New Perspectives on Asset Class Investing

Transcription

1 New Perspectives on Asset Class Investing Steven J. Atkinson, CFS Loring Ward Executive Vice President 2014 LWI Financial Inc. All rights reserved. LWI Financial Inc. ( Loring Ward ) is an investment advisor registered with the Securities and Exchange Commission. Securities transactions are offered through its affiliate, Loring Ward Securities Inc., member FINRA/SIPC.. B (Exp 3/16)

2 Investing starts with a plan People invest their money to reach a goal Creating a plan clarifies those goals $? 2

3 A 65-year old couple has 30 years of planning #1 objective: don t run out of money $? Source: Social Security Administration period life table 3

4 Financial planning software Based on historical market index return data and realistic expectations 4

5 Historical long-term rate of return 6-11% 5

6 Thousands of investment options Passive 6

7 You have two choices Active Stock Picking Market Timing Passive Diversified group of securities Tax efficiency 7 Diversification neither assures a profit nor guarantees against loss in a declining market.

8 Poor track record for Active Managers 100% 80% 60% 40% 20% 0% 39% US Equities 29% International Equities 20% Emerging Equities 53% 54% US Fixed Global Fixed Percentage of Active Funds that Outperformed their Index Source: Standard & Poor s Indices Versus Active Funds Scorecard (SPIVA), Index used for comparison: US Equities S&P 1500 Index; International S&P 700 Index; Emerging Markets S&P/IFCI Composite; US Fixed Gov Long, Global Fixed Global Income Funds. Outperformance is based upon equal weight fund counts. For illustrative purposes only. Index returns do not include payment of any sales charges or fees an investor would pay to purchase the securities they represent. Such costs would lower performance. Past performance is not an indication of future results. More recent performance may alter these assessments or outcomes. 8

9 You choose Active Stock Picking Market Timing Passive Diversified group of securities Tax efficiency 9

10 Thousands of investment options Passive 10

11 You have two more choices Passive Index Diversified groups of securities Tax Efficiency Asset Class Diversified groups of securities Tax Efficiency Precision 11

12 Precision 12

13 You have two more choices Passive Index Diversified groups of securities Tax Efficiency Asset Class Diversified groups of securities Tax Efficiency Precision Flexibility 13

14 Flexibility 14

15 You have two more choices Passive Index Diversified groups of securities Tax Efficiency Asset Class Diversified groups of securities Tax Efficiency Precision Flexibility Factors of Return 15

16 Factors of Return Value Size Momentum Profitability 16

17 Are all passive the same? Diversification Tax Efficiency Precision Flexibility Factors of Return 17

18 There may be a better alternative to index returns 18

19 Asset Class Fund Returns 12% 10% 8% % 4% % 0% US Large Cap US Large Value US Small Cap 5-Year Global Fixed International Large Value Dimensional Funds Morningstar Category Benchmark Annualized Returns % Performance data shown represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor s shares, when redeemed, may be worth more or less than their original cost. Total number of funds analyzed reflects oldest share class and funds reporting a 10-year annualized return for each respective Morningstar category. The indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. See Appendix: Standardized Performance Data & Disclosures to obtain complete information on performance, investment objectives, risks, advisory fees, and expenses of Dimensional s funds. Sources: Dimensional Fund Advisors for Dimensional funds; Mutual fund universe statistical data provided by Morningstar, Inc.; MSCI data copyright MSCI 2013, all rights reserved. 19

20 Asset Class Investing Can Offer 1. Lower overall costs 2. Improving tax efficiency 3. Increased diversification 4. Better risk exposure to an asset class 5. Potentially better long-term performance 20

21 Two Portfolios 5% 4% 2% Cash & Cash Alternatives 7% 17% Global Fixed Income 100% S&P 500 Index 14% 8% 65/35 Portfolio 16% Short-Term Fixed Income 1-3 Years U.S. Market U.S. Large Value U.S. Small Neutral International Large Value International Small Neutral Emerging Markets REITs 12% 15% The S&P 500 Index (Standard & Poor s 500 Index) is an unmanaged market value-weighted index of 500 stocks that are traded on the NYSE, AMEX and NASDAQ. The weightings make each company s influence on the index performance directly proportional to that company s market value. 21

22 Let s look at what happened since 2000 Allocation Annualized Return ( ) Standard Deviation ( ) S&P 500 Index 65/35 Allocation Mix Source: Morningstar Direct Allocation is 100% S&P 500 TR, and 65/35 Mix represented by: 2% (Cash), 16% (DFA One Year Fixed Income DFIHX), 17% (DFA 5 Year Global DFGBX), 15% (DFA US Core Equity 1 DFEOX), 12% (DFA US Large Cap Value DFLVX), 8% (DFA US Small Cap DFSTX), 4% (DFA REIT DFREX), 14% (DFA Intl Value DFIVX), 7% (DFA Intl Small Cap DFISX), 5% (DFA Emerging Markets Value DFEVX). Allocation mix return is the weighted average return of the respective funds, rebalanced annually. The performance data quoted represents past performance. Past performance does not guarantee future results and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information quoted. To obtain current month end performance information please call, toll free, Investing in mutual funds involve risks, including the loss of principal. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Stock investing involves risk including loss of principal. Securities of small companies are often less liquid than those of large companies. As a result, small company stocks may fluctuate relatively more in price. International and emerging market investing involves special risks such as currency fluctuation and political instability, and may not be suitable for all investors. Bonds (fixed income) are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rises, issuer's creditworthiness declines, and are subject to availability and changes in price. REIT investments are subject to changes in economic conditions and real estate values, and credit and interest rate risks. Portfolio returns are after fund s internal expenses and Loring Ward s max investment management fee of 0.65%. Management fee may be lower depending on the assets under management. Portfolio performance does not reflect the deduction of any fees charged by an independent investment advisor or other service provider to an individual account. Such fees, if taken into consideration, will reduce the performance quoted above. 22

23 Portfolio Value Impact of a 5% Withdrawal $600,000 $400,000 $200,000 $ /35 S&P 500 $423,903 $58,373 Source: Morningstar Direct Hypothetical value of $ invested on January 1, 2000 and kept invested through December 31, Withdraw is 5% of initial hypothetical value ($25,000 of initial $500,000 starting value) taken out at start of each year, growing by 3% per year. Allocation is 100% S&P 500 TR, and 65/35 Mix represented by: 2% (Cash), 16% (DFA One Year Fixed Income DFIHX), 17% (DFA 5 Year Global DFGBX), 15% (DFA US Core Equity 1 DFEOX), 12% (DFA US Large Cap Value DFLVX), 8% (DFA US Small Cap DFSTX), 4% (DFA REIT DFREX), 14% (DFA Intl Value DFIVX), 7% (DFA Intl Small Cap DFISX), 5% (DFA Emerging Markets Value DFEVX). The performance data quoted represents past performance. Past performance does not guarantee future results and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information quoted. To obtain current month end performance information please call, toll free, Investing in mutual funds involve risks, including the loss of principal. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Stock investing involves risk including loss of principal. Securities of small companies are often less liquid than those of large companies. As a result, small company stocks may fluctuate relatively more in price. International and emerging market investing involves special risks such as currency fluctuation and political instability, and may not be suitable for all investors. Bonds (fixed income) are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rises, issuer's creditworthiness declines, and are subject to availability and changes in price. REIT investments are subject to changes in economic conditions and real estate values, and credit and interest rate risks. Portfolio returns are the weighted average returns of the respective funds, rebalanced annually. Actual rebalancing may be different. The portfolio allocations are based on a Loring Ward model portfolio, which may not be suitable for all investors. It may not reflect the impact material economic and market factors might have had on decision making if clients money were actually being managed at that time. The performance quoted reflects the reinvestment of dividends and capital gains distributions. Portfolio returns are after fund s internal expenses and Loring Ward s max investment management fee of 0.65%. Management fee may be lower depending on the assets under management. Portfolio performance does not reflect the deduction of any fees charged by an independent investment advisor or other service provider to an individual account. Such fees, if taken into consideration, will reduce the performance quoted above. 23

24 1 & 30 =? Loring Ward

25 Make sure you have the highest probability of capturing market returns 25

26 Design Build Protect An Advisors Process For Clients There is no guarantee that the strategies set forth in this presentation will achieve their intended objectives. LWI Financial Inc. ( Loring Ward ) is an investment adviser registered with the Securities and Exchange Commission. Securities transactions may be offered through Loring Ward Securities Inc., member FINRA/SIPC B (Exp. 2/15) 29

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28 31 A Portfolio To Meet Your Life Goals

29 Short- Term Needs Your Portfolio Future Lifestyle Long- Term Needs 32

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33 Financial Life Map Helping & Protecting Family Enjoying & Protecting Lifestyle Planning Ahead Creating Financial Comfort Building a Legacy Helping Children Income Needs Clarifying Vision Managing Resources Wills and Power of Attorney Assisting Parents Leisure Planning Health Challenges Generating Income Estate Transfer Funding Education Personal Health Managing Change Minimizing Taxes Charitable Giving Retirement Transition Planning Protecting Assets and Business Life Transition Planning Working with an Advisory Team Living Legacy 36

34 37 Your Portfolio Using Scientific & Academic Research

35 Bill Sharpe Harry Markowitz Gene Fama Adam Smith Frederich Hayek Paul Samuelson Merton Miller 41

36 3 Decisions How You Allocate Between Stocks & Short-Term Bonds How You Allocate Between U.S. & International Stocks Your Comfort with Key Risk Factors 42

37 1 How You Allocate Between Stocks & Short-Term Bonds Growth of $1 Jan. 1, 1927 Dec. 31, Risks associated with investing in stocks potentially include increased volatility (up and down movement in the value of your assets) and loss of principal. Indexes are unmanaged baskets of securities that investors cannot directly invest in. Past performance is no guarantee of future results. Hypothetical value of $1 invested at the beginning of 1927 and kept invested through December 31, Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Total returns in U.S. dollars. Long-Term Government Bonds, One-Month U.S. Treasury Bills, and U.S. Consumer Price Index (inflation), source: Morningstar s 2013 Stocks, Bonds, Bills, And Inflation Yearbook (2014); Fama/French Total U.S. Market Index provided by Fama/French from Center for Research in Security Prices (CRSP) data. Includes all NYSE securities (plus Amex equivalents since July 1962 and NASDAQ equivalents since 1973), including utilities.

38 1 How You Allocate Between Stocks & Short-Term Bonds Risk and Rewards Examined for Bonds Source: One-Month U.S. Treasury Bills, Five-Year U.S. Treasury Notes, and Twenty-Year (Long-Term) U.S. Government Bonds provided by Ibbotson Associates. Six-Month U.S. Treasury Bills provided by CRSP ( ) and Merrill Lynch (1978-present). One-Year U.S. Treasury Notes provided by the Center for Research in Security Prices (1964- May 1991) and Merrill Lynch (June 1991-present). Morningstar data 2013 Stocks, Bonds, Bills, and Inflation Yearbook (2013), Morningstar. The Merrill Lynch Indices are used with permission; copyright 2014 Merrill Lynch, Pierce, Fenner & Smith Incorporated; all rights reserved. Assumes reinvestment of dividends. Past performance is not indicative of future results. All investments involve risk. Standard deviation annualized from quarterly data. Standard deviation is a statistical measurement of how far the return of a security (or index) moves above or below its average value. The greater the standard deviation, the riskier an investment is considered to be. Bonds are subject to market and interest rate risk. Bond values will decline as interest rates rise, issuer s creditworthiness declines, and are subject to availability and changes in price.

39 2 How You Allocate Between U.S. & International Stocks 45

40 2 How You Allocate Between U.S. & International Stocks World Market Capitalization $45.4 Trillion as of December 31, 2013 Bloomberg Index Affiliation Developed Markets Emerging Markets Frontier Markets Capitalization over time ($ trillions) 46 Source: Dimensional. In US dollars. Market cap data is free-float adjusted from Bloomberg securities data. Many small nations not displayed. Totals may not equal 100% due to rounding. Past Performance is not indicative of future results. All investments involve risk. Foreign securities involve additional risks including foreign currency changes, taxes and different accounting and financial reporting methods. Countries represented by their respective MSCI IMI(net div.). Indexes are unmanaged baskets of securities in which investors cannot directly invest; they do not reflect the payment of advisory fees or other expenses associated with specific investments or the management of an actual portfolio.

41 2 How You Allocate Between U.S. & International Stocks Ranking of Markets Around the World Ten-Year Performance in US Dollars Annualized Returns Year Ending December 31, Colombia 2. Egypt 3. Indonesia 4. Philippines 5. Peru 6. Mexico 7. Brazil 8. Denmark 9. Malaysia 10. Czech Republic 11. South Africa 12. Singapore 13. China 14. Norway 15. Korea 16. Sweden 17. Hong Kong 18. Australia 19. India 20. Chile 21. Thailand 22. Poland 23. Turkey 24. Switzerland 25. Canada 26. Germany 27. Morocco 28. Netherlands 29. Russia 30. New Zealand 31. UK 32. Spain 33. USA 34. France 35. Taiwan 36. Belgium 37. Israel 38. Hungary 39. Japan 40. Finland 41. Austria 42. Portugal 43. Italy 44. Ireland 45. S&P Greece 47 Source: Dimensional. In US dollars. Market cap data is free-float adjusted from Bloomberg securities data. Many small nations not displayed. Totals may not equal 100% due to rounding. Past Performance is not indicative of future results. All investments involve risk. Foreign securities involve additional risks including foreign currency changes, taxes and different accounting and financial reporting methods. Countries represented by their respective MSCI IMI(net div.). Indexes are unmanaged baskets of securities in which investors cannot directly invest; they do not reflect the payment of advisory fees or other expenses associated with specific investments or the management of an actual portfolio.

42 2 How You Allocate Between U.S. & International Stocks 48

43 3 Your Comfort with Key Risk Factors Small Company Stocks Growth Company Stocks Total Stock Market Increased Expected Returns Value Company Stocks Decreased Risk and Expected Returns Large Company Stocks 49 The risks associated with investing in stocks and overweighting small company and value stocks potentially include increased volatility (up and down movement in the value of your assets) and loss of principal.

44 3 Your Comfort with Key Risk Factors Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. US value and growth index data (ex utilities) provided by Fama/French. The S&P data are provided by Standard & Poor s Index Services Group. CRSP data provided by the Center for Research in Security Prices, University of Chicago. International Value and Growth data provided by Fama/French from Bloomberg and MSCI securities data. International Small data compiled by Dimensional from Bloomberg, StyleResearch, London Business School, and Nomura Securities data. MSCI EAFE Index is net of foreign withholding taxes on dividends; copyright MSCI 2013, all rights reserved. Emerging markets index data simulated by Fama/French from countries in the IFC Investable Universe; simulations are free-float weighted both within each country and across all countries. Values change frequently and past performance may not be repeated. There is always the risk that an investor may lose money. Small company risk: Securities of small firms are often less liquid than those of large companies. As a result, small company stocks may fluctuate relatively more in price. Emerging markets risk: Numerous emerging countries have experienced serious, and potentially continuing, economic and political problems. Stock markets in many emerging countries are relatively small, expensive, and risky. Foreigners are often limited in their ability to invest in, and withdraw assets from, these markets. Additional restrictions may be imposed under other conditions. Foreign securities and currencies risk: Foreign securities prices may decline or fluctuate because of: (a) economic or political actions of foreign governments, and/or (b) less regulated or liquid securities markets. Investors holding these securities are also 50 exposed to foreign currency risk (the possibility that foreign currency will fluctuate in value against the US dollar). Fixed income investments are subject to interest rate and credit risk.

45 The Key Academic Research Defining Value and Growth: Implications for Returns and Turnover Jim Davis and Inmoo Lee, Dimensional Fund Advisors (August 2008) The Anatomy of Value and Growth Stocks Fama, Eugene F., University of Chicago Graduate School of Business and Kenneth R. French, Dartmouth College Tuck School of Business; National Bureau of Economic Research (September 2007) Migration Fama, Eugene and Kenneth R. French, Financial Analysts Journal (June 2007) Dissecting Anomalies Fama, Eugene F., University of Chicago Graduate School of Business and Kenneth R. French, Dartmouth College Tuck School of Business; National Bureau of Economic Research (June 2007) Average Returns, B/M, and Share Issues Fama, Eugene F., University of Chicago Graduate School of Business and Kenneth R. French, Dartmouth College - Tuck School of Business; (May 2007) International Evidence of the Size Effect Rizova, Savina, Dimensional Fund Advisors (August 2006) Multi-Factor Investing Fama Jr., Eugene F., Dimensional Fund Advisors (July 2006) The Value Premium and the CAPM Fama, Eugene F., University of Chicago Graduate School of Business and Kenneth R. French, Dartmouth College - Tuck School of Business; National Bureau of Economic Research (March 2005) 51

46 The Key Academic Research The Capital Asset Pricing Model: Theory and Evidence Fama, Eugene F., University of Chicago Graduate School of Business and Kenneth R. French, Dartmouth College - Tuck School of Business; National Bureau of Economic Research (August 2003) The Corporate Cost of Capital and the Return on Corporate Investment Fama, Eugene F., University of Chicago Graduate School of Business and Kenneth R. French, Dartmouth College Tuck School of Business; (April 1998) Value Versus Growth: The International Evidence Fama, Eugene F., University of Chicago Graduate School of Business and Kenneth R. French, Dartmouth College Tuck School of Business; National Bureau of Economic Research (August 1997) Cross Section of Expected Stock ReturnsFama, Eugene and Kenneth R. French, Journal of Finance 47 (1992) Luck Versus Skill in the Cross Section of Mutual Fund ReturnsFama, Eugene F. and French, Kenneth R., (December 14, 2009 ) Mutual Fund Performance Fama, Eugene F. and French, Kenneth R.; National Bureau of Economic Research (June 30, 2008) The Cost of Active Investing French, Kenneth R. (March 13, 2008) False Discoveries in Mutual Fund Performance: Measuring Luck in Estimated Alphas L. Barras, O. Scaillet, and R. Wermers (July 2006) 52

47 The Key Academic Research The Informational Efficiency of Stock Prices Davis, James L., Dimensional Fund Advisors (April 2006) Market Efficiency: A Theoretical Distinction and So What? Markowitz, Harry M., Financial Analysts Journal (2005) The Efficient Market Hypothesis and Its Critics Malkiel, Burton G. Princeton University, CEPS Working Paper No. 91 (April 2003) Passive Investment Strategies and Efficient Markets Malkiel, Burton G. Princeton University, Princeton University Bendheim Center for Finance; National Bureau of Economic Research (2003) Mutual Fund Performance and Manager Style Davis, James L., Dimensional Fund Advisors Financial Analysts Journal (January / February 2001 ) Market Efficiency, Long-term Returns, and Behavioral Finance Fama, Eugene F., University of Chicago Graduate School of Business (February 1997) Asset Management: Active vs. Passive Management Sinquefield, Rex A., Dimensional Fund Advisors (October 1995) The Performance of Mutual Funds in the Period Jensen, Michael, The Journal of Finance (May 1968 ) Efficient Markets Hypothesis Fama, Eugene F.,University of Chicago (1965) Behavior of Securities Prices 1965 Samuelson, Paul, MIT (1965) The Statistical Properties of Internationally Diversified Portfolios Davis, James L., Dimensional Fund Advisors (September 2004)

48 The Key Academic Research What Measures the Benefits of Diversification Statman, Meir, Santa Clara University Department of Finance and Jonathan Scheid, Loring Ward Advisor Services (May 2005) How Much Diversification is Enough Statman, Meir Santa Clara University Department of Finance (October 2002) Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk? Campbell, John Y., Martin Lettau, Burton G. Malkiel and Yexiao Xu, Harvard University Department of Economics, New York University Department of Finance, Princeton University Bendheim Center for Finance and University of Texas at Dallas - Department of Finance & Managerial Economics (March 2000) The Statistical Properties of Internationally Diversified Portfolios Davis, James L., Dimensional Fund Advisors (September 2004) Several recent studies have cast doubt on the diversification benefits of The Capital Asset Pricing Model: Theory and Evidence Fama, Eugene F., University of Chicago Graduate School of Business and Kenneth R. French, Dartmouth College Tuck School of Business; National Bureau of Economic Research (August 2003) What Measures the Benefits of Diversification Statman, Meir, Santa Clara University Department of Finance and Jonathan Scheid, Loring Ward Advisor Services (May 2005) How Much Diversification is Enough Statman, Meir Santa Clara University Department of Finance (October 2002) Diversification and Portfolio Risk Harry Markowitz, University of Chicago (1962) 54

49 55 Your Portfolio with a Disciplined & Structured Approach

50 56 The buying and selling of securities for the purpose of rebalancing may have adverse tax consequences.

51 Rebalancing and a 50% Stocks/50% Bonds Portfolio Data source: Morningstar Direct Past performance is no indication of future results. All investments involve risk, including loss of principal. Stocks are represented by the S&P 500 Index. Bonds are represented by the SBBI Long-Term Bond Index. Indexes are unmanaged baskets of securities in which investors cannot invest and do not reflect the payment of advisory fees associated with a mutual fund or separate account. Returns assume dividend and capital gain reinvestment. Rebalancing does not guarantee a return or protect against a loss. The buying and selling of securities for the purpose of rebalancing may have adverse tax consequences.

52 58 For Illustration Purposes Only

53 Average Investor vs. Major Indices Stock Behavior Gap = 4.20% Bond Behavior Gap = 5.03% 59 Average stock investor and average bond investor performances were used from a DALBAR study, Quantitative Analysis of Investor Behavior (QAIB), 03/2014. QAIB calculates investor returns as the change in assets after excluding sales, redemptions, and exchanges. This method of calculation captures realized and unrealized capital gains, dividends, interest, trading costs, sales charges, fees, expenses, and any other costs. After calculating investor returns in dollar terms (above), two percentages are calculated: Total investor return rate for the period and annualized investor return rate. Total return rate is determined by calculating the investor return dollars as a percentage of the net of the sales, redemptions, and exchanges for the period. The fact that buy-and-hold has been a successful strategy in the past does not guarantee that it will continue to be successful in the future. S&P 500 returns do not take into consideration any fees.

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55 Can Past Performance Predict Future Results? 10-Year Annualized Performance of 934 U.S. Equity Funds vs. S&P Data source: Center for Research in Security Prices (CRSP), For illustrative purposes only. Mutual funds were placed in descending order of 10-year annualized performance, and subsequent 5-year performance assumes the same ordering as the 10-year period. The number of funds for the subsequent 5-year period represent existing funds from the 10-year period. Eligible universe is share classes of US Equity Open End mutual funds domiciled in the US with prospectus benchmark of the S&P 500, classified into the US Stock mutual fund asset class by Morningstar Direct with a ten-year annualized return as of Dec. 31, 2008 in Morningstar Direct. Mutual fund universe statistical data provided by Morningstar, Inc.; Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results, and there is always the risk that an investor may lose money. S&P 500 is a registered trademark of Standard & Poor s Financial Services LLC All investments involve risk, including loss of principal. 61

56 5 Years Later 296 Funds Have Closed Their Doors 62

57 5 Years Later, No Predictable Pattern of Performance 5-Year Annualized Performance of 934 U.S. Equity Funds vs. S&P Data source: Center for Research in Security Prices (CRSP), For illustrative purposes only. Mutual funds were placed in descending order of 10-year annualized performance, and subsequent 5-year performance assumes the same ordering as the 10-year period. The number of funds for the subsequent 5-year period represent existing funds from the 10-year period. Eligible universe is share classes of US Equity Open End mutual funds domiciled in the US with prospectus benchmark of the S&P 500, classified into the US Stock mutual fund asset class by Morningstar Direct with a ten-year annualized return as of Dec. 31, 2008 in Morningstar Direct. Mutual fund universe statistical data provided by Morningstar, Inc.; Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results, and there is always the risk that an investor may lose money. S&P 500 is a registered trademark of Standard & Poor s Financial Services LLC All investments involve risk, including loss of principal. 63

58 In Summary 1. Design A Portfolio To Meet Your Life Goals 2. Build Your Portfolio Using Scientific & Academic Research 3. Protect Your Portfolio with a Disciplined and Structured Approach 64

59 65 Questions?