoneyIndividual Investors CONSUMER The Procter & Gamble Company (Crest, Duracell, Gillette, Tide) ENTERTAINMENT The Walt Disney Company (ABC Television Network, Disney Channel, Walt Disney World Theme Park) PHARMACEUTICALS Pfizer, Inc. (Advil, Celebrex, Lipitor) Top Holdings Examples TELECOMMUNICATIONS Verizon Communications, Inc. (Wireless voice and data, long-distance telephone, broadband Internet) CONSUMER McDonald’s Corporation TECHNOLOGY Microsoft Corporation (Windows computer software, Xbox video game system)
- 25. Mutual Funds Earn Money Three Ways: 1. Dividends 2. Capital Gains 3. Capital Appreciation 25 Should any of these be earned, they may be subject to taxation. Also note that the value of a fund may fluctuate.
- 26. 5 Great Reasons to Own a Mutual Fund 1. Professional money management 2. Diversification of assets 3. Growth potential 4. Affordability 5. Liquidity 26 Mutual funds are not guaranteed against a loss. Mutual funds also have costs and fees that are attributable to management and distribution.
- 27. We Are a One-Stop Financial Supermarket With Home Delivery! 27 Not all products and services are available in all states, territories, or the District of Columbia. A representative’s ability to offer products from the companies listed is subject to state and federal licensing and certification requirements. Please refer to the Important Endnotes for additional details about the contractual arrangements and company affiliations detailed above.27
- 28. Why Now Is Always A Great Time to Invest • Historical Market Perspective • Compelling Opportunity • Proven Investment Fundamentals • PFSI Investment Solutions 28
- 29. End Notes Auto and Home Insurance: In the U.S., offered through Primerica SecureTM, a personal lines insurance referral program in which representatives may refer individuals to Answer Financial Inc., which offers insurance products and services through its licensed affiliates. Primerica, its representatives and the Primerica Secure program do not represent any of the insurers in the program. Legal Protection: In the U.S., ID Theft Defense is offered by contractual agreement between Primerica Client Services, Inc. and Prepaid Legal Services, Inc. d/b/a Legal Shield (“LegalShield”). ID Theft Defense is a product of LegalShield, and provides access to identity theft protection and restoration services through an exclusive relationship with Kroll, Inc. In the U.S., Primerica Legal Protection Program legal protection services are offered by LegalShield or applicable subsidiary, through contractual agreement between Primerica Client Services, Inc. and LegalShield. LegalShield provides access to legal services offered by a network of provider law firms to LegalShield members through membership-based participation. Life Insurance: Primerica representatives market term life insurance underwritten by National Benefit Life Insurance Company (Home Office: Long Island City, NY) in New York and Primerica Life Insurance Company (Executive Offices: Duluth, GA) in all other U.S. jurisdictions. Long Term Care: In the U.S., representatives may offer long term care insurance from Genworth Financial by contractual agreement among Primerica Financial Services, Inc., Genworth Life Insurance Company and Genworth Life Insurance Company of New York. A referral program in which representatives may refer individuals to LTCI Partners, LLC provides long term care insurance from these Genworth companies and other companies unaffiliated with Primerica. Managed Investments: PFS Investments Inc. is an SEC Registered Investment Adviser doing business as Primerica Advisors. For additional information about managed investments, please ask your Primerica representative for a copy of the Form ADV Part 2A wrap fee program brochure for each of the Freedom Portfolios and the Lifetime Investment Platform. Mutual Funds, Variable Annuities and 401(k) Plans: In the U.S., securities are offered through PFS Investments Inc., 1 Primerica Parkway, Duluth, Georgia 30099-0001. PFS Investments Inc. is a member of FINRA and SIPC. Vivint: Home automation services (including home security) are offered through a referral arrangement by contractual agreement between Primerica Client Services, Inc. Primerica Client Services Inc., PFSL Investments Canada Ltd., Vivint, Inc. and Vivint Canada, Inc. Primerica is the trademark of Primerica, Inc. All other trademarks and service marks are the property of their respective owners. All rights reserved. 29
- 30. 30 Investors should carefully consider the investment objectives, risks, fees, charges and expenses of a mutual fund before investing. The prospectus and/or summary prospectus contains this and other information about the fund. Please read and consider the prospectus carefully before investing. You may obtain a prospectus from your PFS Investments representative. Securities offered by PFS Investments Inc., 1 Primerica Parkway, Duluth, GA 30099-0001 Primerica and PFS Investments are affiliate companies. Primerica refers to Primerica and its affiliated companies. End Notes © 2018 Primerica/55205/518116/6.18
Notas del editor
- Let me start by saying that for the long-term investor, “now” is always a good time to invest. Investing is one way you can help build wealth. At Primerica, our fundamentals are sound and we do what is right for people. With all of the products and services we employ to help families – educating our clients is a key principle - especially so for securities. We teach people the fundamentals of investing - a few of which I’ll cover today that work particularly well in this market. Before I get started, let me tell you a little about who we are. Go to next slide.
- For use by PFS Investments Inc. securities-licensed representatives only. NOTE: You must use this presentation in its entirety. You can not remove, add or rearrange the slides. Points to cover: Read slide
- For the long term investor, we believe “now” is always a good time to invest, even in down markets. We’ll talk about that and we’ll talk about how to do it right. So, let me just give you a brief preview of what we’ll be covering in today’s presentation. Read slide. Let’s get started with some perspective on investing. Go to next slide.
- Sir John made this timeless quote regarding investor emotion and how that effects and is affected by the market. Read slide. Again, Sir John Templeton is talking about investor emotion and how that effects and is affected by the market. Let’s look at how they relate. Note to speaker: If you need to explain who Sir John Templeton is: Legendary investor and mutual fund pioneer – created the Templeton Funds Oxford University Rhodes Scholar Was a billionaire Money magazine in 1999 called him “arguably the greatest global stock picker of the century” Go to next slide.
- This is called the Cycle of Market Emotions. It shows when the market is moving up, people feel really good about investing. Then on the way down, those feelings tend to change. Let me see a show of hands, whose thrilled or euphoric about the market right now? Now raise your hands, who has some fear? Anyone out there panicked? Okay, now who’s a little skeptical or pessimistic. Who thinks we’re down here? We tend to see most of the hands go up with pessimism and skepticism right now. We happen to think that’s probably about where we are right now in the market as well. Somewhere down here. So if we’re pretty much in agreement in where we’re at on the chart, let’s recall what Sir John Templeton said about that as it relates to the market cycle. He said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” That’s his observation based on many successful years of investing. If that is true, it is possible we are at or nearing the point of maximum financial opportunity, but you know…. many people will miss it. Typically, when people move through the down cycle, going through “fear, desperation, panic, capitulation, pessimism” they tend to run for safety. Let’s look at what happened the last time we went through a down market. Go to next slide.
- He said: “You make most of your money in a bear market, you just don’t realize it at the time.” That one bears repeating…. “You make most of your money in a bear market, you just don’t realize it at the time.” Shelby Cullom Davis, the legendary Wall Street investor we are quoting here, turned $100,000 in the late 1940s to $900 million by the 1990s through careful and sensible investment practices. You can draw your own conclusion about what he attributed a lot of that growth to. Investing during bear markets, when people are pessimistic and skeptical, isn’t always the easiest thing to do. However, the values created in bear markets have historically been great opportunities to make significant gains – a probable point of maximum financial opportunity. Though there are no guarantees in regard to the market but, historically, we have seen some significant gains from off the bottom of a bear market. Now I don’t know when the bottom will be or if we are already there. Usually, we can’t pinpoint it until we’re well past it. But if you aren’t trying to time it, you won’t miss it, right? Let’s look at some history. Note to speaker, if you need to explain who Shelby Cullom David is: Legendary Wall Street investor A leading financial advisor to governors and U.S. Presidents. United States Ambassador to Switzerland Go to next slide.
- The slide says, “History is a Great Teacher.” Let’s look at some historical returns coming off the market lows following significant market downturns. Highlight some of the time periods and returns. Now we always need to keep in mind that past performance is no guarantee of future results and no one can consistently time the market with accuracy. But what one can do is study the past and heed the wisdom of successful investors for guidance – I think that’s a pretty good idea. When Shelby said, “You make most of your money in a bear market, you just don’t realize it at the time.” I think he said it from experience. Go to next slide.
- He said: “You make most of your money in a bear market, you just don’t realize it at the time.” That one bears repeating…. “You make most of your money in a bear market, you just don’t realize it at the time.” Shelby Cullom Davis, the legendary Wall Street investor we are quoting here, turned $100,000 in the late 1940s to $900 million by the 1990s through careful and sensible investment practices. You can draw your own conclusion about what he attributed a lot of that growth to. Investing during bear markets, when people are pessimistic and skeptical, isn’t always the easiest thing to do. However, the values created in bear markets have historically been great opportunities to make significant gains – a probable point of maximum financial opportunity. Though there are no guarantees in regard to the market but, historically, we have seen some significant gains from off the bottom of a bear market. Now I don’t know when the bottom will be or if we are already there. Usually, we can’t pinpoint it until we’re well past it. But if you aren’t trying to time it, you won’t miss it, right? Let’s look at some history. Note to speaker, if you need to explain who Shelby Cullom David is: Legendary Wall Street investor A leading financial advisor to governors and U.S. Presidents. United States Ambassador to Switzerland Go to next slide.
- So, using history and insight as a guide, I think we’ve made a good argument for not sitting it out. Now let’s talk about some core investment concepts that will help you be a successful investor. These are three basic and proven investment fundamentals. We refer to them as the “three Ds”... Dollar-Cost Averaging, Discipline and Diversification. Go to next slide.
- Let’s start with some perspective. The quote at the top says, “Bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.” Warren Buffett is another legendary investor. A lot of people have heard of him, but I’ll tell you a little more about him in a minute. First, let’s talk about the quote. What is he talking about? You mean that bad news can actually be a “good” thing? Well, for smart investors, it may be. What happens when we go through economic downturns and volatile times is that people become fearful and panic and then capitulate. When they capitulate they sell, just like we saw on the Cycle of Market Emotions. A lot of times, when the market goes down people sale indiscriminately, helping to drag the price of otherwise sound company stocks down. I know that’s true, but I also know that I’m not a stock picker. I leave that up to professional money managers. They have the expertise and resources to research companies and find these sound but undervalued stocks for their mutual funds and portfolios. [Note to speaker, if you need to explain who Warrren Buffett is: One of the world’s most successful investors Largest shareholder and CEO of Berkshire Hathaway. Known as the “Oracle of Omaha” Estimated net worth: $85.8 Billion (as of 2-15-18)] https://www.forbes.com/profile/warren-buffett/ Go to next slide.
- Systematic Investing: A Proven Method Objective: To demonstrate the advantage of dollar-cost-averaging Points to cover: “You’re an investor putting $100 a month into your investment program. Which example would you prefer, A or B?” (Allow audience to answer.) “Let’s see which example is better on the next slide.” Go to next slide.
- Systematic Investing: A Proven Method (cont’d) Objective: To demonstrate the advantage of dollar-cost-averaging Points to Cover: “Investor A and B both invested $100 every month into the market. But investor A only accumulated 42 shares in the rising market because the price per share was climbing. Investor A’s $100 investment could buy more shares in the first few months, but that same $100 didn’t go as far in the last few months on the graph.” “Meanwhile, Investor B was able to take advantage of a fluctuating market, when the price per share declined. Investor B’s $100 monthly investment could buy more shares as the prices fell. Over time, Investor B was able to accumulate three times as many shares as Investor A, and get in position for those shares to appreciate in value at the next market gain.” “The key is to put your savings program in place and keep it up every month, regardless of how the market is performing. By investing the same dollar amount of money monthly or quarterly, regardless of what the market is doing, you have the potential to lower your average cost per share.” Cover all points in disclaimer. Go to next slide.
- Let’s bring Warren back into it. This is what he said back in October of 2008. Read quote. Based on past experience, we typically see the market begin its move back upwards even if the press is still talking gloom and doom, many times before all the economic indicators are positive as well. The market tends to be a leading indicator of the economy. That usually happens when many people are still holding cash and waiting for the good news; so, they miss out on that early movement, which could be substantial. Note to speaker, if you need to explain who Warrren Buffett is: One of the world’s most successful investors Largest shareholder and CEO of Berkshire Hathaway. Known as the “Oracle of Omaha” Estimated net worth: $85.8 Billion (as of 2-15-18) https://www.forbes.com/profile/warren-buffett/ Go to next slide.
- The slide says “Invest with your head, not the headlines.” It seems like every time we pick up a newspaper or turn on the television, we can find another reason why today is not a good day to start investing. And over the years there have been plenty of “reasons” not to invest. However, for the long-term investors, the results have generally been positive over time. (Pick out a few events, shown or not, and discuss them briefly with the audience. You can also ask the audience for some) But in spite of all the bad news we’re exposed to every day, if $10,000 were invested in the stock market, as represented by the S&P 500 on December 31, 1986, and held firm through all of the scandals, financial crises, conflicts and other bad news over thirty years … the investment would grow to almost $182,261. An average annual rate of return of 10.15%. Let’s look further into this same example. Go to next slide.
- Invest with your head, not the headlines (cont’d) This chart shows the value of that original $10,000 investment each year. It also shows the annual return for the year and it shows a headline… one that may have caused an investor some concern. Let me ask you, how many negative return years do you count? They are the ones in red. In the last 30 years, investors experienced just 5 years of negative returns. Over 80% of the time the market has had a positive return for the year, but wouldn’t the headlines make you believe there were more bad years? The most important thing to remember is that, historically, every major setback the stock market has suffered over the past 30 years has been temporary. Of course, past performance does not guarantee future results. Nevertheless, the market has typically recovered, as the chart indicates. So, do you see how, over time, you can achieve your investing goals regardless of the headlines? Go to next slide.
- The third D – Diversification. Diversification is a time-tested principle. We use this chart to show how the various market asset classes performed over time. “One of the most important strategies for achieving your long-term investing goals is diversification — spreading investment dollars across different types of funds based on your goals, needs and risk tolerance. This strategy may help reduce risk and can work to increase returns by offsetting losses in one asset class with an increased opportunity for gain in another.” “This chart helps to illustrate how the returns of different asset classes have varied from one year to the next. It helps to demonstrate the challenges with trying to predict the next top-performing asset class. Given the volatility in the market, no one can know for sure which asset class will be next year’s top performer. However, a properly diversified portfolio can help to reduce downside risk and increase upside potential for the long-term investor.” “I should point out that diversification does not guarantee against a loss or ensure a profit, but diversification may help spread out the risk in your portfolio.” We believe it’s a good idea to be diversified and you do can that with various stock and bond asset classes. You might be asking yourself now, how do I do that? What is the right mix. Over the next few slides, we’ll talk about just that. Go to next slide.
- Objective: To show how the various market asset classes performed over time and point out why being diversified is a good idea. Points to Cover: “Small cap stocks are stocks of companies with a market capitalization, or total stock value, of less than $1 billion.” “Small Cap stocks outperformed other classes in six of the last fifteen years and ranked either first or second in nine of the last fifteen years versus the other five asset classes shown. Investments in small to mid-sized companies may offer the potential for higher returns, but are also subject to greater short-term price fluctuations and may be less liquid than larger, more established companies.” Go to next slide.
- Objective: To show how the various market asset classes performed over time and point out why being diversified is a good idea. Points to Cover: “International stocks are stocks of companies that are traded in foreign markets.” “International Equity stocks outperformed other classes in five of the last fifteen years, and ranked either first or second in seven of the last fifteen years versus the other five asset classes shown. However, international investments involve special risks such as fluctuations in currency, foreign taxation, economic and political risks, liquidity risks and differences in accounting and financial standards.” Go to next slide.
- Objective: To show how the various market asset classes performed over time and point out why being diversified is a good idea. Points to Cover: “Large cap stocks are stocks of companies with a market capitalization, or total stock value, of $10 billion or more.” “Large cap stocks outperformed other classes in one of the last fifteen years. They have not been on top for several years, but I wouldn’t count them out and are an important asset class for many diversified portfolios. Generally, this asset class offers higher returns but with more risk than fixed income asset classes.” Go to next slide.
- Objective: To show how the various market asset classes performed over time and point out why being diversified is a good idea. Points to Cover: “Long-Term Government Bonds are interest-bearing or discounted debt securities issued by the U.S. Government, essentially a loan that earns interest for the bondholder.” “Long-Term Government Bonds outperformed other classes in five of the last fifteen years – not surprisingly during a long bear market, which is when we would expect them to potentially outperform equities and is a good reason why many model portfolios have some allocation to them.” Go to next slide.
- Objective: To show how the various market asset classes performed over time and point out why being diversified is a good idea. Points to Cover: “30-Day Treasury Bills are short-term discounted securities issued by the U.S. government with a maturity of 30 days.” “Government bonds and Treasury Bills are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than the other asset classes. However, by itself, this asset class falls into the lower half of the chart in most years, possibly making it more difficult for investors to reach their goals.” Go to next slide.
- What’s one of the most effective long-term investment vehicles? Mutual Funds Objective: To illustrate how mutual funds generally work. Points to Cover: Ask, “What is a mutual fund?” “A mutual fund is an investment that pulls together money from individuals, called investors, to buy stocks and bonds from a wide range of companies. In other words, a mutual fund is a professionally managed ’pool’ of money.” Ask, “How does a mutual fund work?” “The stocks and bonds that the mutual fund buys are known as securities, and they make up the assets of the fund. Many funds invest in companies you have grown to trust with familiar brands and products, many of which you probably own in your home. Mutual funds commonly invest in companies like those in the example shown in this presentation.” Read slide and ask, “Do you recognize any familiar names? What other products or services do you use or rely on daily?” “Buying these stocks individually can require substantial capital. Mutual funds are an affordable way to share in the performance of many companies. Together, all of the stocks make up the fund’s portfolio. When you invest in a mutual fund, you are actually buying shares of that fund. The typical mutual fund holds an average of more than 150 stocks.” “Let’s look at some of the advantages of owning a mutual fund as they relate to growing your investment.” Go to next slide.
- Mutual funds earn money three ways Objective: Explain how mutual funds earn money Points to cover: “Through their investments, mutual funds earn money three ways: Dividends: As a company begins to make a profit, it often reinvests its earnings. When it has grown enough that it no longer needs to reinvest all of its profits, the company may distribute some to its shareholders through dividends. Depending on the type of account, this distribution can either be taken by the shareholder as cash or reinvested to by more shares. There is no guarantee a mutual fund will earn dividends. Capital Gains Distributions. When the value of stocks within a mutual fund go up and the fund manager sells the stock held in the fund portfolio, this gain can be distributed to the shareholders as a capital gain. Depending on the type of account, this distribution can either be taken by the shareholder as cash or reinvested to by more shares. There is no guarantee a mutual fund will distribute capital gains. Capital Appreciation: When the value of stocks within a mutual fund go up – or appreciate – the value of the fund goes up. If the value of the fund goes up after you purchase the shares, then the difference between the price you paid for your shares and the increased share price is capital appreciation. There is no guarantee of capital appreciation. “Besides the financial benefits described here, there are other great reasons to invest in mutual funds. Let’s see what other advantages mutual funds offer to investors.” Go to next slide.
- 5 Great Reasons to Own a Mutual Fund Objective: Explain benefits that mutual funds offer to investors Points to cover: Ask, “Why own a mutual fund?” “You get professional money management. Investments of a mutual fund are monitored by portfolio managers who study the market for a living. Strategies like diversification of assets cannot assure a profit or protect against a loss in a declining market, but it can help reduce volatility. Considered the essential tool in risk management, mutual funds make it possible for even small investors to diversify their portfolio. A mutual fund can effectively diversify its portfolio among many stocks because of the large investment pool of money.” “Although mutual funds are not FDIC insured or guaranteed and the value will fluctuate, the growth potential that comes with owning mutual funds is among the greatest of any investment type.” “Mutual funds are among the most affordable investments for small investors because you pool your money with other investors to accumulate shares.” “Mutual funds offer liquidity at the discretion of the shareholder. You can typically sell mutual fund shares at any time the stock market is open. Sometimes, mutual funds may have Contingent Deferred Sales Charges, also known as CDSCs.” “Now that we have learned how mutual funds work and what advantages they offer, let’s examine another key principle that ties in with thinking long-term.” Go to next slide.
- So let’s recap. We believe, when done correctly, now is always a good time to invest. We have supported that with some historical perspective and offered valuable insight from the legends of investing. We believe there are always plenty of opportunities in the market, especially when the market is down. We have professionals looking for those opportunities that manage our various securities products. We believe that if you employ proven investment fundamentals, like dollar cost averaging, discipline and diversification, you’ll be a more successful investor than those who do not. Finally, we believe we have great investment solutions that can help you reach your goals. Go to next slide.