long-term investment performance - … alternatives money-market funds treasury bills certificates...

LONG-TERM INVESTMENT PERFORMANCE

Source: Created by Raymond James using Ibbotson Presentation Materials • © 2011 Morningstar. All Rights Reserved. 3/1/2011 • Used with permission.

Cash alternatives

Money-market funds Treasury bills Certificates of deposit

Real assets

Real estate Commodities Gold

Stocks

Large stocks Small stocks International stocks

Bonds

Government bonds Corporate bonds Municipal bonds High-yield bonds International bonds

Source: Created by Raymond James using Ibbotson Presentation Materials • © 2011 Morningstar. All Rights Reserved. 3/1/2011 • Used with permission.

TYPES OF ASSET CLASSES

IBBOTSON®

SBBI®

STOCKS, BONDS, BILLS AND INFLATION 1926 – 2010

Past performance is no guarantee of future results. • An investment cannot be made directly in an index. • Hypothetical value of $1 invested at the beginning of 1926. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. • Source: Created by Raymond James using Ibbotson Presentation Materials • © 2011 Morningstar. All Rights Reserved. 3/1/2011

0.10

1

10

100

1,000

$10,000

1926 1936 1946 1956 1966 1976 1986 1996 2006

$16,055

$2,982

$21$12

$93

Compound Annual ReturnSmall StocksLarge StocksGovernment BondsTreasury Bills

• Inflation

12.1%9.95.53.63.0

1991 1996 2001 2006

1

10

$20

0.60

$12.57

$5.75$5.05

$1.64$1.97

IBBOTSON®

SBBI®

STOCKS, BONDS, BILLS AND INFLATION 1991 – 2010


Compound Annual ReturnSmall StocksLarge StocksGovernment BondsTreasury Bills

• Inflation

12.5%9.18.43.52.5

0.50

$3

2001 2003 2005 2007 2009

$1.26$1.24$1.15

$1.90

$2.51

1

THE PAST 10 YEARS2001 – 2010


Compound Annual ReturnSmall StocksGovernment Bonds

• InflationTreasury BillsLarge Stocks

9.6%6.62.32.21.4

LONG-TERM ASSET CLASS PERFORMANCE1926 – 2010

Past performance is no guarantee of future results. • An investment cannot be made directly in an index. • Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. • Source: Created by Raymond James using Ibbotson Presentation Materials • © 2011 Morningstar. All Rights Reserved. 3/1/2011

Annual

12-MonthRollingPeriods

Compound Annual Return

Standard Deviation

Highest Return

Lowest Return

Average Positive Return

Average Negative Return

Percent Periods Positive

Percent Periods Negative

12.1%

32.6%

316.4%

-75.9%

31.4%

-19.0%

71.8%

28.2%

9.9%

20.4%

162.9%

-67.6%

21.7%

-14.3%

73.3%

26.7%

5.5%

9.5%

54.4%

-17.1%

8.6%

-3.9%

78.1%

21.9%

3.6%

3.1%

15.2%

0.0%

3.7%

0.0%

98.4%

1.6%

SmallStocks

LargeStocks

GovernmentBonds

TreasuryBills

BOND MARKET PERFORMANCE1926 – 2010


$20.55

$34.88

$92.94$133.38

$285.34$500

100

10

1

0.101926 1936 1946 1956 1966 1976 1986 1996 2006

6.9%5.95.54.33.6


High-Yield Corp BondsCorporate BondsGovernment BondsMunicipal BondsTreasury Bills

GROWTH AND VALUE INVESTING1970 – 2010


$500

10

1

0.501970 1975 1990 1995 2000 2005

$20.09

$59.19

$303.48

$32.06

100

1980 1985 2010

15.0%10.5

8.87.6


Small ValueLarge ValueSmall GrowthLarge Growth

STOCKS, COMMODITIES, REITs, AND GOLD1980 – 2010


$100

0.50

1

10

$2.68

$28.08$19.98

$36.02

1980 1985 1995 2000 20051990 2010

$9.35

12.3%11.410.17.53.2


REITsU.S. StocksInternational StocksCommoditiesGold

WHAT IS ASSET ALLOCATION?

Source: Created by Raymond James using Ibbotson Presentation Materials • © 2011 Morningstar. All Rights Reserved. 3/1/2011

Asset allocation is theprocess of combining asset classes such as stocks, bonds, real estate, commodities and cash in a portfolio in orderto meet your goals.

Stocks Bonds

Cash

THE CASE FOR ASSET ALLOCATION2001 – 2010

Past performance is no guarantee of future results. • An investment cannot be made directly in an index. Time period illustrated is from 2001 – 2010. This time period was chosen as a dramatic illustration of stock and bond return behavior and how their often opposite movements reduced portfolio volatility. This is for illustrative purposes only and not indicative of any investment. Created by Raymond James using Ibbotson Presentation Materials © 2011 Morningstar. All Rights Reserved. 3/1/2011

30% Return

20

10

-10

-20

0

-30

-40Year 1 2 3 4 5 6 7 8 9 10

1.4

Bonds50/50 PortfolioStocks

6.6%5.2


ASSET ALLOCATION: RISK VERSUS RETURN1970 – 2010

Past performance is no guarantee of future results. • An investment cannot be made directly in an index. Risk and return are measured by standard deviation and arithmetic mean, respectively. This is for illustrative purposes only and not indicative of any investment. Created by Raymond James using Ibbotson Presentation Materials © 2011 Morningstar. All Rights Reserved. 3/1/2011

12% Return

11

10

9

Maximum Risk Portfolio:100% Stocks

60% Stocks, 40% Bonds


100% Bonds

Minimum Risk Portfolio:28% Stocks, 72% Bonds

11 12 13 14 15 16 1917 1810% Risk


10

STOCK DIVERSIFICATION

Past performance is no guarantee of future results. • An investment cannot be made directly in an index. This is for illustrative purposes only and not indicative of any investment. Created by Raymond James using Ibbotson Presentation Materials © 2011 Morningstar. All Rights Reserved. 3/1/2011

1 2 4 6 8 16 30 50 100 1,000

Risk

• Company Risk• Market Risk

Number of Stocks in Portfolio

MORE FUNDS DO NOT ALWAYS MEAN GREATER DIVERSIFICATIONIDENTIFYING POTENTIAL SECURITY OVERLAP


Equity Portfolio B

Mic

roS

mal

lM

idLa

rge

Gia

nt

Equity Portfolio A

Deep-Value Core-Value Core Core-GrowthHigh-Growth

Mic

roS

mal

lM

idLa

rge

Gia

nt

Deep-Value Core-Value Core Core-GrowthHigh-Growth

ASSET ALLOCATION & DIVERSIFICATION IN BULL AND BEAR MARKETS


Bear Market$2,500

Bull Market

2,000

1,500

1,000

5002002 2003 2004 2005

$1,274

2006 2007Oct Oct Oct Oct Oct Oct

$2,084

$1,653

2007 2008500

750

1,000

1,250

$1,500

$1,160

$767

$491

• Stocks• 50/50 Portfolio• Bonds

Nov Nov

DIVERSIFIED PORTFOLIOS IN VARIOUS MARKET CONDITIONSPERFORMANCE DURING AND AFTER SELECT BEAR MARKETS

Past performance is no guarantee of future results. • An investment cannot be made directly in an index. Diversified portfolio: 35% stocks, 40% bonds, 25% Treasury bills. Hypothetical value of $1,000 invested at the beginning of January 1973 and Nov 2007, respectively. This is for illustrative purposes only and not indicative of any investment. Created by Raymond James using Ibbotson Presentation Materials © 2011 Morningstar. All Rights Reserved. 3/1/2011

Mid-1970s Recession (Jan 1973 – Jun 1976) 2007 Bear Market and Aftermath (Nov 2007 – Dec 2010)

$1,150

$1,014

$1,072

$872

$1,250

1,000

750

250 Jan1973

Jan1974

Jan1975

Jan1976

Nov 2007

Nov 2008

Nov2009

Nov 2010

• Stocks• Diversified Portfolio

500

CAN YOU STAY ON TRACK?

Past performance is no guarantee of future results. • An investment cannot be made directly in an index. • This is for illustrative purposes only and not indicative of any investment. Created by Raymond James using Ibbotson Presentation Materials. © 2011 Morningstar. All Rights Reserved. 3/1/2011

$1,091

$912

$746

600

800

1,000

$1,200

1972 1973 1974

$21,754

$40,139$56,036

100

1k

10k

$100k

1975 1985 1995 2005

Stocks50/50 PortfolioBonds

COMPOUNDING & REBALANCING

Created by Raymond James using Ibbotson Presentation Materials • © 2011 Morningstar, Inc. All rights reserved. Used with permission.

POWER OF REINVESTING1991 – 2010

Past performance is no guarantee of future results. • An investment cannot be made directly in an index. • Hypothetical value of $1,000 invested at the beginning of 1991. Data does not account for taxes or transaction costs. This is for illustrative purposes only and not indicative of any investment. Created by Raymond James using Ibbotson Presentation Materials. © 2011 Morningstar. All Rights Reserved. 3/1/2011

$10k

8001991 1994 1997 2000 2003 2006 2009

$5,751

$3,808

$5,053

$1,609

1,000

9.1%6.98.42.4

Compound Annual ReturnStocks With ReinvestmentStocks Without ReinvestmentBonds With ReinvestmentBonds Without Reinvestment

POWER OF COMPOUNDINGHYPOTHETICAL INVESTMENT IN STOCKS


Years Contributing: 1991 – 2000Annual Amount Contributed: $2,000

Years Contributing: 2001 – 2010Annual Amount Contributed: $4,000

Investor BInvestor A

$40,000

$48,881

$20,000

• Total Amount Invested• Compounded Value at Year-End 2010

0

20

40

60

$80k

1991 – 2010 2001 – 2010

$60,858

IMPORTANCE OF REBALANCING1990 – 2010

Past performance is no guarantee of future results. • An investment cannot be made directly in an index. • Stocks: 50% large and 50% small stocks. Bonds: intermediate-term government bonds. This is for illustrative purposes only and not indicative of any investment. Created by Raymond James using Ibbotson Presentation Materials. © 2011 Morningstar. All Rights Reserved. 3/1/2011

0

10

20

30

40

50

60

80%

2005 2010200019951990Year-End

70

50% 50%

63%

37%

71%

29%

75%

25%

72%

28%

• Stock Allocation• Bond Allocation

CONTROLLING RISK WITH PORTFOLIO REBALANCING THE RISK AND RETURN OF REBALANCED VERSUS NON-REBALANCED

PORTFOLIOS

Past performance is no guarantee of future results. • An investment cannot be made directly in an index. • Risk and return are measured by annualized standard deviation and compound annual return, respectively. This is for illustrative purposes only and not indicative of any investment. Created by Raymond James using Ibbotson Presentation Materials. © 2011 Morningstar. All Rights Reserved. 3/1/2011

0

2

4

6

8

10

12

14%

Jan 1970 –Dec 2010

Jan 1980 –Dec 2010

Jan 1990 –Dec 2010

Risk

12.9% 13.1%

11.5%

10.5% 10.4%9.8%

Return

Jan 1970 –Dec 2010

Jan 1980 –Dec 2010

Jan 1990 –Dec 2010

10.1%10.6%

8.1%

10.0%10.5%

7.9%

• Non-Rebalanced Portfolio• Rebalanced Portfolio

COMBATING COMMON INVESTOR ERRORS


Past performance is no guarantee of future results. ©2009 DALBAR, Inc. This information is for illustrative purposes and seeks to demonstrate the virtues of a buy-and-hold strategy rather than trying to time the market. The calculations assume a $10,000 initial investment over the specified time period from 1988 through 2008.

Barclays Capital AggregateBond Index

AverageBondFund

Investor

AverageStockFund

Investor

InflationS&P 500

Please refer to disclosures on the next slide.

INDIVIDUAL INVESTORS HAVE UNDERPERFORMED

24

Source: AllianceBernstein Investments. 2005 Survey of Financial Advisors on Asset Allocation

Asset allocation does not ensure a profit or protect against a loss. Investing involves risk and investors may incur a profit or a loss.

Not paying enough attention to asset allocation33%Having too much

money in one investment

16%

Buying overvalued investments

8%

Other1%

Holding on to investments too long

11%

Trying to time the market31%

THE MOST DETRIMENTAL INVESTOR MISTAKES

25

The S&P 500 is an unmanaged index of 500 widely held stocks. The Barclays Capital Aggregate Bond index measures changes in the fixed rate debt issues rated investment grade or higher. Investors cannot invest directly in an index. There is no assurance that past trends will continue into the future. | Source: Investment Company Institute. Morningstar Data. The categories listed above, Equity and Fixed Income, represent those funds categorized as such by the Investment Company Institute.

Subsequent Returns

Stocks (S&P 500)

Bonds (Barclays Capital Agg Index)

2001 -11.89% +8.43%

2002 -22.10% +10.26%

Subsequent Returns

Stocks (S&P 500)


2003 +28.68% +4.10%

2004 +10.88% +4.34%

Subsequent Returns

Stocks (S&P 500)


2009 +26.47% +5.93%

Stock Funds Bond Funds

($ Billions)

2000$262.80

-$49.90

2002

2008

$140.50

-$29.10

-$87.88

$39.29

Net flows by broad investment categories at major inflection points in the market and subsequent performance:

INDIVIDUAL INVESTORS TEND TO REACT EMOTIONALLY

26

DANGERS OF MARKET TIMINGHYPOTHETICAL VALUE OF $1 INVESTED FROM 1991 – 2010


$5.75

$1.96 $1.97

0

2

4

$6

Stocks Stocks Minus Best 13 Months Treasury Bills

THE COST OF MARKET TIMINGRISK OF MISSING THE BEST DAYS IN THE MARKET 1991 – 2010


10% Return

5

-5

0

-10

Daily Returns for All 5,043 Trading Days

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Invested for All5,043 Trading Days

10 Best Days Missed 20 Best Days Missed 30 Best Days Missed 40 Best Days Missed 50 Best Days Missed- 4

-2

8

6

4

2

0

9.1%

5.4%

3.0%

-1.0% -2.7%

10%Return

0.9%

REDUCTION OF RISK OVER TIME1926 – 2010

Past performance is no guarantee of future results. • An investment cannot be made directly in an index. • Each bar shows the range of compound annual returns for each asset class over the period 1926–2010. This is for illustrative purposes only and not indicative of any investment. Created by Raymond James using Ibbotson Presentation Materials. © 2011 Morningstar. All Rights Reserved. 3/1/2011

Small Stocks Large Stocks Government Bonds Treasury Bills

-60

-30

0

30

60

90

120

150%

1-YearHolding Period

5-Year 20-Year 1-Year 5-Year 20-Year 1-Year 5-Year 20-Year 1-Year 5-Year 20-Year

Compound Annual Return:12.1% 9.9% 5.5% 3.6%

Past performance does not guarantee future results. No fees or expenses are reflected in the performance of the index. An investor cannot invest directly in an index, and an index’s results are not indicative of any specific investment. | Source: Compustat; Roger G. Ibbotson and Rex A. Sinquefield, “Stocks, Bonds, Bills, and Inflation: Year-by-Year Historical Returns,” University of Chicago Press Journal of Business (January 1976); and Bernstein Global Wealth Management | Updated as of 2/1/10 with data from Callan and Associates. Market data references S&P 500 returns. The S&P 500 is an unmanaged index of 500 widely held stocks.

$100,000

(15)%(30)%

(17)%

(43)%(29)%(16)%

(22)%

(15)%

(41)%(15)%(51)%

$53.5 million

BRUTAL DECLINES AMID THE LONG-TERM RISE

30

PORTFOLIO CONSTRUCTION


We use a variety of tools to tailor our investment process to your objectives, risk tolerance, time horizon, tax situation and investment experience.

“Time is your friend; impulse is your enemy."

– John BogleFounder, The Vanguard Group

INVESTMENT PROCESS PORTFOLIO CONSTRUCTION

32

INVESTMENT PROCESS

We can build specific investments into your financial plan to help you achieve your financial goals.

33

Conservative

Conservative Balanced

Balanced

Balanced with Emphasis on

GrowthGrowth

Aggressive Growth

Global Equity

Lower-Risk Portfolios

Higher-Risk Portfolios

Expe

cted

Ret

urn

An efficient frontier represents every possible combination of assets that maximizes return at each level of portfolio risk and minimizes risk at each level of portfolio return.The above illustration depicts the typical relationship between risk and return. Generally, investors are expected to be compensated in returns for assuming higher levels of risk.

Asset allocation does not ensure a profit or protect against a loss. Standard deviation measures the fluctuation of returns around the arithmetic average return of the investment. The higher the standard deviation, the greater the variability (and the risk) of the investment returns.

Risk (Standard Deviation of Return)

INVESTMENT PROCESS RISK AND REWARD

34

• U.S. Equity

• Non-U.S. Equity

• Fixed Income

• Real Estate

• Alternative Investments

• Cash & Cash Alternatives

HYPOTHETICAL INCOME-FOCUSED PORTFOLIO

HYPOTHETICAL GROWTH-FOCUSED PORTFOLIO


INVESTMENT PROCESS ASSET CLASSES

We employ a variety of asset classes to help balance risk.

35

INVESTMENT UNIVERSE(Professional Asset Managers, Mutual

Funds, ETFs, Annuities, Stocks, Bonds, REITs, Alternatives, etc.)

RELEVANT INVESTMENTS (Quality investments

appropriate to your situation)

SPECIFIC RECOMMENDATIONS (Investments chosen

for you)

Raymond James Research and Due Diligence

Our Quantitative and Qualitative Analysis

Knowledge of Your Personal Situation


INVESTMENT PROCESS INVESTMENT OPTIONS

We have access to a wide variety of investments when designing portfolios for our clients and – with the support of Raymond James research and due diligence, and our own analysis and understanding of your needs – we choose investments best suited to your needs, constraints, obligations and goals.

36

Investing in small-cap stocks generally involves greater risks and, therefore, may not be appropriate for every investor.

U.S. government bonds and Treasury bills are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

Diversification does not ensure a profit or protect against a loss.

Standard deviation measures the fluctuation of returns around the arithmetic average return of investment. The higher the standard deviation, the greater the variability (and thus risk) of the investment returns.

Holding stocks for the long-term does not insure a profitable outcome. Investing in stocks always involves risk, including the possibility of losing one’s entire investment.

There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices rise.

DISCLOSURES

March 1, 2011 • Source: Created by Raymond James using Ibbotson Presentation Materials © 2011 Morningstar, Inc. All rights reserved. Used with permission. 2011 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC • 2011 Raymond James Financial Services, Inc., member FINRA/SIPC

DISCLOSURES (CONTINUED)

Continued on next slide

High-yield (below investment grade) bonds are not suitable for all investors. The risk of default may increase due to changes in the issuer’s credit quality. Price changes may occur due to changes in interest rates and the liquidity of the bond. When appropriate, these bonds should only comprise a modest portion of your portfolio.

Municipal bond interest is not subject to federal income tax but may be subject to AMT, state or local taxes. Income from taxable municipal bonds is subject to federal income taxation; and it may be subject to state and local taxes. Municipal securities typically provide a lower yield than comparably rated taxable investments in consideration of their tax-advantaged status. Investments in municipal securities may not be appropriate for all investors, particularly those who do not stand to benefit from the tax status of the investment. Please consult an income tax professional to assess the impact of holding such securities on your tax liability.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Commodities and precious metals are volatile investments and should only form a small part of a diversified portfolio. Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising.



Continued on next slide

Investing in small-cap stocks generally involves greater risks and, therefore, may not be appropriate for every investor.

International investing involves special risks, including currency fluctuations, different financial accounting standards, and possible political and economic volatility.

U.S. government bonds and Treasury bills are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.

Diversification does not ensure a profit or protect against a loss.

Holding stocks for the long-term does not insure a profitable outcome. Investing in stocks always involves risk, including the possibility of losing one's entire investment.

Specific sector investing such as real estate can be subject to different and greater risks than more diversified investments. Declines in the value of real estate, economic conditions, property taxes, tax laws and interest rates all present potential risks to real estate investments.



Certificates of Deposit are FDIC-insured up to $250,000 per depositor. Coverage applies to total holdings per bank per depositor. Visit fdic.gov for more information.


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