5847 san felipe, suite 4100, houston, texas 77057 (713) 260-9000(800) 262-6631(713) 260-9025(fax)...
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CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
5847 San Felipe, Suite 4100, Houston, Texas 77057(713) 260-9000 (800) 262-6631 (713) 260-9025(Fax)
INVESTING IN RETIREMENT
THE GAME HAS CHANGED … OR HAS IT?
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
Sources of Retirement Income:
19% Social Security21% Pension 18% Investments 40% Earned Income2% Other
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
Source: Annuity 2000 Mortality Table; Society of Actuaries. Figure assumes a person is in good health.
65 70 75 80 85 90 95 100
50% chance of one spouse surviving
25% chance of one spouse surviving
Male age 65
Female age 65
Couple (both age 65)
85
92
88
94
92
97
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
All numbers were calculated based on hypothetical rates of inflation of 2%, 3%, and 4% (historical average from 1926 to 2006 was 3%) to show the effects of inflation over time; actual inflation rates may be more or less and will vary.Source: Retirement Income Planning – America’s Lifetime Income Challenge, Fidelity Investments Insight, June 2008.
Dol
lars
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0Today 5 years 10 years 15 years 20 years 25 years
Years from retirement start date
$50,000
$18,756
$23,880
$30,477
2% inflation
3% inflation4% inflation
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
For a 65-year-old couple, there is a 94% chance thatat least one spouse will need income at age 80.
A couple, both age 65,would have run out ofmoney at age 88 if theyhad withdrawn 5%,adjusted upwards forinflation each year.
4%
5%
6%7%8%
9%
$100,000
1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
100% atAge 65
99% atAge 70
98% atAge 75
94% atAge 80
83atAge 85
63%atAge 90
35% atAge 95
Dol
lars
Rem
ain
ing
$1,000,000
Source: Fidelity Investments. Hypothetical value of assets held in an untaxed account of $500,000 invested in a portfolio of 50% stocks, 40% bonds, and 10% short-term investments with inflation-adjusted withdrawal rates as specified. This chart’s hypothetical illustration uses historical monthly performance from January 1972 through December 2006 from Ibbotson Associates: stocks, bonds, and short-term investments are represented by S&P 500, U.S. Intermediate-Term Government Bonds, and U.S. 30-day T-bills. This chart is for illustrative purposes only and is not indicative of any investment. Past performance is no guarantee of future results. * Probability of a couple surviving to various ages is based on Annuity 2000 Mortality Table from Society of Actuaries. Figures assume you are in good health. See “Methodology and Information” at the end of this presentation for further details about indexes and methodology used to produce the chart.
How a couple retiring in 1972 with $500,000 is affected.
HypotheticalCouple(Both Age 65)*
10%
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
The Value Of Diversification
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
Current Income Portfolio “CIP”
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
Investment Profile
Current Income Portfolio seeks to:
Provide the highest current yields available on investment grade, coupon and dividend-paying, U.S. investments;
Utilize a high degree of issuer diversification and asset allocation strategic management;
Establish a defined investment horizon to safeguard investment principal;
Maintain the highest possible real (inflation adjusted) returns.
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
Current Income Portfolio invests in:
One to fifteen year corporate issues, predominately rated A/A2 to BBB/BAA2;
U.S. Agencies (with call and step-up provisions);
Corporate inflation protection (floating rate) securities;
Seasoned mortgage-backed securities; and
Listed preferred stocks.
Investment Profile
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
“CIP” Portfolio Characteristics6/30/09
** Barclay’s Capital Intermediate Government Credit Index
Capstone BCIGC**
Duration 4.13* 3.87
Current Yield 6.01% 4.14%
Yield to Maturity 5.26% 3.21%
Average Quality A Agency
* Does not include preferred stocks
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
“CIP” Portfolio Sector Weightings6/30/09
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
“CIP” Yield Advantage 6/30/09
* Barclay’s Capital Intermediate Government/Credit Bond Index** Source: Informa Investment Solutions – PSN using gross calculations
Per
cent
Current Yield Advantage**
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
This Strategy Offers Investors:
Conservative equity portfolio:The portfolio is composed of large cap stocks.
Price appreciation potential:The portfolio seeks to achieve price appreciation from the stocks held.
The potential for attractive cash flows: Combined option premium income and dividend yield is better than current broad bond market yields and does not have interest rate risk.
Moderation of volatility on equity returns:The portfolio utilizes covered calls and is therefore less volatile than an equity-only strategy.
Theta Growth
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
Projected Average annual cash flow: 8 - 10%*
Number of stocks held: 35 - 45Number of options sold: 70 - 100% writtenAverage option duration: Market directed
(average 6 months)
* Combined option premium income and dividend yield estimate.
Theta Growth Characteristics6/30/09
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
Theta Growth Sector Characteristics6/30/09
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
-16.0%
-13.0%
-10.0%
-7.0%
-4.0%
-1.0%
2.0%
14.0% 17.0% 20.0% 23.0%
BXM Buy Write Index
Capstone Theta Growth
S&P 500 IndexAnn
ual R
etur
n
more returnless risk
Annual Risk (Standard Deviation)
Theta Growth 3 Year Risk vs. Return*
* Source: Informa Investment Solutions – PSN using gross calculations
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
Theta Growth Portfolio Cash Flow6/30/09
CAPSTONEBuilding Wealth, Controlling Risk
CAPSTONEBuilding Wealth, Controlling Risk
Trailing Returns*
Per
cen
t
Theta Growth Performance
* Source: Informa Investment Solutions – PSN using gross calculations
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