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IMPORTANT DISCLOSURES Investment Advisory Services offered through Align Wealth Management, a Federally Registered Investment Advisor. Performance results are presented net-of-fees and reflect the reinvestment of dividends and capital gains. Portfolio returns are composite returns of all clients invested within the respective portfolios. Individual results may vary as each client s portfolio is customized to their particular circumstances. In addition, returns will likely vary based on timing of deposits and withdrawals, as well as the use of asset classes and investments that are not part of our current portfolio allocations. Returns are Time Weighted Returns. No current or prospective client should assume that the future performance of any specific investment or strategy will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals, and economic conditions may materially alter the performance of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will either be suitable or profitable for a client's investment portfolio. Historical performance results for investment indexes and/or categories generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investmentmanagement fee, the incurrence of which would have the effect of decreasing historical performance results. There are no assurances that a portfolio will match or outperform any particular benchmark. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information contained in this commentary has been obtained from sources that are reliable. This presentation is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. These are the views of Align Wealth Management and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
AGENDA Firm Update Market Update What You Own and Why Portfolio Changes Q&A
Align Wealth Management Fiduciary Wealth Management Serving community of 142 CLIENTS $225 MILLION under management Over 22 YEARS OF SUCCESS Experience Independence Transparency Our passion is helping you make the most of your one financial life.
Other Firm News: NAPFA Board of Directors Building Purchase New Team Member
Laura Payne CPA CFP Past experience: Auditor for Arthur Andersen Human Resources & 401(k) specialist CPA: profit and non-profit entities 3 children Nick, Cathryn, and Rachel Board member on Oklahoma Family Network
Our Investment Philosophy Our approach in plain English
FIRST HALF SNAPSHOT 2,150 2,130 2,110 Global Growth Worries S&P 500 2015 Performance Through June 30 Oil Prices Plunge +0.24% YTD Greek Bailout Jitters 2,090 2,070 2,050 2,030 2,010 1,990 1,970 Jan-2015 Feb-2015 Mar-2015 Apr-2015 May-2015 Jun-2015 The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. All index returns exclude reinvested dividends and interest. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Data Source: Yahoo Finance. All data as of June 30,2015.
INTRA-YEAR DIPS ARE NORMAL Source: Standard & Poor s, FactSet, J.P. Morgan Asset Management. Returns are based on price index only and do not include dividends. Intra-year drops refers to the largest market drops from a peak to a trough during the year. For illustrative purposes only. Past performance does not guarantee future returns.. *Returns shown are calendar year returns from 1980 to 2014, excluding 2015, which is year-to-date. Data are as of June 30, 2015.
Markets Have Rewarded Discipline Growth of a dollar MSCI World Index (net dividends), 1970 2014 IP2420 $100 $10 Arab oil Arab oil embargo embargo Oil prices quadruple e S&P 500 down 43% BusinessWeek: The Death of of Equities Gold hits Gold record hits high record high US US inflatio inflation at n 13.5% at 13.5% Dow Dow drops drops 23% 23% on on Black Black Monday Savings and loan loan crisis crisis 1 Iraq invades Kuwait Income tax rates e tax rise rates Dotcom stock crash rate Y2K Y2K Scare Scar e 9/11 terrorist attacks Russian financial crisis Asian currency crisis Subprime mortgage crisis S&P 500 down 46% Hurricanes Katrina Hurricanes and Rita Iraq Katrina S&P war and Rita Subprime 500 Iraq begin mortgage down war s crisis 46% Eurozone debt crisis US home prices hit bottom Fiscal cliff worries $45 $43 $1 1970 1980 1990 2000 2000 2010 2010 2014 2013 $0 A disciplined investor looks beyond the concerns of today to the long-term growth potential of markets. In US dollars. 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 no guarantee of future results. MSCI data MSCI 2015, all rights reserved. 10
Reacting Can Hurt Performance Performance of the S&P 500 Index, 1970-2014 IP2415 Growth of $1,000 $88,454 $79,322 $57,513 $33,400 Missing only a few days of strong returns can drastically impact overall performance. $21,070 $9,193 Total Period Missed 1 Best Day Missed 5 Best Single Days Missed 15 Best Single Days Missed 25 Best Single Days One- Month US T-Bills Annualized Compound Return 10.47% 10.21% 9.42% 8.11% 7.01% 5.05% In US dollars. 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. Performance data for January 1970 August 2008 provided by CRSP; performance data for September 2008 December 2014 provided by Bloomberg. S&P data provided by Standard & Poor s Index Services Group. US bonds and bills data Stocks, Bonds, Bills, and Inflation Yearbook, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). 11
The Media Greece is Broke! The U.S. is Broke! The Republicans may Win! The Democrats may Win! The Fed is raising rates! Inflation is out of control! Deflation is out of control! Social Security is Broke! The Market is Too High! Stocks/Bonds are Going Up Stock/Bonds are Going Down For illustrative purposes only. 12
WE AREN T WORRIED ABOUT GREECE 1. Greek defaults are nothing new first default was in 4 th century B.C. and Greece has defaulted 5 times since 1826. 2. Greece contributes just 0.3% to the global economy. 3. Default &/or Grexit has been widely broadcast it s hardly news - a default or Grexit from the EU would not likely be a surprise. Source: U.S. Trust, World Bank
World Market Capitalization Percent of world market capitalization as of December 31, 2014 Market cap data is free-float adjusted from Bloomberg securities data. Many nations not displayed. Total may not equal 100% due to rounding. For educational purposes; should not be used as investment advice. China market capitalization excludes A-shares, which are generally only available to mainland China investors. 14
Changes to Bond Allocations
Core Holding: Investment Grade Short-term, high-quality bonds are good for reducing the risk of the overall portfolio, but their low returns in today s interest rate environment proportionally reduce portfolio return. Our most current research indicates the probability of loss for the new portfolios, especially those with the lowest percentage of equities, will decrease even though the bond allocation itself may lose money from time to time.
Different bonds for different people Bonds play different roles in portfolios depending on the risk tolerance level of the investor: More cautious investors should consider investing in inflation protected bonds. More aggressive investors should consider investing in high-credit-quality, long-term bonds.
Returns by Year S&P 500 vs. 10 year Treasury Bonds Year S&P 500 10-year T. Bond 2000-9.03% 16.66% 2001-11.85% 5.57% 2002-21.97% 15.12% 2003 28.36% 0.38% 2004 10.74% 4.49% 2005 4.83% 2.87% 2006 15.61% 1.96% 2007 5.48% 10.21% 2008-36.55% 20.10% 2009 25.94% -11.12% 2010 14.82% 8.46% 2011 2.10% 16.04% 2012 15.89% 2.97% 2013 32.15% -9.10% 2014 13.48% 10.75% 21
Returns by Year S&P 500 vs. 10 year Treasury Bonds Year S&P 500 10-year T. Bond 2000-9.03% 16.66% 2001-11.85% 5.57% 2002-21.97% 15.12% 2003 28.36% 0.38% 2004 10.74% 4.49% 2005 4.83% 2.87% 2006 15.61% 1.96% 2007 5.48% 10.21% 2008-36.55% 20.10% 2009 25.94% -11.12% 2010 14.82% 8.46% 2011 2.10% 16.04% 2012 15.89% 2.97% 2013 32.15% -9.10% 2014 13.48% 10.75% 22
What about rising interest rates? Bond yields went from approximately 5% to 15% from 1972 to 1982, yet 10-year government bonds only lost money in 1978 and 1980 (-0.78% and -2.99%). Reality: Bonds have actually made money 4 out of the last 5 rate hike periods.
Bond Implementation Schedule August Dec/Jan March 2016 Stage 1 Stage 2 Stage 3
UNTIL NEXT TIME
IMPORTANT DISCLOSURES Investment Advisory Services offered through Align Wealth Management, a Federally Registered Investment Advisor. Performance results are presented net-of-fees and reflect the reinvestment of dividends and capital gains. Portfolio returns are composite returns of all clients invested within the respective portfolios. Individual results may vary as each client s portfolio is customized to their particular circumstances. In addition, returns will likely vary based on timing of deposits and withdrawals, as well as the use of asset classes and investments that are not part of our current portfolio allocations. Returns are Time Weighted Returns. No current or prospective client should assume that the future performance of any specific investment or strategy will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals, and economic conditions may materially alter the performance of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will either be suitable or profitable for a client's investment portfolio. Historical performance results for investment indexes and/or categories generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investmentmanagement fee, the incurrence of which would have the effect of decreasing historical performance results. There are no assurances that a portfolio will match or outperform any particular benchmark. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information contained in this commentary has been obtained from sources that are reliable. This presentation is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. These are the views of Align Wealth Management and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.