getting through a volatile market
DESCRIPTION
This presentation shows steps one can take today to get through today\'s volatile market and put oneself in the best possible position going forwardTRANSCRIPT
Financial planning services and investments offered through Ameriprise Financial Services, Inc. Member FINRA and SIPC. © 2008 Ameriprise Financial, Inc. All rights reserved.
Getting Through a Volatile MarketSteps you can take today
Presenter name], [Presenter title]
[Date]
Why I do what I do.
Ameriprise Financial cannot guarantee future financial results.
> Approximately 2.8 million clients1
> Ameriprise is America’s largest financial planning company2,3
> More people come to Ameriprise for financial planning than any other company2
Ameriprise Financial
1 Ameriprise Financial 2007 Annual Report2 Based on the number of financial plans annually disclosed in Form ADV, Part 1A, Item 5, available at adviserinfo.sec.gov as of December 31, 2006.3 Based on the number of CFP® professionals documented by the Certified Financial Planner Board of Standards, Inc.
Our unique position in a volatile market
Ameriprise Financial
> Helps clients manage volatility by staying focused on immediate needs and long-term goals
> Careful, prudent way of doing business
Getting through a volatile market
► Managing risk
► What market volatility means to you
► Steps you can take today
► No one can predict the future… but some try
Fluctuations
Past performance does not guarantee future results. These examples do not reflect sales charges, taxes or other costs associated with investing. Lehman Brothers Aggregate Bond Index, an unmanaged index, is made up of a representative list of government, corporate, asset-backed and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. Standard & Poor’s 500 Index (S&P 500 Index), an unmanaged list of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. Morgan Stanley Capital International EAFE Index, an unmanaged index, is compiled from a composite of securities markets of Europe, Australia and the Far East. The index is widely recognized by investors in foreign markets as the measurement index for portfolios of non-North American securities. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Citigroup one-month U.S. Treasury Bill Index, an unmanaged index, represents the performance of one-month Treasury bills. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Dow Jones Wilshire Real Estate Investment Trust Index includes equity owners and operators of commercial and/or residential real estate. Source: Morningstar Direct & Bloomberg (1978 to 1980 Citi T-bill returns, Citi T-bill incept is 12/31/77). You may not invest directly in an index.
Fluctuations
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Citi Treasury Bill 1 Mon USD DJ Wilshire REIT TR USD LB US Agg Bond TR USD MSCI EAFE GR USD S&P 500 TR
Riding out volatility
The Standard & Poor’s 500 Market Index (S&P 500) is an unmanaged list of common stocks frequently used as a measure of market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The highest return is represented by the top of each bar and the lowest annual return is shown at the bottom. The rolling 5-, 10- and 20-year ranges are also shown. Over time, lower performing years will be offset by higher performing years and vice versa. Therefore the range of the historical returns over the entire period is narrower than the range of returns in any single year. Past performance is no guarantee of future results. Source: Morningstar Direct (DJ Wilshire REIT TR USD, LB US Agg Bond TR USD, S&P 500 TR) — returns over 1 year in length are annualized.
49.0%
32.6%
37.6%
30.2%
18.4%
28.6%
20.3%
14.1%
19.2%
15.3%
10.6%
17.9%
-23.4%
-2.9%
-22.1%
.7% 3.0%-2.3% 6.4% 6.0% 5.9% 10.0% 7.3% 11.1%
DJ Wilshire REIT LB US Agg Bond S&P 500
1 year 5 year 20 year10 year
Historic rates from 1977 to 2007
*Data as of 12/31/07. The table above shows how various asset classes and a hypothetical diversified portfolio based upon equal weighting of each of the asset classes have performed from 2000–2007. Sources: Lipper, Inc., Thomson/InvestmentView and Wilshire REIT Index. Past performance does not guarantee future results. Diversification helps you spread risk throughout your portfolio, so investments that do poorly may be balanced by others that do relatively better. Diversification and asset allocation do not guarantee overall portfolio profit and do not protect against loss. The above performance is not intended to represent any specific investment. It is not possible to invest directly in any of the unmanaged indices shown above. All performance shown assumes reinvestment of interest and does not include the expenses of managing a mutual fund. Every investor has unique goals and tolerance for risk. Russell 1000® Growth Index measures the performance of the 1,000 largest companies in the Russell 3000 Index with higher price-to-book ratios and higher forecasted growth values. Russell 1000® Value Index measures the performance of the 1,000 largest companies in the Russell 3000 Index with lower price-to-book ratios and lower forecasted growth values. MSCI EAFE Index is designed to measure the performance of the developed stock markets of Europe, Australia and the Far East, weighted by capitalization. Russell 2000® Value Index contains those Russell 2000 securities with lower price-to-book ratios. Russell 2000® Growth Index contains those Russell 2000 securities with higher price-to-book ratios. Russell Midcap® Index consists of the smallest 800 companies in the Russell 1000 Index, as ranked by total market capitalization. Lehman Brothers High Yield Bond Index covers the universe of fixed rate, non-investment grade debt. The Index includes both corporate and noncorporate sectors. Lehman Brothers Aggregate Bone Index is composed of corporate, U.S. Government, mortgage-backed and Yankee bonds with an average maturity of approximately 10 years. Wilshire REIT Index is an unmanaged group of publicly-traded real estate investment trusts. Diversified Portfolio assumes quarterly rebalancing and an equal weighting in each of the listed indices. This is for illustrative purposes only and does not reflect the performance of any specific investment.
Large Cap Growth: Russell 1000® Growth Index
Large Cap Value: Russell 1000® Value Index
Int’l Stocks: MSCI EAFE Index
Small Cap Value: Russell 2000® Value Index
Small Cap Growth: Russell 2000® Growth Index
Mid Cap Stocks: Russell Mid Cap® Index
High Yield Bonds: Lehman Brothers High Yield Bond Index
Bonds: Lehman Brothers Aggregate Bond Index
Real Estate: Wilshire REIT Index
Diversified Portfolio: Hypothetical portfolio with quarterly rebalancing and an equal weighting in each of the indices listed
REAL ESTATE 31.04%
SMALL CAP VALUE
22.83%
BONDS 11.63%
MID CAP STOCKS 8.25%
LARGE CAP VALUE7.01%
DIVERSIFIED PORTFOLIO
1.14%
HIGH YIELD BONDS-5.86%
INT’L STOCKS-13.96%
LARGE CAP GROWTH-22.42%
SMALL CAP VALUE
14.02%
REAL ESTATE 12.35%
BONDS 8.44%
HIGH YIELD BONDS5.28%
DIVERSIFIED PORTFOLIO -1.87%
LARGE CAP VALUE-5.59%
MID CAP STOCKS-5.62%
LARGE CAP GROWTH–20.42%
INT’L STOCKS-21.21%
BONDS 10.25%
REAL ESTATE 3.58%
HIGH YIELD BONDS-1.41%
SMALL CAP VALUE
-11.43%
DIVERSIFIED PORTFOLIO -11.74%
LARGE CAP VALUE
-15.52%
INT’L STOCKS-15.66%
MID CAP STOCKS-16.19%
LARGE CAP GROWTH-27.88%
SMALL CAP GROWTH48.54%
SMALL CAP VALUE
46.03%
MID CAP STOCKS 40.06%
INT’L STOCKS39.17%
REAL ESTATE 36.18%
DIVERSIFIED PORTFOLIO 33.58%
LARGE CAP VALUE
30.03%
LARGE CAP GROWTH29.75%
HIGH YIELD BONDS28.97%
BONDS4.10%
REAL ESTATE 33.16%
SMALL CAP VALUE
22.25%
INT’L STOCKS20.70%
MID CAP STOCKS 20.22%
DIVERSIFIED PORTFOLIO 16.63%
LARGE CAP VALUE
16.49%
HIGH YIELD BONDS11.13%
LARGE CAP GROWTH6.30%
BONDS 4.34%
INT’L STOCKS14.02%
REAL ESTATE 13.82%
MID CAP STOCKS12.65%
DIVERSIFIED PORTFOLIO
7.46%
LARGE CAP VALUE7.05%
LARGE CAP GROWTH5.26%
SMALL CAP VALUE 4.71%
HIGH YIELD BONDS2.74%
BONDS2.43%
REAL ESTATE 35.97%
INT’L STOCKS26.86%
SMALL CAP VALUE
23.48%
LARGE CAP VALUE
22.25%
DIVERSIFIED PORTFOLIO17.97%
MID CAP STOCKS15.26%
HIGH YIELD BONDS11.85%
LARGE CAP GROWTH9.07%
BONDS 4.33%
LARGE CAP GROWTH11.81%
INT’L STOCKS11.63%
BONDS 6.97%
MID CAP STOCKS5.60%
DIVERSIFIED PORTFOLIO
2.19%
HIGH YIELD BONDS1.87%
LARGE CAP VALUE-0.17%
SMALL CAP VALUE-9.78%
REAL ESTATE
-17.55%
SMALL CAP GROWTH-22.43%
SMALL CAP GROWTH -9.23%
SMALL CAP GROWTH-30.26%
SMALL CAP GROWTH14.31%
SMALL CAP GROWTH4.15%
SMALL CAP GROWTH13.35%
SMALL CAP GROWTH7.05%
2000 2001 2002 2003 2004 2005 2006 2007*
Initial $10,000 investment
Hypothetical example. Rate of return is for illustration purposes only and is not meant to represent any specific investment. Yields are hypothetical compounded rates of return. The actual value and returns on most investments will fluctuate. It does not take into account any federal or state taxes that may apply.
25 years later: Kent has earned $23,367 more
Hypothetical example. Rate of return is for illustration purposes only and is not meant to represent any specific investment. Yields are hypothetical compounded rates of return. The actual value and returns on most investments will fluctuate. It does not take into account any federal or state taxes that may apply.
RiskMarket
Interest rate
Inflation
Geo-political
Missing the best days
The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The chart shows the S&P 500 total return. Dividends are reinvested. Source: Ned Davis Research, Inc. YS285, 2/07/2008.
S&P 500 Index 1977-2007
10.88%
9.40%
8.09%
6.89%
12.90%All 7,571 Trading Days
Less Best 10 Days
Less Best 20 Days
Less Best 30 Days
Less Best 40 Days
Dollar-cost averaging
Dollar-cost averaging not guarantee a profit or protect against losses in a declining market. Investors should consider their ability to continue investing during periods of low markets. This illustration is hypothetical and is not a forecast or guarantee of specific investment results.
Average price per share: (10+8+5+7+9+10)/6= $8.17Average cost per share: (600/77.9)= $7.70
Month You invest Share price Shares purchased
January $100 ÷ $10 = 10
February $100 ÷ $8 = 12.5
March $100 ÷ $5 = 20
April $100 ÷ $7 = 14.3
May $100 ÷ $9 = 11.1
June $100 ÷ $10 = 10
Total $600 = 77.9
► Market volatility is natural
Q: How many bear markets have there been since 1950?
A: 10
Q: For the same time period, how long did the average bear market last?
A: 10 months
Q: What was the level of bounce-back 12 months after the bear market ended?
A: 16%24%32%
A: 16% after three months24% after six months32% after twelve months
1RiverSource Institute2Ned Davis, Lehman Bros.3Ned Davis, Lehman Bros. Past performance does not guarantee future results.
► What it means to you
emotions
expectations
► Steps you can take
Five things to do during a volatile market
1. Don’t let emotions affect your financial future
2. Diversify, diversify, diversify
3. Be disciplined
4. Avoid market timing
5. Get or review your financial plan
Let’s get started.
Financial planning services and investments offered through Ameriprise Financial Services, Inc. Member FINRA and SIPC.
© 2008 Ameriprise Financial, Inc. All rights reserved.
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