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Investing Fundamentals

Alight Financial Advisors LLC Alight Financial Solutions LLC, member FINRA/SIPC Alight Financial Advisors LLC (AFA) is a federally registered investment advisor and wholly owned subsidiary of Alight Solutions LLC

Proprietary and Confidential

Disclaimer

2

This information is provided by Alight Financial Advisors LLC (AFA)

for general informational purposes only and should not be considered

an individualized recommendation or personalized advice. The

strategies mentioned may not be suitable for everyone. Each investor

needs to pursue a particular investment strategy based on his or her

own particular situation. Data contained herein is obtained from what

are considered reliable sources; however, its accuracy,

completeness, or reliability cannot be guaranteed. The content of this

presentation is for informational purposes only. This information does

not constitute investment advice or an offer to invest or to provide

management services. The information in this document does not

constitute tax advice. Please see your tax advisor to determine how

this information may apply to your own situation.


Learning Objectives

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Understand what the stock market is

Grasp the three basic asset classes

Learn what a fund is

Discover how asset allocation can help you

pursue your goals

View your investment options

Explore ways to get help with your account

Proprietary and Confidential 4

Investment Basics • What Is the Stock Market?

• Three Basic Asset Classes

• What Is a Stock?

• What Is a Bond?

• What Is a Short-Term Investment?

• Sub Asset Classes

• What Is a Fund?


What Is the Stock Market?

5

Company wants to expand

Money is raised in an IPO

Investors receive stock

in exchange for money

Those shares then trade on

the open market

1

3

2

4


Three Basic Asset Classes

Stocks Ownership in a company. Fluctuates in value daily. Highest risk of loss.

Bonds Represents a loan to a government or corporation. Legal obligation. Provides regular interest payments.

Short-Term Cash or other instruments with short-term maturities such as CDs and money markets.


What Is a Stock?

7

Main Features Part owner in the company Participate in company earnings Vote on important issues

Risks

Can lose significant value over short periods of time Market, industry, company- specific, currency, inflation

Rewards

Gain from increase in share price Income through dividends

Stocks


What Is a Bond?

8

Bonds

Main Features Loan to a government or company Receive interest payments, then principal when bond matures

Risks

Market, industry, company- specific, inflation, interest rate

Rewards

Consistent income1 Generally more stable than stocks Lower interest rates can increase current value of the bond

1Subject to the claims-paying ability of the issuer


What Is a Short-Term Investment?

9

Short-Term

Main Features Consists of money markets, CDs, T-bills, insurance contracts Short-term in nature, with maturities less than one year Considered liquid, or easy to get to in an emergency

Risks

Can lose purchasing power due to inflation

Rewards Consistent income through interest payments Stable value over time


Sub-Asset Classes

Stocks

Bonds

Short-Term

Size Type Location

Large-cap

Mid-cap

Small-cap

Growth

Value

Domestic

International

Issuer Duration Interest

Government

Corporation

Long

Medium

Short

Fixed

Variable

Instrument

Cash

Notes

Certificates

Issuer

Government

Corporations

Banks

Insurance co.


What Is a Fund?

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Imagine a shopping cart filled with groceries…

Owning Individual stocks and bonds is like owning individual food

items, while owning a fund is like owning the shopping cart that holds

them. 1. Professionally managed

2. Diversified

3. Lower cost than building diversified

portfolio from individual stocks


Fund Location Is Important

Employer-Sponsored 401(k)

Retail

No transaction fees when switching investments

No sales load to buy into the fund

Low expense ratios from institutional pricing

May have limited number of choices

Transaction fees can apply when buying and selling

Sales loads can also apply when buying or selling

Higher ongoing expense ratios than in 401(k) plans

May have many more options than in a 401(k)

Note: Using the self-directed brokerage window within your 401(k) may

expose you to some additional fees.


Asset Allocation • Diversification

• Historical Performance

• Asset Allocation In Practice

• Your Asset Allocation

• When to Change

• Rebalancing

• 401(k) Investment Options


The Risk/Return Trade-Off

Risk

Return

Short-Term

Bonds

Historically, stocks have returned higher than bonds, but at a much greater

risk, just as bonds have produced a greater return than short-term

investments, but also at a higher risk.

For illustrative purposes only. Graphic does not represent actual historical data.

Stocks


Diversification

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Risk

Return

Short-Term

Bonds

Stocks

Diversified

Portfolio


A diversified portfolio combines multiple asset classes. The goal is to

maximize returns for a given amount of risk.


Asset Class Historical Performance

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This table shows the range of returns for stocks, bonds, and cash for the 30-year period ending September 30, 2017. Source: ChartSource®, DST Systems, Inc. Based on 12-month periods for the 30 years ended September 30, 2017. Stocks are represented by Standard & Poor's Composite Index of 500 Stocks. Bonds are represented by the Barclays U.S. Aggregate Bond index. Cash equivalents are represented by a composite of the yields on 3-month Treasury bills, published by the Federal Reserve, and the Barclays 3-Month Treasury Bills index. It is not possible to invest directly in an index. Past performance is not a guarantee of future results. Copyright© 2017, DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.

–45% –35% –25% –15% –5% 5% 15% 25% 35% 45% 55%

Average: 6.5%

Average: 3.4%

Average: 11.6%

Annual Return

Range of Returns Over 30 Years

Stocks Bonds Short-Term


Asset Allocation in Practice

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

Oct

-97

Jun-

98

Feb

-99

Oct

-99

Jun-

00

Feb

-01

Oct

-01

Jun-

02

Feb

-03

Oct

-03

Jun-

04

Feb

-05

Oct

-05

Jun-

06

Feb

-07

Oct

-07

Jun-

08

Feb

-09

Oct

-09

Jun-

10

Feb

-11

Oct

-11

Jun-

12

Feb

-13

Oct

-13

Jun-

14

Feb

-15

Oct

-15

Jun-

16

Feb

-17

$3.75

$2.33

$2.96

$1.53

80% Stock/20% Bond

40% Stock/40% Bond/20% Cash

25% Stock /25% Bond/50% Cash

Inflation

Growth of $1 since October, 1997

Source: ChartSource®, DST Systems, Inc. Inflation is represented by the change in the Consumer Price index. The "80/20" portfolio is composed of 80% stocks (S&P 500 index) and 20% bonds

(Bloomberg Barclays U.S. Aggregate Bond index). The "40/40/20" portfolio is composed of 40% stocks (S&P 500 index), 40% bonds (Bloomberg Barclays U.S. Aggregate Bond index), and 20%

cash (a composite of yield on 3-Month Treasury Bills and the Bloomberg Barclays U.S. Treasury Bill 1-3 Month index). The "25/25/50" portfolio is composed of 25% stocks (S&P 500 index), 25%

bonds (Bloomberg Barclays U.S. Aggregate Bond index), and 50% cash (a composite of yield on 3-Month Treasury Bills and the Bloomberg Barclays U.S. Treasury Bill 1-3 Month index).


Your Asset Allocation

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Three primary factors to determine your asset allocation:

Investment

Objectives

Risk Tolerance Time Horizon


When to Change

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Consider reviewing your asset allocation after certain events to

make sure your strategy is still appropriate.

Change in goals

Change in risk tolerance

Change in time horizon

Change in other life circumstances


Rebalancing

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Rebalancing is the act of restoring your portfolio to its target mix

after market conditions have changed it.

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1. Target mix 2. Change from market

conditions • Stocks have grown to 50% • Bonds have decreased to 16% • Portfolio is significantly more

aggressive than intended

33 34 50

16

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3. Rebalance to target mix • Sold 17% of stock mix • Purchased additional 17% of bond

mix • Achieved target risk level

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33

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Stocks Bonds Cash


Target Retirement Funds

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Target Retirement Funds

Target Retirement Income

Target Retirement 2020









TIME Aggressive Conservative


Core Funds

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Fund Name Objective

Caterpillar Stock Fund Company Stock

International Equity Index Growth

International Equity Fund Growth

US Small/Mid Cap Equity Index Growth

US Small/Mid Cap Equity Growth

US Large Cap Equity Index Growth

US Large Cap Equity Growth

Bond Index Fund Income

Bond Fund Income

Stable Principal Fund Preservation

Money Market Fund Preservation

Aggressive

Conservative


Tools & Resources • Benefits Website

• Fund Fact Sheets

• Advisory Services

• Additional Resources

Advisory Services offered by Alight Financial Services LLC, a federally registered investment advisor.


Benefits Website

24


Fund Fact Sheets

25


Advisory Services—Overview

26

Advisory Services offered by Alight Financial Advisors LLC, a federally registered investment advisor.

Savings

Am I saving enough?

AFA helps with saving adequately for retirement.

Investments

Do I have the right investments?

AFA helps properly diversify and manage risk-appropriate portfolios.

Retirement Income

Will I have enough to retire?

AFA helps identify your income needs and sources.

Investing Savings Retirement

Income


Advisory Services—Online Advice

27



Advisory Services—Professional Management

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• Receive a personalized

retirement plan

• Plan put into action for you

• Personalize your profile

so AFA can create a

strategy tailored to help

you meet your goals

• Routine monitoring of

account monthly • Investment advisors

available by phone

• Stay informed with quarterly

updates • Will consider outside

accounts you tell us

about


Online Advice and Professional Management

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Online Advice: Professional-grade tools for hands-on investors

Build a retirement plan

Get ready for retirement

Check in quarterly to stay on track

Professional Management: Professionals manage and monitor your retirement savings account

Receive a retirement plan

Get ready for retirement and receive payouts

AFA helps keep you on track

Online Advice • No additional cost • Get saving and investing

advice • Build and execute your

own strategy • Receive support from

Investment Advisors

Professional

Management • Fee-based service • Personalized plan

created for you • Actions taken for you • Routine monitoring • Retirement check ups

with Investment Advisors


Additional Resources

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Financial

Education Center

Articles

Financial

Education Center

Calculators

Online Advice

Professional

Management

Target-Date Funds

Contributions Taxes Investments Distributions

Four primary areas participants need help, and where to get it



Contact Information

Alight Financial Advisors LLC is a federally registered investment advisor.

Alight Financial Advisors Representatives are available Monday–Friday,

8:00 a.m. – 8:00 p.m. CT

877-228-4010 and select “Investment advice”

[email protected]

Caterpillar Benefits Center Representatives are available Monday–Friday,

8:00 a.m.– 6:00 p.m. CT

877-228-4010

Caterpillar Benefits Center

http://resources.hewitt.com/cat

mailto:[email protected]

http://resources.hewitt.com/cat


Course Summary

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• The Risk/Return trade-off • Historical performance • Asset allocation in practice • Your asset allocation • When to change • Rebalancing • Investment options

• What is the stock market? • Three basic asset classes • What is a stock? • What is a bond? • What is a short-term investment? • Sub-asset classes • What is a fund?

• Benefits website • Fund fact sheets • Online Advice • Professional Management • Additional resources

Asset Allocation

Investment Basics

Tools and Resources



Questions

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