Investment Options for 2014 Presented by Laurence T. Hanslits, CFP 500 Liberty Street SE Suite 310 Salem, OR 97301 (503) 371-3333 [email protected] thehgroup-salem.com
Jan 11, 2016
Investment Options for 2014
Presented by Laurence T. Hanslits, CFP
500 Liberty Street SESuite 310
Salem, OR 97301(503) 371-3333
Investment Options for 2014
•CD’s•Savings/Money Market/Checking•Bonds•Stocks•Real Estate•Commodities (Gold)
What are the Advantages?
•CD’s•Savings/Money Market/Checking•Bonds•Stocks•Real Estate•Commodities (Gold)
What are the Dangers?
•CD’s•Savings/Money Market/Checking•Bonds•Stocks•Real Estate•Commodities (Gold)
WHAT ASSET CLASS IS BEST?
Conservative Asset Class (T-Bills) Asset class returns sorted top to bottom, best to worst
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Foreign Large-Cap Real Large-Cap Large-Cap Real Small-Cap Real Real U.S. Gov't Mid-Cap Real Real Real Small-Cap
Stocks Stocks Estate Stocks Stocks Commodities Commodities Estate Commodities Stocks Estate Commodities Estate Commodities Bonds Stocks Estate Estate Estate Stocks
7.78% 37.53% 37.04% 33.35% 28.58% 40.92% 49.74% 12.36% 32.07% 47.25% 33.14% 25.55% 35.99% 32.67% 12.39% 40.47% 28.60% 9.24% 17.59% 38.82%
Foreign Mid-Cap Mid-Cap Foreign Foreign Real Corporate Foreign Mid-Cap Foreign Real Foreign Foreign Foreign Foreign Small-Cap U.S. Gov't Foreign Mid-Cap
Bonds Stocks Commodities Stocks Stocks Stocks Estate Bonds Bonds Stocks Stocks Estate Stocks Bonds Bonds Stocks Stocks Bonds Stocks Stocks
5.99% 34.45% 33.92% 29.02% 19.93% 27.03% 31.04% 10.40% 21.99% 40.08% 20.25% 13.82% 26.36% 11.47% 10.10% 31.78% 26.85% 9.01% 17.32% 34.76%
Small-Cap Large-Cap Small-Cap Foreign Small-Cap U.S. Gov't U.S. Gov't U.S. Gov't Foreign Mid-Cap Foreign Small-Cap Foreign Treasury Real Mid-Cap Corporate Mid-Cap Large-Cap
Commodities Stocks Stocks Stocks Bonds Stocks Bonds Bonds Bonds Stocks Stocks Stocks Stocks Stocks Bills Estate Stocks Bonds Stocks Stocks
5.29% 28.46% 22.95% 22.37% 17.79% 21.26% 13.24% 7.23% 11.50% 38.59% 20.23% 13.54% 18.35% 11.18% 2.08% 28.61% 25.49% 8.35% 17.26% 32.39%
Treasury Corporate Mid-Cap Real Mid-Cap Large-Cap Corporate Treasury Corporate Real Small-Cap Mid-Cap Large-Cap U.S. Gov't Corporate Small-Cap Large-Cap Foreign Small-Cap Foreign
Bills Bonds Stocks Estate Stocks Stocks Bonds Bills Bonds Estate Stocks Stocks Stocks Bonds Bonds Stocks Stocks Bonds Stocks Stocks
4.45% 22.25% 19.00% 19.66% 10.09% 21.04% 9.39% 3.67% 10.52% 36.18% 18.32% 12.65% 15.80% 8.66% -3.08% 27.19% 15.05% 5.17% 16.35% 22.78%
Real Small-Cap Corporate U.S. Gov't Mid-Cap Mid-Cap Small-Cap Real Large-Cap Large-Cap Mid-Cap Mid-Cap Small-Cap Large-Cap Large-Cap Large-Cap Real
Estate Commodities Stocks Bonds Bonds Stocks Stocks Stocks Estate Stocks Commodities Stocks Stocks Stocks Stocks Stocks Commodities Stocks Stocks Estate
2.66% 20.33% 16.51% 10.23% 9.85% 18.23% 8.26% 2.49% 3.60% 28.67% 17.28% 4.91% 15.27% 5.59% -33.80% 26.45% 9.02% 2.12% 15.98% 1.86%
Large-Cap Foreign Foreign U.S. Gov't Corporate Treasury Treasury Foreign Treasury Foreign Small-Cap Foreign Large-Cap Large-Cap Corporate Corporate Treasury Corporate Treasury
Stocks Bonds Stocks Bonds Bonds Bills Bills Bonds Bills Commodities Bonds Stocks Bonds Stocks Stocks Bonds Bonds Bills Bonds Bills
1.31% 19.55% 6.05% 9.59% 8.57% 4.87% 6.31% -3.55% 1.68% 20.72% 12.13% 4.56% 6.97% 5.50% -37.00% 16.05% 8.24% 0.06% 9.39% 0.10%
Small-Cap U.S. Gov't Treasury Treasury Treasury Corporate Foreign Mid-Cap Foreign Foreign Large-Cap Treasury Treasury Corporate Real Foreign U.S. Gov't
Stocks Bonds Bills Bills Bills Bonds Bonds Stocks Stocks Bonds Stocks Bills Bills Bonds Estate Commodities Stocks Commodities Bonds Commodities
-1.82% 18.34% 5.26% 5.32% 5.01% -1.96% -2.64% -5.63% -15.94% 18.53% 10.88% 3.34% 5.05% 5.11% -39.20% 13.48% 7.76% -1.18% 2.01% -1.22%
Mid-Cap Real Foreign Foreign Small-Cap Real Small-Cap Large-Cap Mid-Cap Corporate Corporate U.S. Gov't Corporate Treasury Mid-Cap Foreign U.S. Gov't Mid-Cap Foreign Corporate
Stocks Estate Bonds Stocks Stocks Estate Stocks Stocks Stocks Bonds Bonds Bonds Bonds Bills Stocks Bonds Bonds Stocks Bonds Bonds
-2.08% 12.24% 4.09% 1.78% -2.56% -2.57% -3.03% -11.88% -16.19% 7.70% 5.24% 2.65% 4.26% 4.99% -41.46% 4.37% 5.53% -1.73% 1.50% -2.01%
U.S. Gov't Foreign Corporate Foreign Real U.S. Gov't Large-Cap Foreign Small-Cap U.S. Gov't U.S. Gov't Corporate U.S. Gov't Small-Cap Foreign Treasury Foreign Small-Cap Treasury U.S. Gov't
Bonds Stocks Bonds Bonds Estate Bonds Stocks Stocks Stocks Bonds Bonds Bonds Bonds Stocks Stocks Bills Bonds Stocks Bills Bonds
-3.37% 11.21% 3.28% -4.26% -17.00% -2.23% -9.10% -21.43% -20.48% 2.36% 3.48% 1.96% 3.48% -1.55% -43.39% 0.24% 5.21% -4.17% 0.11% -2.61%
Corporate Treasury U.S. Gov't Foreign Foreign Large-Cap Treasury Treasury Foreign Real U.S. Gov't Treasury Foreign Foreign
Bonds Bills Bonds Commodities Commodities Bonds Stocks Commodities Stocks Bills Bills Bonds Commodities Estate Commodities Bonds Bills Stocks Commodities Bonds
-3.93% 5.79% 2.77% -14.07% -35.75% -5.08% -14.19% -31.93% -22.09% 1.05% 1.43% -9.20% -15.10% -17.56% -46.49% -2.19% 0.13% -12.13% 0.06% -4.00%
Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation(CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI)2.7% 2.5% 3.3% 1.7% 1.6% 2.7% 3.4% 1.6% 2.4% 1.9% 3.3% 3.4% 2.5% 4.1% 0.1% 2.7% 1.5% 3.0% 1.7% 1.5%
Disclosures. Assets are represented by the following indices: Large-Cap Stocks: Standard & Poor's 500; Mid-Cap Stocks: Russell MidCap; Small-Cap Stocks: Russell 2000; Foreign Stocks: MSCI-EAFE (in U.S. $); Foreign Bonds: Citi Non-$ World Government Bond; Corporate Bonds: Barclays Capital Credit; U.S. Gov't Bonds: Barclays Capital Government; Treasury Bills: Citi 3-Month Treasury; Real Estate: Dow Jones Wilshire REIT; Commodities: S&P GSCI; Inflation: Annual change in the Consumer Price Index for Urban Consumers (CPI-U), as calculated by the U.S. Bureau of Labor Statistics. Index performance is provided as a benchmark but is not illustrative of any particular investment. An investment cannot be made in an index. Market indexes do not include expenses, which are deducted from fund returns. Sources: Morningstar, U.S. Bureau of Labor Statistics. The performance data shown represents past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost.
Volatile Asset Class (Commodities) Asset class returns sorted top to bottom, best to worst
Disclosures. Assets are represented by the following indices: Large-Cap Stocks: Standard & Poor's 500; Mid-Cap Stocks: Russell MidCap; Small-Cap Stocks: Russell 2000; Foreign Stocks: MSCI-EAFE (in U.S. $); Foreign Bonds: Citi Non-$ World Government Bond; Corporate Bonds: Barclays Capital Credit; U.S. Gov't Bonds: Barclays Capital Government; Treasury Bills: Citi 3-Month Treasury; Real Estate: Dow Jones Wilshire REIT; Commodities: S&P GSCI; Inflation: Annual change in the Consumer Price Index for Urban Consumers (CPI-U), as calculated by the U.S. Bureau of Labor Statistics. Index performance is provided as a benchmark but is not illustrative of any particular investment. An investment cannot be made in an index. Market indexes do not include expenses, which are deducted from fund returns. Sources: Morningstar, U.S. Bureau of Labor Statistics. The performance data shown represents past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost.
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Foreign Large-Cap Real Large-Cap Large-Cap Real Small-Cap Real Real U.S. Gov't Mid-Cap Real Real Real Small-Cap
Stocks Stocks Estate Stocks Stocks Commodities Commodities Estate Commodities Stocks Estate Commodities Estate Commodities Bonds Stocks Estate Estate Estate Stocks
7.78% 37.53% 37.04% 33.35% 28.58% 40.92% 49.74% 12.36% 32.07% 47.25% 33.14% 25.55% 35.99% 32.67% 12.39% 40.47% 28.60% 9.24% 17.59% 38.82%
Foreign Mid-Cap Mid-Cap Foreign Foreign Real Corporate Foreign Mid-Cap Foreign Real Foreign Foreign Foreign Foreign Small-Cap U.S. Gov't Foreign Mid-Cap
Bonds Stocks Commodities Stocks Stocks Stocks Estate Bonds Bonds Stocks Stocks Estate Stocks Bonds Bonds Stocks Stocks Bonds Stocks Stocks
5.99% 34.45% 33.92% 29.02% 19.93% 27.03% 31.04% 10.40% 21.99% 40.08% 20.25% 13.82% 26.36% 11.47% 10.10% 31.78% 26.85% 9.01% 17.32% 34.76%
Small-Cap Large-Cap Small-Cap Foreign Small-Cap U.S. Gov't U.S. Gov't U.S. Gov't Foreign Mid-Cap Foreign Small-Cap Foreign Treasury Real Mid-Cap Corporate Mid-Cap Large-Cap
Commodities Stocks Stocks Stocks Bonds Stocks Bonds Bonds Bonds Stocks Stocks Stocks Stocks Stocks Bills Estate Stocks Bonds Stocks Stocks
5.29% 28.46% 22.95% 22.37% 17.79% 21.26% 13.24% 7.23% 11.50% 38.59% 20.23% 13.54% 18.35% 11.18% 2.08% 28.61% 25.49% 8.35% 17.26% 32.39%
Treasury Corporate Mid-Cap Real Mid-Cap Large-Cap Corporate Treasury Corporate Real Small-Cap Mid-Cap Large-Cap U.S. Gov't Corporate Small-Cap Large-Cap Foreign Small-Cap Foreign
Bills Bonds Stocks Estate Stocks Stocks Bonds Bills Bonds Estate Stocks Stocks Stocks Bonds Bonds Stocks Stocks Bonds Stocks Stocks
4.45% 22.25% 19.00% 19.66% 10.09% 21.04% 9.39% 3.67% 10.52% 36.18% 18.32% 12.65% 15.80% 8.66% -3.08% 27.19% 15.05% 5.17% 16.35% 22.78%
Real Small-Cap Corporate U.S. Gov't Mid-Cap Mid-Cap Small-Cap Real Large-Cap Large-Cap Mid-Cap Mid-Cap Small-Cap Large-Cap Large-Cap Large-Cap Real
Estate Commodities Stocks Bonds Bonds Stocks Stocks Stocks Estate Stocks Commodities Stocks Stocks Stocks Stocks Stocks Commodities Stocks Stocks Estate
2.66% 20.33% 16.51% 10.23% 9.85% 18.23% 8.26% 2.49% 3.60% 28.67% 17.28% 4.91% 15.27% 5.59% -33.80% 26.45% 9.02% 2.12% 15.98% 1.86%
Large-Cap Foreign Foreign U.S. Gov't Corporate Treasury Treasury Foreign Treasury Foreign Small-Cap Foreign Large-Cap Large-Cap Corporate Corporate Treasury Corporate Treasury
Stocks Bonds Stocks Bonds Bonds Bills Bills Bonds Bills Commodities Bonds Stocks Bonds Stocks Stocks Bonds Bonds Bills Bonds Bills
1.31% 19.55% 6.05% 9.59% 8.57% 4.87% 6.31% -3.55% 1.68% 20.72% 12.13% 4.56% 6.97% 5.50% -37.00% 16.05% 8.24% 0.06% 9.39% 0.10%
Small-Cap U.S. Gov't Treasury Treasury Treasury Corporate Foreign Mid-Cap Foreign Foreign Large-Cap Treasury Treasury Corporate Real Foreign U.S. Gov't
Stocks Bonds Bills Bills Bills Bonds Bonds Stocks Stocks Bonds Stocks Bills Bills Bonds Estate Commodities Stocks Commodities Bonds Commodities
-1.82% 18.34% 5.26% 5.32% 5.01% -1.96% -2.64% -5.63% -15.94% 18.53% 10.88% 3.34% 5.05% 5.11% -39.20% 13.48% 7.76% -1.18% 2.01% -1.22%
Mid-Cap Real Foreign Foreign Small-Cap Real Small-Cap Large-Cap Mid-Cap Corporate Corporate U.S. Gov't Corporate Treasury Mid-Cap Foreign U.S. Gov't Mid-Cap Foreign Corporate
Stocks Estate Bonds Stocks Stocks Estate Stocks Stocks Stocks Bonds Bonds Bonds Bonds Bills Stocks Bonds Bonds Stocks Bonds Bonds
-2.08% 12.24% 4.09% 1.78% -2.56% -2.57% -3.03% -11.88% -16.19% 7.70% 5.24% 2.65% 4.26% 4.99% -41.46% 4.37% 5.53% -1.73% 1.50% -2.01%
U.S. Gov't Foreign Corporate Foreign Real U.S. Gov't Large-Cap Foreign Small-Cap U.S. Gov't U.S. Gov't Corporate U.S. Gov't Small-Cap Foreign Treasury Foreign Small-Cap Treasury U.S. Gov't
Bonds Stocks Bonds Bonds Estate Bonds Stocks Stocks Stocks Bonds Bonds Bonds Bonds Stocks Stocks Bills Bonds Stocks Bills Bonds
-3.37% 11.21% 3.28% -4.26% -17.00% -2.23% -9.10% -21.43% -20.48% 2.36% 3.48% 1.96% 3.48% -1.55% -43.39% 0.24% 5.21% -4.17% 0.11% -2.61%
Corporate Treasury U.S. Gov't Foreign Foreign Large-Cap Treasury Treasury Foreign Real U.S. Gov't Treasury Foreign Foreign
Bonds Bills Bonds Commodities Commodities Bonds Stocks Commodities Stocks Bills Bills Bonds Commodities Estate Commodities Bonds Bills Stocks Commodities Bonds
-3.93% 5.79% 2.77% -14.07% -35.75% -5.08% -14.19% -31.93% -22.09% 1.05% 1.43% -9.20% -15.10% -17.56% -46.49% -2.19% 0.13% -12.13% 0.06% -4.00%
Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation(CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI)2.7% 2.5% 3.3% 1.7% 1.6% 2.7% 3.4% 1.6% 2.4% 1.9% 3.3% 3.4% 2.5% 4.1% 0.1% 2.7% 1.5% 3.0% 1.7% 1.5%
Moderate Allocation (Balanced) Asset class returns sorted top to bottom, best to worst
Disclosures. Assets are represented by the following indices: Large-Cap Stocks: Standard & Poor's 500; Mid-Cap Stocks: Russell MidCap; Small-Cap Stocks: Russell 2000; Foreign Stocks: MSCI-EAFE (in U.S. $); Foreign Bonds: Citi Non-$ World Government Bond; Corporate Bonds: Barclays Capital Credit; U.S. Gov't Bonds: Barclays Capital Government; Treasury Bills: Citi 3-Month Treasury; Real Estate: Dow Jones Wilshire REIT; Commodities: S&P GSCI; Inflation: Annual change in the Consumer Price Index for Urban Consumers (CPI-U), as calculated by the U.S. Bureau of Labor Statistics; Balanced Portfolio: Annually rebalanced portfolio of 17.5% large-cap stocks, 7.5% mid-cap stocks, 5.0% small-cap stocks, 20.0% foreign stocks, 8.0% foreign bonds, 11.0% corporate bonds, 13.0% U.S. government bonds, 3.0% treasury bills, 10.0% real estate and 5.0% commodities. Index performance is provided as a benchmark but is not illustrative of any particular investment. An investment cannot be made in an index. Market indexes do not include expenses, which are deducted from fund returns. Sources: Morningstar, U.S. Bureau of Labor Statistics. The performance data shown represents past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost.
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Foreign Large-Cap Real Large-Cap Large-Cap Real Small-Cap Real Real U.S. Gov't Mid-Cap Real Real Real Small-Cap
Stocks Stocks Estate Stocks Stocks Commodities Commodities Estate Commodities Stocks Estate Commodities Estate Commodities Bonds Stocks Estate Estate Estate Stocks
7.78% 37.53% 37.04% 33.35% 28.58% 40.92% 49.74% 12.36% 32.07% 47.25% 33.14% 25.55% 35.99% 32.67% 12.39% 40.47% 28.60% 9.24% 17.59% 38.82%
Foreign Mid-Cap Mid-Cap Foreign Foreign Real Corporate Foreign Mid-Cap Foreign Real Foreign Foreign Foreign Foreign Small-Cap U.S. Gov't Foreign Mid-Cap
Bonds Stocks Commodities Stocks Stocks Stocks Estate Bonds Bonds Stocks Stocks Estate Stocks Bonds Bonds Stocks Stocks Bonds Stocks Stocks
5.99% 34.45% 33.92% 29.02% 19.93% 27.03% 31.04% 10.40% 21.99% 40.08% 20.25% 13.82% 26.36% 11.47% 10.10% 31.78% 26.85% 9.01% 17.32% 34.76%
Small-Cap Large-Cap Small-Cap Foreign Small-Cap U.S. Gov't U.S. Gov't U.S. Gov't Foreign Mid-Cap Foreign Small-Cap Foreign Treasury Real Mid-Cap Corporate Mid-Cap Large-Cap
Commodities Stocks Stocks Stocks Bonds Stocks Bonds Bonds Bonds Stocks Stocks Stocks Stocks Stocks Bills Estate Stocks Bonds Stocks Stocks
5.29% 28.46% 22.95% 22.37% 17.79% 21.26% 13.24% 7.23% 11.50% 38.59% 20.23% 13.54% 18.35% 11.18% 2.08% 28.61% 25.49% 8.35% 17.26% 32.39%
Treasury Corporate Mid-Cap Real Mid-Cap Large-Cap Corporate Treasury Corporate Real Small-Cap Mid-Cap Large-Cap U.S. Gov't Corporate Small-Cap Large-Cap Foreign Small-Cap Foreign
Bills Bonds Stocks Estate Stocks Stocks Bonds Bills Bonds Estate Stocks Stocks Stocks Bonds Bonds Stocks Stocks Bonds Stocks Stocks
4.45% 22.25% 19.00% 19.66% 10.09% 21.04% 9.39% 3.67% 10.52% 36.18% 18.32% 12.65% 15.80% 8.66% -3.08% 27.19% 15.05% 5.17% 16.35% 22.78%
Real Balanced Small-Cap Balanced Balanced Mid-Cap Mid-Cap Small-Cap Real Large-Cap Balanced Mid-Cap Balanced Balanced Large-Cap Balanced Large-Cap Large-Cap Balanced
Estate Portfolio Stocks Portfolio Portfolio Stocks Stocks Stocks Estate Stocks Commodities Portfolio Stocks Portfolio Portfolio Stocks Portfolio Stocks Stocks Portfolio
2.66% 21.63% 16.51% 12.94% 9.93% 18.23% 8.26% 2.49% 3.60% 28.67% 17.28% 7.33% 15.27% 6.17% -24.06% 26.45% 12.80% 2.12% 15.98% 14.02%
Balanced Balanced Corporate U.S. Gov't Balanced Treasury Foreign Treasury Balanced Balanced Large-Cap Balanced Mid-Cap Small-Cap Balanced Balanced Balanced Real
Portfolio Commodities Portfolio Bonds Bonds Portfolio Bills Bonds Bills Portfolio Portfolio Stocks Portfolio Stocks Stocks Portfolio Commodities Portfolio Portfolio Estate
1.81% 20.33% 14.08% 10.23% 9.85% 12.54% 6.31% -3.55% 1.68% 25.42% 14.61% 4.91% 14.57% 5.59% -33.80% 20.75% 9.02% 0.99% 11.55% 1.86%
Large-Cap Foreign Foreign U.S. Gov't Corporate Treasury Balanced Balanced Balanced Foreign Small-Cap Foreign Large-Cap Large-Cap Corporate Corporate Treasury Corporate Treasury
Stocks Bonds Stocks Bonds Bonds Bills Portfolio Portfolio Portfolio Commodities Bonds Stocks Bonds Stocks Stocks Bonds Bonds Bills Bonds Bills
1.31% 19.55% 6.05% 9.59% 8.57% 4.87% 4.36% -5.11% -2.87% 20.72% 12.13% 4.56% 6.97% 5.50% -37.00% 16.05% 8.24% 0.06% 9.39% 0.10%
Small-Cap U.S. Gov't Treasury Treasury Treasury Corporate Foreign Mid-Cap Foreign Foreign Large-Cap Treasury Treasury Corporate Real Foreign U.S. Gov't
Stocks Bonds Bills Bills Bills Bonds Bonds Stocks Stocks Bonds Stocks Bills Bills Bonds Estate Commodities Stocks Commodities Bonds Commodities
-1.82% 18.34% 5.26% 5.32% 5.01% -1.96% -2.64% -5.63% -15.94% 18.53% 10.88% 3.34% 5.05% 5.11% -39.20% 13.48% 7.76% -1.18% 2.01% -1.22%
Mid-Cap Real Foreign Foreign Small-Cap Real Small-Cap Large-Cap Mid-Cap Corporate Corporate U.S. Gov't Corporate Treasury Mid-Cap Foreign U.S. Gov't Mid-Cap Foreign Corporate
Stocks Estate Bonds Stocks Stocks Estate Stocks Stocks Stocks Bonds Bonds Bonds Bonds Bills Stocks Bonds Bonds Stocks Bonds Bonds
-2.08% 12.24% 4.09% 1.78% -2.56% -2.57% -3.03% -11.88% -16.19% 7.70% 5.24% 2.65% 4.26% 4.99% -41.46% 4.37% 5.53% -1.73% 1.50% -2.01%
U.S. Gov't Foreign Corporate Foreign Real U.S. Gov't Large-Cap Foreign Small-Cap U.S. Gov't U.S. Gov't Corporate U.S. Gov't Small-Cap Foreign Treasury Foreign Small-Cap Treasury U.S. Gov't
Bonds Stocks Bonds Bonds Estate Bonds Stocks Stocks Stocks Bonds Bonds Bonds Bonds Stocks Stocks Bills Bonds Stocks Bills Bonds
-3.37% 11.21% 3.28% -4.26% -17.00% -2.23% -9.10% -21.43% -20.48% 2.36% 3.48% 1.96% 3.48% -1.55% -43.39% 0.24% 5.21% -4.17% 0.11% -2.61%
Corporate Treasury U.S. Gov't Foreign Foreign Large-Cap Treasury Treasury Foreign Real U.S. Gov't Treasury Foreign Foreign
Bonds Bills Bonds Commodities Commodities Bonds Stocks Commodities Stocks Bills Bills Bonds Commodities Estate Commodities Bonds Bills Stocks Commodities Bonds
-3.93% 5.79% 2.77% -14.07% -35.75% -5.08% -14.19% -31.93% -22.09% 1.05% 1.43% -9.20% -15.10% -17.56% -46.49% -2.19% 0.13% -12.13% 0.06% -4.00%
Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation Inflation
(CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI) (CPI)
2.7% 2.5% 3.3% 1.7% 1.6% 2.7% 3.4% 1.6% 2.4% 1.9% 3.3% 3.4% 2.5% 4.1% 0.1% 2.7% 1.5% 3.0% 1.7% 1.5%
BONDS
Bond Return Histograms
The histogram illustrations on the following pages represent frequency distributions for the Ibbotson U.S. Long-Term Government Bond Index total returns based on a variety of time periods: •1-year holding period•5-year holding period*•10-year holding period*•20-year holding period*
(*returns calculated on a rolling annualized basis)
For each chart and each return range, the index return history is sorted from highest to lowest for each segment.
For example, in the 1-year holding period chart, the years 1969, 1931, 1956, 1958, 1994, 1999 and 1967 fall into the return interval of -10% to -5%, with 1969 delivering the highest return and 1967 having the lowest return.
U.S. LT Government Bonds Annual Return Histogram
1935193019742001 1920s1966 1930s1953 1940s1964 1950s1929 2007 1960s1948 1988 1970s2012 1975 1980s1942 1927 1990s
1933 1944 2004 2000s1946 1943 1992 2010s1968 1981 20051977 2003 19261996 1963 19361973 2006 19571978 1952 1954 1991
1969 1979 1961 1962 1960 19931931 1955 1941 1949 1971 19891956 1959 1965 1990 1998 20021958 1947 1983 1940 1970 19321994 1987 1937 1939 1945 1976
2013 1999 1951 1928 1972 2010 1997 1986 2011 19952009 1967 1980 1950 1938 1934 1984 2000 2008 1985 1982
25% to
30%
20% to
25%
15% to
20%
10% to
15%
40% to
45%
30% to
35%
35% to
40%
5% to
10%
-15% to
-10%
-10% to
-5%
-5% to
0%
0% to
5%
U.S. LT Government Bonds Annualized Rolling 5-Year Return Histogram1940
193519341930197219391973 1930s1937 1940s1979 1950s1942 1960s1963 1970s1945 1980s1941 1990s1946 1984 2000s1932 1991 2010s1933 19981943 20121949 19991966 19961944 20021948 20011965 19941961 20051947 19361962 20001931 20061957 19762013 19741971 20031980 1983 19881954 1975 19931953 1982 19951950 2007 1987
1970 1952 1938 19921967 1955 2010 19901968 1960 1977 20111981 1956 1978 19971959 1951 1964 2008 19851969 1958 2009 2004 1989 1986
-5% to 0% 0% to 5% 5% to 10% 10% to 15% 15% to 20% 20% to 25%
U.S. LT Government Bonds Annualized Rolling 10-Year Return Histogram1940
19351936193919381943 1930s1945 1940s1942 1950s1976 1960s1937 1970s1944 1980s1980 1990s1946 2000s1947 2010s1949194819751966 20041981 19861950 20021954 19871971 19961972 19851962 20111974 19991951 20011973 20081953 20031963 20061952 20091965 20051957 20121968 2007 19931961 1984 19901964 2010 19891969 2013 19921955 1983 19951970 1982 19941960 1941 19981967 1979 19971958 1977 1988
1959 1956 1978 2000 1991 -5% to 0% 0% to 5% 5% to 10% 10% to 15% 15% to 20%
U.S. LT Government Bonds Annualized Rolling 20-Year Return Histogram1945
1984
1946
1949
1982
1983 1940s
1948 1950s
1951 1960s
1950 1970s
1947 1980s
1976 1990s
1979 2000s
1978 2010s
1953
1954
1952
1977
1955
1981
1980
1957
1975 2008
1972 2005
1956 1996
1962 1994
1964 2007
1971 1992
1973 1989
1963 1991
1958 2011
1974 1990 2001
1961 2006 2000
1960 2012 2003
1966 2010 1998
1965 2009 2002
1959 1988 2004
1967 1987 1999
1968 2013 1995
1970 1986 1997
1969 1985 1993
0% to 5% 5% to 10% 10% to 15%
Disclosures
Performance represents the total return of the Ibbotson U.S. Long-Term Government Bond Index over a variety of time periods. The Ibbotson U.S. Long-Term Government Bond Index is an unweighted index which measures the performance of twenty-year maturity U.S. Treasury Bonds. Each year a one-bond portfolio containing the bond having closest to 20 years to maturity is constructed. To measure holding period returns for the one-bond portfolio, it is prices (with accrued coupons) over the holding period and total returns are calculated, including investment of income. Index returns include dividend and/or interest income and do not reflect the removal of fees or expenses. Index performance is provided as a benchmark but is not illustrative of any particular investment. An investment cannot be made in an index and market indexes do not include expenses. The performance data shown represents past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost.
Sources: Ibbotson, FPS calculations
Bond Real Return HistogramsThe histogram illustrations on the following pages represent frequency distributions for the Ibbotson U.S. Long-Term Government Bond Index total real returns based on a variety of time periods: •1-year holding period•5-year holding period*•10-year holding period*•20-year holding period*
(*real returns calculated on a rolling annualized basis)
“Real” returns are defined as the annual index return less each year’s respective annual change in the Consumer Price Index for Urban Consumers (CPI-U). This creates an inflation-adjusted real return history. For each chart and each return range, the index real return history is sorted from highest to lowest.
For example, in the 1-year holding period chart, the years 2000, 1991, 1993 and 2002 fall into the return interval of 15% to 20%, with 2000 delivering the highest real return and 2002 having the lowest real return.
U.S. LT Government Bonds Annual Real Return Histogram
19572005 19711931 19261929 20101953 19451964 1938
1968 1972 19491950 1963 1975 19341942 2003 2001 19541981 1933 1935 1970
1978 1987 1943 2012 1939 19971994 1977 1965 1928 1936 19891969 1974 2006 1944 2007 19601947 1958 1955 1948 1962 1976 19951999 1956 1937 1961 1988 1984 2000 1985
1980 1967 1941 1983 1966 2004 1998 1991 19322009 2013 1951 1959 1952 1992 1927 1993 20081946 1979 1973 1996 1990 1940 1930 2002 1986 2011 1982
1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s
20% to
25%
25% to
30%
30% to
35%
35% to
40%
0% to
5%
5% to
10%
10% to
15%
15% to
20%
-20% to
-15%
-15% to
-10%
-10% to
-5%
-5% to
0%
U.S. LT Government Bonds Annualized Rolling 5-Year Real Return Histogram1956
1974201319551976197319751960 1993
1930s 1953 2000 19871940s 1943 1994 19341950s 1954 1940 19321960s 1958 2006 19331970s 1952 1938 20111980s 1945 2003 19361990s 1944 1939 19972000s 1967 1964 19922011s 1977 2010 2004
1983 1984 19351978 2007 20081971 1963 20121949 1937 19981968 2009 19301959 1941 19991946 1965 20021951 1966 19901982 1962 20011979 1961 1996 1985
1950 1948 1957 1931 19891969 1970 1942 2005 1988
1981 1980 1947 1972 1991 1995 1986 -15% to -10% -10% to -5% -5% to 0% 0% to 5% 5% to 10% 10% to 15% 15% to 20%
U.S. LT Government Bonds Annualized Rolling 10-Year Real Return Histogram
1957196819601967198419711972 1990
1930s 1946 19921940s 1969 19981950s 1977 19951960s 1958 19941970s 1970 19971980s 1976 20001990s 1978 19352000s 1956 1941 20042010s 1973 2007 2002
1947 2010 19891979 1988 19361954 2013 19391959 1987 20111983 1986 19381949 1942 20011953 1943 19401975 1985 20081948 1945 19991955 1966 19961974 1962 19371952 1944 20031982 1963 20061950 1961 20091951 1965 2005 1991
1981 1980 1964 2012 1993
-10% to -5% -5% to 0% 0% to 5% 5% to 10% 10% to 15%
U.S. LT Government Bonds Annualized Rolling 20-Year Real Return Histogram1972
19711976 1940s1966 1950s1967 1960s1953 1970s1954 1980s1985 1990s1973 2000s1968 2010s195219551977196419781963 19951962 20131970 19451957 1996 20011975 1993 20001965 1994 20031974 1946 20021956 1992 20041979 1989 20081961 1991 20051969 1990 19991984 1949 19981958 1947 20111960 1948 20071982 1988 20121983 1950 20101959 1987 20061980 1951 20091981 1986 1997
-5% to 0% 0% to 5% 5% to 10%
Disclosures
Performance represents the total return of the Ibbotson U.S. Long-Term Government Bond Index over a variety of time periods. The Ibbotson U.S. Long-Term Government Bond Index is an unweighted index which measures the performance of twenty-year maturity U.S. Treasury Bonds. Each year a one-bond portfolio containing the bond having closest to 20 years to maturity is constructed. To measure holding period returns for the one-bond portfolio, it is prices (with accrued coupons) over the holding period and total returns are calculated, including investment of income. Index returns include dividend and/or interest income and do not reflect the removal of fees or expenses. Index performance is provided as a benchmark but is not illustrative of any particular investment. An investment cannot be made in an index and market indexes do not include expenses. The performance data shown represents past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost.
The Consumer Price Indexes (CPI) measure changes in the prices paid by urban consumers for a representative basket of goods and services.
Sources: Ibbotson, Bureau of Labor Statistics, FPS calculations
Bonds and Interest Rates
How do changes in rates affect bond prices?
If current interest rates increase, existing traditional bonds become less attractive and prices move lower.
Conversely—if interest rates decrease—prices of traditional bonds become more attractive and increase.
Interest Rates Rise
Bond Prices Fall
Interest Rates Fall
Bond Prices Rise
If: Then:
Duration
When interest rates changes, how much do bond prices change?
A mathematical measure called “duration” estimates how sensitive a bond/portfolio is to rate changes. If the stated duration is 5 years, a 1% rate change will cause the bond/portfolio value to move about 5% in the opposite direction.Interest Rates Rise +1%
Bond Prices Fall About -5%
Interest Rates Fall -1%
Bond Prices Rise About +5%
If: Then:Duration: 5 Years
STOCKS
Disclosures
Performance represents the total return of the Standard & Poor's 500 Index over a variety of time periods. The Standard & Poor’s 500 is an unmanaged, market capitalization-weighted index of 500 widely held stocks of large-cap U.S. companies and is commonly used as a gauge of the overall U.S. equity market. Index returns include dividend and/or interest income and do not reflect the removal of fees or expenses. Index performance is provided as a benchmark but is not illustrative of any particular investment. An investment cannot be made in an index and market indexes do not include expenses. The performance data shown represents past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost.
The Consumer Price Indexes (CPI) measure changes in the prices paid by urban consumers for a representative basket of goods and services.
Sources: Ibbotson, Bureau of Labor Statistics, FPS calculations
S&P 500 Return Histograms
The histogram illustrations on the following pages represent frequency distributions for S&P 500 index total returns based on a variety of time periods: •1-year holding period•5-year holding period*•10-year holding period*•20-year holding period*
(*returns calculated on a rolling annualized basis)
For each chart and each return range, the index return history is sorted from highest to lowest for each segment.
For example, in the 1-year holding period chart, the years 1966, 1957, 1941, 2001 and 1973 fall into the return interval of -15% to -10%, with 1966 delivering the highest return and 1973 having the lowest return.
S&P 500 Annual Return Histogram
1944
1972 1936
1949 1951 1997
1977 1992 1986 1967 1980
1946 1978 1971 1979 1976 2013
1932 1956 1965 1952 1996 1985
1966 1929 1939 2005 1984 1959 1988 1963 2003 1950
1957 1969 1953 1970 1947 1926 1964 1983 1998 1955 1927
1941 1962 1934 2011 1948 1968 2012 1982 1961 1989 1995
1937 1930 2001 2000 1990 1994 2007 2004 2006 1999 2009 1938 1975 1928 1933
1931 2008 1974 2002 1973 1940 1981 1960 1987 1993 2010 1942 1943 1991 1945 1958 1935 1954
1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s
40% to
45%
45% to
50%
50% to
55%
10% to
15%
15% to
20%
20% to
25%
25% to
30%
30% to
35%
35% to
40%
5% to
10%
-45% to
-40%
-40% to
-35%
-35% to
-30%
-30% to
-25%
-25% to
-20%
-20% to
-15%
-15% to
-10%
-10% to
-5%
-5% to
0%
0% to
5%
S&P 500 Annualized Rolling 5-Year Return Histogram
1959
1947
1979
1984
1985
1993
1937
1982
1980 1986
1969 1957 1952
1976 1962 2000
1942 1965 2013
1978 1950 1990 1946
1943 1963 2007 1953
1970 1960 1961 1983
1975 1994 1967 1945 1998
1977 1935 1930 1939 1951 1954
2011 2010 1971 1948 1995 1955
2003 1973 1981 1964 1987 1936
2002 2012 1944 2001 1992 1958
1931 2008 2005 1972 1949 1988 1989
1933 1941 2004 1940 2006 1938 1991 1997
1932 1934 1974 2009 1966 1968 1996 1956 1999
-15% to -10% -10% to -5% -5% to 0% 0% to 5% 5% to 10% 10% to 15% 15% to 20% 20% to 25% 25% to 30%
1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s
S&P 500 Annualized Rolling 10-Year Return Histogram
19681972
1930s 19471940s 19421950s 20021960s 19441970s 19661980s 19491990s 2005 19592000s 1980 19982010s 2006 1956
1945 1993 19991970 1995 19971969 1984 19911936 1994 19892013 1985 20001948 1953 19511943 1990 19542012 1986 19521971 1962 1955
1946 1982 1950 19571977 1976 2001 19611975 1981 1967 1988
1937 1978 1941 1964 19921939 2011 1973 2004 19601938 1940 2007 1965 19632009 2010 1979 2003 19962008 1974 1935 1983 1987 1958
-5% to 0% 0% to 5% 5% to 10% 10% to 15% 15% to 20% 20% to 25%
S&P 500 Annualized Rolling 20-Year Return Histogram1940s 1964
1950s 19681960s 19601970s 19671980s 19951990s 19942000s 19962010s 1959
19651966
19581969
1988 20041987 19522013 19542010 20031985 19572008 19931980 20021982 19551983 19702012 20052009 19911977 20071976 20062011 19511984 19721950 1971 19991945 1989 19981975 1992 19611974 1956 19971979 1990 2000
1947 1981 1973 19621949 1978 1953 20011948 1946 1986 1963
0% to 5% 5% to 10% 10% to 15% 15% to 20%
Disclosures
Performance represents the total return of the Standard & Poor's 500 Index over a variety of time periods. The Standard & Poor’s 500 is an unmanaged, market capitalization-weighted index of 500 widely held stocks of large-cap U.S. companies and is commonly used as a gauge of the overall U.S. equity market. Index returns include dividend and/or interest income and do not
reflect the removal of fees or expenses. Index performance is provided as a benchmark but is not illustrative of any particular investment. An investment cannot be made in an index and market indexes do not include expenses.
The performance data shown represents past performance, which is not a guarantee of future results. Investment returns and principal value will
fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost.
Sources: Ibbotson, FPS calculations
S&P 500 Real Return HistogramsThe histogram illustrations on the following pages represent frequency distributions for S&P 500 index total real returns based on a variety of time periods: •1-year holding period•5-year holding period*•10-year holding period*•20-year holding period*
(*real returns calculated on a rolling annualized basis)
“Real” returns are defined as the annual index return less each year’s respective annual change in the Consumer Price Index for Urban Consumers (CPI-U). This creates an inflation-adjusted real return history. For each chart and each return range, the index real return history is sorted from highest to lowest.
For example, in the 1-year holding period chart, the years 1940, 2000, 1966, 2001, 1957, 1981, 1977 and 1969 fall into the return interval of -15% to -10%, with 1940 delivering the highest real return and 1969 having the lowest real return.
S&P 500 Annual Real Return Histogram
198019961976
1992 2012 19831940 2011 1956 2010 1999 19952000 1960 1948 2006 1951 1985 19451966 1994 1984 1926 1944 1991 19382001 1970 1932 1988 1982 2009 1998 19361957 1953 2005 2004 1942 1952 1943 1989 1997
2008 1941 1981 1929 1978 2007 1993 1971 1986 1963 2003 1955 19351937 1973 1977 1990 1947 1987 1968 1965 1972 1967 1961 2013 1928 19331974 1931 1946 2002 1930 1969 1962 1934 1939 1979 1959 1964 1949 1950 1975 1927 1958 1954
1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s
5% to
10%
-40% to
-35%
-35% to
-30%
-30% to
-25%
-25% to
-20%
-20% to
-15%
-15% to
-10%
-10% to
-5%
-5% to
0%
0% to
5%
40% to
45%
45% to
50%
50% to
55%
10% to
15%
15% to
20%
20% to
25%
25% to
30%
30% to
35%
35% to
40%
S&P 500 Annualized Rolling 5-Year Real Return Histogram
1931 1939 19951940 2007 19871943 1946 19591970 1980 1985 19961981 1982 1964 1951
2009 1966 1938 19572005 1971 1990 19622011 1949 1983 19372002 2006 1963 19652003 1948 2001 1988 19561976 1972 1984 1992 19971973 1944 1935 1945 19521934 1950 1968 1930 1989 1936
1933 1978 1969 1960 1961 1986 19551932 2008 1942 1947 1991 2013 19981977 1975 2010 1979 1993 1953 1954
1941 1974 2004 2012 1994 1967 2000 1958 1999 -15% to -10% -10% to -5% -5% to 0% 0% to 5% 5% to 10% 10% to 15% 15% to 20% 20% to 25% 25% to 30%
1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s
S&P 500 Annualized Rolling 10-Year Real Return Histogram
1930s 20041940s 1935 19611950s 1965 20001960s 1990 19971970s 1953 19571980s 1987 19631990s 2003 19602000s 1968 19912010s 1966 1989
2012 1984 19921943 1985 19541971 1986 1962
1980 1947 2002 19551946 1940 1950 19522010 2007 2005 19961979 1949 1972 19951982 1939 1942 19641981 1937 1944 19931975 1983 2006 19361977 1938 1941 1967 19582009 1973 1945 1951 19592008 1948 1969 1994 19981978 2011 1970 2001 19561974 1976 2013 1988 1999
-5% to 0% 0% to 5% 5% to 10% 10% to 15% 15% to 20%
S&P 500 Annualized Rolling 20-Year Real Return Histogram2003
19591940s 19701950s 20021960s 19711970s 19581980s 19961990s 19952000s 19722010s 1946 1994
1989 19541992 19571990 19521976 20051977 20071986 2006 19991947 1955 19981974 1951 19611975 1973 19681988 1945 19671949 1956 20011987 2013 20001980 2010 19621985 1953 19631982 1993 19641983 2012 19971978 2008 19661979 2009 19691948 2011 19651984 1991 19601981 1950 2004
0% to 5% 5% to 10% 10% to 15%
Principles
of Asset Allocation
Importance of Asset Allocation
Based on academic research conducted by Brinson, Beebower and Singer (Financial Analysts Journal,1986 and 1991).
Asset Allocation
91%
Security Selection 5%
Market Timing 2%
Other Factors 2%
Three Components in Determining Allocation of Assets
Component #1
Asset Class Rates of Return
Asset Class RelationshipsV
ol a
til i
ty
Specialty Stocks
Small Cap Stock Mid Cap Stock
Foreign Stock
Large Cap Stock
Specialty Bonds
Corporate Bonds
Government Bonds
Foreign Bonds
Real Estate
Commodities
Specialty Stocks
Small Cap Stock Mid Cap Stock
Foreign Stock
Large Cap Stock
Specialty Bonds
Corporate Bonds
Government Bonds
Foreign Bonds
Real Estate
Commodities
This is designed to show general long-term relationships, as opposed to specific results. Actual volatility achieved will likely vary.
Cumulative Long-term Returns (80+ Years)
Based on cumulative index total returns 1926-2013. Source: Ibbotson Associates, U.S. Bureau of Labor Statistics.
Short-Term (1-Year) Returns (%)
Based on single year index total returns. Source: Ibbotson Associates, Morningstar.
Three Components in Determining Allocation of Assets
Component #2
Asset Class Volatility
(“Standard Deviation”)
Distribution of Returns by Asset Class
Histograms show frequency distributions of returns by range, based on index annual returns 1926-2013. Source: Ibbotson Associates, Morningstar.
Reduction of Risk Over Time
One Year Holding Period Five Year Holding Period Ten Year Holding Period Twenty Year Holding Period
-75%
-50%
-25%
0%
25%
50%
75%
100%
125%
150%
Small Company Stocks Large Company Stocks Long-Term Government Bonds
Treasury Bills
Ranges show historic highest and lowest return achieved based on index rolling return periods 1926-2013. Source: Ibbotson Associates, Morningstar.
Three Components in Determining Allocation of Assets
Component #3
Relative Volatility of the Asset
Classes
(“Correlation”)
Correlations
Positive Correlation
Negative Correlation
Correlation refers to how closely the returns of two distinct assets move relative to each other. Positive correlation implies a strong linear relationship, while negative correlation signifies weak one.
Correlations of Asset Classes
Long-term correlations calculated based on annual index returns (1972-2013). Source: Ibbotson Associates, Morningstar.
BondsLarge Cap
StocksSmall Cap
StocksForeign Stocks
Real Estate Commodities
Bonds 100%
Large Cap Stocks 24% 100%
Small Cap Stocks 9% 78% 100%
Foreign Stocks 6% 67% 54% 100%
Real Estate 17% 55% 41% 41% 100%
Commodities -14% -9% -15% -1% -4% 100%
Putting It All Together
Minimize volatility by combining different classes of
assets
Diversifying RiskR
etu
rn
Risk
Based on long-term index total returns and standard deviations (1926-2013). Source: Ibbotson Associates, Morningstar.
50% Stocks / 50% Bonds
25% Stocks / 75% Bonds
100% Bonds
100% Stocks
75% Stocks / 25% Bonds
Diversifying RiskR
etu
rn
RiskBased on long-term index total returns and standard deviations (1972-2013). Source: Ibbotson Associates, Morningstar.
Addition of Real Estate and Commodities
Stocks and Bonds
DisclosuresIndexes used in analysis:
Stocks (broad asset class): Standard & Poor’s 500 Composite Index (1926-2013)Bonds (broad asset class): Ibbotson Long-Term U.S. Government Bond Series (1926-1985), Barclays Capital U.S. Aggregate (1986-2013)Long-Term Government Bonds: Ibbotson Long-Term U.S. Government Bond Series (1926-2013)Long-Term Corporate Bonds: Ibbotson Long-Term U.S. Corporate Bond Series (1926-2013)Large Cap Stocks: Standard & Poor’s 500 Composite Index (1926-2013)Small Cap Stocks: Ibbotson Small Company Return Series/CRSP Deciles 6-10 (1926-2013) International Stocks: Morgan Stanley Capital International – Europe, Australia & Far East Index (1972-2013) International Bonds: Citi/Salomon Non-Dollar World Government Bond Index (1985-2013)Real Estate: National Association of Real Estate Investment Trusts – Equity REIT Index (1972-2013)Commodities: S&P/Goldman Sachs Commodities Index (1972-2013)Inflation: Consumer Price Index for Urban Consumers (CPI-U) (1926-2013)
On the efficient frontier slides: ‘Return’ represents average annualized total returns of different combinations of market indexes (on the vertical axis). These consist of monthly total returns that are chained geometrically, and include both price appreciation and dividends. ‘Risk’ is represented by annualized standard deviation of monthly returns of combined market index portfolios (and are displayed on the horizontal axis).
Index performance is provided as a benchmark but is not illustrative of any particular investment. An investment cannot be made in an index. Market indexes do not include expenses, which are deducted from fund returns. The performance data shown represents past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost.
How should I be invested?
Depends on how close you are to retirement and how much you need from your portfolio.
April 21, 2023 Page54
Investment Policy – 10 Years to Retirement
Bonds12%
Money Market3%
Commodities6%
Real Estate12%
Stocks67% `
April 21, 2023 Page55
Investment Policy – 5 Years to Retirement
Bonds32%
Money Market3%
Commodities5%
Real Estate9%
Stocks51%
April 21, 2023 Page56
Investment Policy – During Retirement
Bonds52%
Commodities3%
Real Estate7%
Stocks35%
Money Market3%
Retirement Planning
Planning for varying returns
Eight Percent Growth applied to $1,000,000
Years0 8.0% 1,000,000$ 16.0% 1,000,000$ 1.3% 1,000,000$ 1 8.0% 1,080,000 15.0% 1,160,000 1.5% 1,012,663 2 8.0% 1,166,400 14.0% 1,334,000 2.0% 1,027,853 3 8.0% 1,259,712 13.0% 1,520,760 3.0% 1,048,410 4 8.0% 1,360,489 12.0% 1,718,459 4.0% 1,079,863 5 8.0% 1,469,328 11.0% 1,924,674 5.0% 1,123,057 6 8.0% 1,586,874 10.0% 2,136,388 6.0% 1,179,210 7 8.0% 1,713,824 9.0% 2,350,027 7.0% 1,249,963 8 8.0% 1,850,930 8.0% 2,561,529 8.0% 1,337,460 9 8.0% 1,999,005 8.0% 2,766,452 8.0% 1,444,457
10 8.0% 2,158,925 8.0% 2,987,768 8.0% 1,560,013 11 8.0% 2,331,639 8.0% 3,226,789 8.0% 1,684,814 12 8.0% 2,518,170 8.0% 3,484,932 8.0% 1,819,599 13 8.0% 2,719,624 8.0% 3,763,727 8.0% 1,965,167 14 8.0% 2,937,194 8.0% 4,064,825 8.0% 2,122,381 15 8.0% 3,172,169 8.0% 4,390,011 8.0% 2,292,171 16 8.0% 3,425,943 8.0% 4,741,212 8.0% 2,475,545 17 8.0% 3,700,018 8.0% 5,120,509 8.0% 2,673,589 18 8.0% 3,996,019 8.0% 5,530,149 8.0% 2,887,476 19 8.0% 4,315,701 7.5% 5,972,561 8.0% 3,118,474 20 8.0% 4,660,957 7.0% 6,420,503 8.0% 3,367,952 21 8.0% 5,033,834 6.5% 6,869,939 8.0% 3,637,388 22 8.0% 5,436,540 6.0% 7,316,485 9.0% 3,928,379 23 8.0% 5,871,464 5.5% 7,755,474 10.0% 4,281,933 24 8.0% 6,341,181 5.0% 8,182,025 11.0% 4,710,126 25 8.0% 6,848,475 4.5% 8,591,126 12.0% 5,228,240 26 8.0% 7,396,353 4.0% 8,977,727 13.0% 5,855,629 27 8.0% 7,988,061 3.5% 9,336,836 14.0% 6,616,861 28 8.0% 8,627,106 3.0% 9,663,625 15.0% 7,543,221 29 8.0% 9,317,275 1.1% 9,953,534 16.0% 8,674,704 30 10,062,657$ 10,062,657$ 10,062,657$
Average 8.0% 8.0% 8.0%
8%Low then High
8%Straight
8%High then Low
8% Growth
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
Eight Percent Growth applied to $1,000,000with $80,000 Annual Distribution
Years0 8.0% 1,000,000$ 16.0% 1,000,000$ 1.3% 1,000,000$ 1 8.0% 1,000,000 15.0% 1,080,000 1.5% 932,663 2 8.0% 1,000,000 14.0% 1,162,000 2.0% 866,653 3 8.0% 1,000,000 13.0% 1,244,680 3.0% 803,986 4 8.0% 1,000,000 12.0% 1,326,488 4.0% 748,106 5 8.0% 1,000,000 11.0% 1,405,667 5.0% 698,030 6 8.0% 1,000,000 10.0% 1,480,290 6.0% 652,932 7 8.0% 1,000,000 9.0% 1,548,319 7.0% 612,108 8 8.0% 1,000,000 8.0% 1,607,668 8.0% 574,955 9 8.0% 1,000,000 8.0% 1,656,282 8.0% 540,951
10 8.0% 1,000,000 8.0% 1,708,784 8.0% 504,228 11 8.0% 1,000,000 8.0% 1,765,487 8.0% 464,566 12 8.0% 1,000,000 8.0% 1,826,726 8.0% 421,731 13 8.0% 1,000,000 8.0% 1,892,864 8.0% 375,469 14 8.0% 1,000,000 8.0% 1,964,293 8.0% 325,507 15 8.0% 1,000,000 8.0% 2,041,436 8.0% 271,548 16 8.0% 1,000,000 8.0% 2,124,751 8.0% 213,271 17 8.0% 1,000,000 8.0% 2,214,731 8.0% 150,333 18 8.0% 1,000,000 8.0% 2,311,910 8.0% 82,360 19 8.0% 1,000,000 7.5% 2,416,863 8.0% 8,949 20 8.0% 1,000,000 7.0% 2,518,127 8.0% - 21 8.0% 1,000,000 6.5% 2,614,396 8.0% - 22 8.0% 1,000,000 6.0% 2,704,332 9.0% - 23 8.0% 1,000,000 5.5% 2,786,592 10.0% - 24 8.0% 1,000,000 5.0% 2,859,855 11.0% - 25 8.0% 1,000,000 4.5% 2,922,847 12.0% - 26 8.0% 1,000,000 4.0% 2,974,376 13.0% - 27 8.0% 1,000,000 3.5% 3,013,351 14.0% - 28 8.0% 1,000,000 3.0% 3,038,818 15.0% - 29 8.0% 1,000,000 1.1% 3,049,982 16.0% - 30 1,000,000$ 3,003,420$ -
Average 8.0% 8.0% 8.0%
8% 8%8%Straight High then Low Low then High
8% Growth with $80,000 Annual Distribution
$(500,000)
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
Horsetail Chart of Random Series of Returns Based on 8% Growth with 12% Std Deviation
-10000000
-5000000
0
5000000
10000000
15000000
20000000
25000000
30000000
35000000
Questions?
Presented by Laurence T. Hanslits, CFP
500 Liberty Street SESuite 310
Salem, OR 97301(503) 371-3333