RBC Advisor Workstation Research: Graphing Job Aid Use with Clients Interpret and Customize the graph

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1 Investment Growth Graph Get a quick snapshot of the historical performance of a clients funds not available on the Spotlight list or Substitution chart Compare a fund to it s benchmark to explain performance within a context, such as the poor performance of a specific sector or geography of fund Rolling Returns Graph Focus on retention. Explain the buy and hold philosophy to a client when a they are nervous about short term poor performance by looking at the perfomance over a short and long period of time If considering investing in a fund with a specific investment horizon, like 36 months. Look at the changes in the returns to see the variability of the "36" month returns in the rolling chart Compare ups and downs of performance back 15 years or since inception. AWS will automatically graph the most appropriate index if the graph is used for one fund Each line represents one fund or index Graph back 15 years or since the inception of the youngest fund Represent the value of $10,000 (or an amount you specify) over time Rest cursor on any point of any line to find out the return at that point Add a forgotton fund or index in any of the graphs with Edit Add Item menu in the graphing window Remove a fund from the graph by deselecting it in the legend to the right of the graph Modify the Initial Value to reflect the amount of the clients investment To change start and end date click on month or year and use the arrows Create any of the graphs in the PDF format to save, or print with Reports Printable (PDF). PDF s are RBC approved for client use. Look at the best and worst returns for the short or long term. If the rolling period is 3 months, each bar represents the rate of return for the fund if the client had bought and sold the fund within any 3 month period. Many equity funds will show a number of losing and winning periods. If the rolling period is changed to a longer time period such as 60 or 120 months, many equity funds will show a lower number of losing time periods. This is a good way to illustrate the buy and hold philosophy or dollar cost averaging by showing 2 graphs above if a trend exists where the longer the rolling period the lower the number of losing time periods. Change the fund on the graph by clicking on the appropriate radio button in the legend Change the rolling period with the drop box Highlight highest and lowest performance with check box. Page 1 of 6

2 Correlation Matrix Explain if adding or removing a fund would add to the diversity of a portfolio. If there is no negative correlation, there is no historical diversity of performance to protect the investor when markets change. Risk/Reward To illustrate to a client that there are too many funds in one quadrant, or a lack of diversity in a portfolio When clients ask for funds which are too risky for their risk profile, use the chart to illustrate the amount of risk they will take on for the performance Identify diversity in performance patterns. Each fund is given a number in the legend and mapped on a grid to compare the correlation of historical performance between each fund Funds with a blue square (correlation from 1 to.11) are postively correlated. This means that the performance of the 2 funds is moving the same or in a similar pattern. An orange square (correlation from 1 to -.11) indicates negative correlation. This means the performance of the funds are moving with different or opposite patterns of performance. A grey square or a correlation from.10 to -.10 shows no correlation. This means there is no relationship in the patterns of performance between the funds. Use the Time Period drop box to look at the correlation of performance on a 3, 5, 10 and 15 year basis Rest your cursor on any of the squares to see which two funds are being compared. Look for funds with to little/much risk. Investment Growth graph will plot the right index if used for one fund Returns are mapped on the vertical axis and risk on the horizontal axis Each fund is mapped with a dot on the graph to show where the fund would fall when risk and return are considered together Funds which fall in the upper left corner (quadrant) have higher returns with lower risk; funds in the lower left corner have lower returns and risk; funds in the upper right corner have higher returns and risk; funds in the bottom right corner have lower returns and higher risk It is important to insert an index to see how the funds compare to it For funds in the same IFSC category, use the approved index (see Quicktake Report, Growth of $10,000 graph), category average or median. For funds in different categories, use an index for each. Remove a fund from the graph by deselecting it in the legend Click the benchmark button to add crosshairs to your chart Change time period drop box to see correlation for 3, 5, 10 and 15 years Rest your cursor on any of the dots to get more details about the fund. Page 2 of 6

3 Total Annual Return Quickly examine the track record of a single fund and benchmark or a combination of funds. Annual returns of funds/benchmarks in a bar chart. AWS will automatically graph the appropriate benchmark if the Investment Growth graph is used for one fund The annual return for each fund or benchmark is charted with a different colored bar going back 15 years or since the inception annual return of the youngest fund Remove a fund from the graph by deselecting it in the legend to the right of the graph To change the Start Date and End Date click on the month or year and using the arrows. Asset Allocation Standard* Compare the standard breakout of funds (and a benchmark) to illustrate the similarity or disimilarity of the fund makeup. This works well with the Correlation chart since the asset allocation should be diverse as well. Look for excessive percentages in any of the asset allocation pie graphs to weed out over exposure in a specific sector, region or breakout. Explain the importance of diversification of asset allocation. Displays a pie chart with the distributions of the types of securities held in the fund including Canadian bond, Canadian equity, cash, foreign equity, foreign bond, other sectors, preferred equities, mortgage-backed securities, investment funds, index futures, warrant, other sectors and Canadian income trust. Page 3 of 6

4 Asset Allocation Geographic* Compare the standard breakout of funds and selected benchmark to illustrate similarities or differences Explain the importance of diversification of geographic asset allocation. The Geographic asset allocation graph displays a pie chart showing the distribution of the selected fund allocated to geographic regions Asset Allocation - TSX Global Sectors* Compare the TSX sector breakout of funds and selected benchmarks to illustrate the similarities or disimilarities Explain the importance of diversification of asset allocation with the TSX sectors. The TSX asset allocation graphs shows the Global Information Sector breakout of a fund in pie graph format Asset Allocation - Morningstar Sectors Canada / U.S. / Global* Compare the Morningstar breakout of funds and benchmarks to illustrate the similarity or disimilarity of the fund makeup Explain the concept of sectoral diversity to an investor not familiar with the financial industry. The Morningstar Sectors are designed to be easily understood by individual investors Page 4 of 6 Explain asset diversification with Morningstar Sectors. Morningstar uses its own global industry sector security classification system, which classifies companies based on what they actually do, rather than how they react to economic cycles or interest rates. The Morningstar system comprises 12 industry sectors within three major economic spheres, or Super Sectors - the Information Economy, the Service Economy and the Manufacturing Economy. Sector classifications are built on detailed stock analysis, which classifies companies into 128 industries. Sector weights are calculated from market value weight of each stock in the fund. The combined weight of stocks that can t be identified or classified is shown as "Unclassified". The Morningstar sector is shown in pie graph format from a Canadian, U.S. and global perspective

5 Asset Allocation - Bond Maturity Breakout* Compare the bond maturity breakout of funds and benchmarks and explain the value of diversity in bond terms Explain the importance of bond maturity diversification. The bond maturity asset allocation pie graph shows the amount of short, medium and long term bonds in the fund Asset Allocation - Bond Issuer* Compare the bond issuer breakout of funds and benchmarks Explain the importance of diversification of bond issuers. A pie chart with the distributions of bond issuers the fund holds including federal bonds, corporate bonds, other government bonds, other bonds Asset Allocation -Cash Breakout* Find out if clients fund with a high MER is holding an excessive amount of cash, to help weed out inappropriate funds in a clients holdings Explain the importance of diversification of cash content. The cash breakout graph displays a pie chart with the distributions of the percentage of corporate cash t-bills, liquid bonds, general cash, mortgage-backed securities, banker s acceptances a fund holds Page 5 of 6

6 Investment Detail Report (PDF) Provide clients with a one page summary for funds under discussion. Give a client an overall summary page about a fund not listed on the RBC, Spotlight or substition lists Speak to clients about a funds overexposure to specific styles, geographic regions or holdings Review the historical performance from multiple perspectives Morningstar Style Boxes Investment Style Box a measure of an equity s size (market cap), shown on the vertical axis of the equity style box, and style, shown on the horizontal axis. One of the boxes is shaded in to indicate which style and market cap are most prevalent. Fixed Income Style Box - securities are analyzed with respect to their credit quality, shown on the vertical axis, and interest rate sensitivity, shown on the horizontal axis. One box is shaded to show the style. Composition and Regional Exposure Examine the percentage of the fund invested in cash, Canadian, U.S. and international stocks and bonds Shows the amount of the fund invested in Canada, U.S., Europe, Japan, Latin America, and Pacific Rim Morningstar Sector Weightings and Bond Credit Ratings Equity Funds - compare which Morningstar sectors an equity fund is invested in and quickly compare this to the most appropriate benchmark. Bond Funds illustrates the percentage of the bond fund invested in each credit rating category. Top Holdings View up to the top 15 holdings in the fund Performance View trailing period performance, growth of $10,000 and calendar year performance for the fund, index and the category average Operations Examine fund details including the sponsor, manager, minimum investment, load type, MER, management fee and inception date Graphing Pointers Always use the PDF version of graphs and reports to ensure client communication is RBC compliance approved. Never, never do a print screen of any graph, report or excel sheet to hand off to a client. PDFs are third-party reports with RBC compliance approval and branding and are acceptable for client use. Black and white print-outs distinguish between funds with unique symbols. Page 6 of 6