Using Market Insights to discuss Principles of successful long-term investing

Using Market Insights to discuss Principles of successful long-term investing

Nandini Ramakrishnan

Learning objectives Describe the principles of successful long-term investing Give examples of time tested strategies for portfolio management Apply key insights that guide portfolio construction

Principles for successful long-term investing INVEST FOR THE FUTURE CASH IS RARELY KING COMPOUNDING WORKS MIRACLES VOLATILITY IS NORMAL STAYING INVESTED MATTERS DIVERSIFICATION WORKS

Invest for the future We are living longer Probability of reaching ages 8 and 9 % probability, persons aged 65, by gender and combined couple 1 92 8 76 66 6 4 2 23 Men Women Couple at least one lives to specified age 35 5 8 years 9 years Source: ONS 21-212 Life Tables, J.P. Morgan Asset Management. Guide to the Markets - UK. Data as of 3 September 217.

is rarely king pays less Income generated by 1, in a three-month bank deposit GBP (LHS); % change year on year (RHS) 27: 6, 6, Income Inflation (y/y) 6 4, Sep 217: 38 4 2, 2 '1 '3 '5 '7 '9 '11 '13 '15 '17 Source: Bloomberg, ONS, J.P. Morgan Asset Management. Guide to the Markets - UK. Data as of 3 September 217.

is rarely king underperforms over the long term Total return of 1 in real terms GBP, log scale for total returns 1, Annualised real returns 1899 216 2 216 1 Equities 5.3% 2.% Bonds 1.7% 4.1% 1.8% -.3% Equities: 4 Bonds: 7 1 : 3 1899 1919 1939 1959 1979 1999 Source: Dimson, Marsh and Staunton ABN AMRO/LBS Global Investment Returns Yearbook 28, FactSet, J.P. Morgan Asset Management. J.P. Morgan estimates from 28. Equities: FTSE 1; Bonds: JPMorgan GBP Government Bond Index; : three-month GBP Libor (prior to 28 cash is short dated Treasury bills). Guide to the Markets - UK. Data as of 3 September 217.

Compounding works miracles Start early and invest regularly 5, invested annually with 5% growth per year GBP 7, 6, 5, 4, 3, 2, 1, Starting at age 25 Starting at age 35 639,199 363,83 25 3 35 4 45 5 55 6 65 Age Source: J.P. Morgan Asset Management. For illustrative purposes only, assumes all income re-invested, actual investments may incur higher or lower growth rates and charges. Guide to the Markets - UK. Data as of 3 September 217.

Compounding works miracles Re-invest income from investments if you don t need it 5, investment with/without income reinvested GBP, FTSE All-Share returns 1, With dividends reinvested 8, 6, Without dividends reinvested 94,563 4, 29,65 2, '86 '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 Source: Bloomberg, FTSE, J.P. Morgan Asset Management. Based on FTSE All-Share index and assumes no charges. Guide to the Markets - UK. Data as of 3 September 217.

Volatility is normal; don t panic Keep your head when all about you are losing theirs FTSE All-Share Index intra-year declines vs. calendar-year returns Despite average intra-year drops of 15.8% (median 12.6%), annual returns are positive in 22 of 31 years % Calendar-year return Intra-year decline 4 3 YTD 3 22 23 25 19 2 21 15 15 17 18 2 17 4 6 12 11 13 9 11 12 8 1 5 2-2 -1-3 -4-1 -4-8 -7-9 -8-6 -6-7 -4-2 -14-14 -12-1 -11-12 -1-15 -13-12 -12-1 -12-18 -18-17 -17-15 -22-25 -19-3 -25-23 -4-3 -31-33 -37-5 -43 '86 '88 '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 '16 Source: FactSet, FTSE, J.P Morgan Asset Management. Returns are based on local price only and do not include dividends. Intra-year decline refers to the largest market fall from peak to trough within a short time period during the calendar year. Returns shown are calendar years from 1986 to 217. Guide to the Markets - UK. Data as of 3 September 217.

Staying invested matters Impact of being out of the market Returns of FTSE All-Share GBP, value of a 1, investment between 1996 and 216 with annualised return (%) 5, 45, 7.4% 4, 35, 3, 25, 4.2% 2, 15,.2% 1, 5, Initial investment -2.9% Fully invested Missed 1 best days Missed 3 best days Missed 5 best days Source: FactSet, FTSE, J.P. Morgan Asset Management. For illustrative purposes only. Assumes all income is reinvested; returns calculated daily over the time period assuming no return on each of the specified number of best days. Guide to the Markets - UK. Data as of 3 September 217.

Staying invested matters (part 2) US asset returns by holding period Range of equity and bond total returns %, annualised total returns, 195-present 75 Large cap equity Bonds 61% 5/5 portfolio 5 48% 49% 25-25 -5 3% 24% 24% 21% 17% 17% 18% 13% 15% -3% -1% -7% -3% % 1% 4% 4% 1% -18% -24% -43% 1-yr rolling 5-yr rolling 1-yr rolling 2-yr rolling Source: Strategas/Ibbotson, J.P. Morgan Asset Management. Large cap equity represents the S&P 5 Composite and Bonds represents the Strategas/Ibbotson US Government Bond Index and US Long-term Corporate Bond Index. Returns shown are per annum and are calculated based on monthly returns from 195 to latest available and include dividends. Guide to the Markets - UK. Data as of 3 September 217.

Diversification works Asset class returns (GBP) 27 28 29 21 211 212 213 214 215 216 37.5% 52.6% 59.4% 31.6% 1.% 14.9% 25.% 35.1% 8.2% 36.3% YTD 18.% QTD 4.6% 1-yr ann. 12.4% Vol. 27.1% 14.7% 26.5% 41.9% 22.9% 8.1% 14.4% 9.6% 12.8% 7.7% 33.4% 7.3% 1.6% 11.6% 17.3% 12.6% 25.% 18.4% 2.5% 7.1% 13.4% 6.% 12.1% 5.5% 33.1% 5.% 1.1% 9.6% 16.8% 8.9% 6.9% 16.5% 18.4% 5.1% 12.9% 5.3% 9.6% 2.9% 3.8% 3.3%.4% 9.3% 16.7% 8.7% 1.3% 16.4% 15.9% 3.9% 11.4% 1.3% 8.7% 2.3% 3.4%.8%.1% 8.9% 14.% 7.7% 1.2% 13.5% 15.3% 1.2% 8.%.5% 6.2% 2.% 29.%.3% -.4% 8.8% 12.8% 6.1% -12.5% 12.1% 14.9% -.9% 7.5% -1.5% 5.4% 1.3% 25.8%.1% -.8% 7.8% 1.5% 4.9% -13.2% 7.3% 1.6% -2.9% 6.3% -4.1% 4.3%.7% 24.4% -1.% -1.% 7.% 9.8% 4.7% -17.4% 6.1% 9.2% -4.3% 1.4% -6.1% 4.1% -.8% 21.3% -1.7% -1.% 3.5% 8.7% 1.4% -18.3% 2.2% 9.2% -12.7% -2.6% -1.%.6% -9.7%.7% -2.2% -1.7% 2.1% 7.7% -19.2% -35.2% -8.6% 1.% -17.6% -5.4% -11.2% Source: Barclays, Bloomberg, FactSet, FTSE, MSCI, J.P. Morgan Economic Research, J.P. Morgan Asset Management. Annualised return covers the period from 27 to 216. Vol. is the standard deviation of annual returns. : Bloomberg Barclays Global Aggregate Government Treasuries; : Bloomberg Barclays Global High Yield; : J.P. Morgan EMBI+; : Bloomberg Barclays Global Aggregate Corporates; : Bloomberg UBS Commodity; : FTSE NAREIT All ; : MSCI World; : MSCI EM; Hedge funds: Credit Suisse/Tremont Hedge Fund; : JP Morgan United Kingdom (3M). Hypothetical portfolio (for illustrative purposes only and should not be taken as a recommendation): 3% DM equities; 1% EM equities; 15% ; 12.5% government bonds; 7.5% ; 5% ; 5% commodities; 5% cash; 5% and 5% hedge funds. All returns except are unhedged. All returns are total return, in GBP. Guide to the Markets - UK. Data as of 3 September 217. -11.8% -2.3% -1.1% -1.5% -2.% -1.1% 2.2%

Visit us on Stand 32 To collect your booklet:

Learning outcomes Describe the principles of successful long-term investing Give examples of time tested strategies for portfolio management Apply key insights that guide portfolio construction

J.P. Morgan Asset Management The Market Insights programme provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the programme explores the implications of current economic data and changing market conditions. The views contained herein are not to be taken as an advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield may not be a reliable guide to future performance. J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication is issued by the following entities: in the United Kingdom by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other EU jurisdictions by JPMorgan Asset Management (Europe) S.à r.l.; in Hong Kong by JF Asset Management Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited; in India by JPMorgan Asset Management India Private Limited; in Singapore by JPMorgan Asset Management (Singapore) Limited, or JPMorgan Asset Management Real Assets (Singapore) Pte Ltd; in Taiwan by JPMorgan Asset Management (Taiwan) Limited; in Japan by JPMorgan Asset Management (Japan) Limited which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number Kanto Local Finance Bureau (Financial Instruments Firm) No. 33 ); in Korea by JPMorgan Asset Management (Korea) Company Limited; in Australia to wholesale clients only as defined in section 761A and 761G of the Corporations Act 21 (Cth) by JPMorgan Asset Management (Australia) Limited (ABN 551438328) (AFSL 376919); in Brazil by Banco J.P. Morgan S.A.; in Canada for institutional clients use only by JPMorgan Asset Management (Canada) Inc., and in the United States by JPMorgan Distribution Services Inc. and J.P. Morgan Institutional Investments, Inc., both members of FINRA/SIPC.; and J.P. Morgan Investment Management Inc. In APAC, distribution is for Hong Kong, Taiwan, Japan and Singapore. For all other countries in APAC, to intended recipients only. Copyright 216 JPMorgan Chase & Co. All rights reserved. Activity ID: 4d3c2a8343b4 Material ID: 93c2a81217dd