linked in
TRANSCRIPT
1
www.moneyconcepts.com
DecisionTime Starts With
PLANNING
DAN PYLE FINANCIAL
Money Concepts
DAN PYLE FINANCIAL
Money Concepts
www.moneyconcepts.com
2
Planning For An Enriched Retirement
1. Lifestyle 2. Financial Planning / Wealth Management 3. Insurance Needs4. Legal Affairs
5. Estate Issues
www.moneyconcepts.com
3
Self-Assessment
• Retirement Satisfaction Exercise
• What Do I Need To Make Me Feel Happy And Satisfied?
• What Do I Want My Life To Be Like?
• What Personal And Financial Resources Do I Have?
Lifestyle
www.moneyconcepts.com
4
What Is Your Vision For Retirement?
Lifestyle
• Homebodies
• Snowbirds
• Globetrotters
• Part-Timers“What Do I Want To Do With The Rest Of My Life?”
www.moneyconcepts.com
5
In A Recent Survey Conducted By Guardian Life Insurance, 80% Of Baby Boomers Expressed Concern About Having Adequate Retirement Income. Approximately Half Of Boomers, Meanwhile, Were Uncertain About How Much Money They Need To Retire.1
A Principal Financial Survey Found That Two-thirds Of Workers Older Than 55 Expect That Their Standard Of Living Will Decline Once They Enter Retirement.1
1 Retirement Services Roundtable, “The Next Generation: Strengthening Relationships with the Upcoming Generations of Retirees,” 2005
Decision Time
www.moneyconcepts.com
6
72% 28%
Agree Disagree
Americans Recognize The Need For Change…
Financial Risks Are Different In The Retirement Red Zone, Requiring ChangesTo Financial And Investment Strategies
… But May Not Understand Why Or How
How Critical Is It To Minimize Investment Losses In The Retirement Red Zone?
Very NotSomewhat
23% 30%47%
What Is The Greater Investment Risk In The Retirement Red Zone?
Too Aggressive:Upside potential,
risk of loss
Too Conservative:Protect against
losses, weak upside
potential50% 50%
Source: February, 2006 Retirement Red Zone Research Study Conducted by Prudential Financial
Decision Time
www.moneyconcepts.com
7
The Pitfalls You Must Avoid1. Outliving Your Assets
2. Understanding The Effects Of Inflation And Taxes
3. Not Knowing The Difference Between Compound Growth And Simple Interest
4. Taking Too Much Or To Little Risk
5. Lack Of Diversification And Asset Allocation
6. Reacting To Short Term Results In A Long Term Strategy
7. Failing To Plan For The UnexpectedLifestyle
www.moneyconcepts.com
8
62% 62% Have Annual Have Annual Incomes Under $25,000Incomes Under $25,000
9%9% Have Annual Have Annual Incomes Over $70,000Incomes Over $70,000
12% 12% Have Annual Have Annual Incomes Between Incomes Between
$40,000 and $70,000$40,000 and $70,000
17% 17% Have Annual Have Annual Incomes Between Incomes Between
$25,000 and $40,000$25,000 and $40,000
Retirement Statistics
Source: Social Security Administration, The Office of Policy, Income of the Population 55 or older 2002, table 3.1; released May 2004.
62%17%
12%
9%
www.moneyconcepts.com
9
Sources of Baby Boomers’ Retirement Income:
Beliefs vs. Reality
Belief Reality
Company Pensions 45% 20%
Social Security 26% 18%
Private Savings 22% 33%
Other 4% 2%
Work Earnings 3% 27%
Source: U.S. Department of Health and Human Services.
Source of Income
www.moneyconcepts.com
10
1980
1000
1981 897
1982 850
1983 823
1984 788
1985 759
1986 745
1987 718
1988 689
1989 655
1990 620
1991 594
1992 576
1993 559
1994 545
1995 529
1996 513
1997 502
1998 494
1999 483
2000 466
2001 453
2002 445
2003 434
2004 422
2005 406
25 Year Average Inflation Rate
3.15%
www.moneyconcepts.com
11
Common Stocks
ReturnsOne-YearHolding Period
1926-2007
-60
-40
-20
0
20
40
60
'26 '01
’26 ’65 ‘06
Source: Ibbotson & Associates And Morning Star
www.moneyconcepts.com
12
Reacting To Short Term Results In A Long Term Strategy
The Stock Market Fluctuates Dramatically
Over The Long Term The Results Are Positive
Time Is Your Ally When You Invest; While The Stock Market Has A 28.8% Chance Of Going Down In Any One Year, The Chance Of Losing Money Over 15 Years is 0*
*Past Performance Does Not Guarantee Future Results
www.moneyconcepts.com
13
Investments vs. Investor Performance1984 - 2002
12.2%10.8%
3.1% 2.6%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
S&P 500 Small Mid CapIndex
Inflation CPI-U Average EquityFund Investor
During The Biggest Bull Market In History, Equity Mutual Fund Investors Significantly Lagged The Market. Why?Why?
Source: Dalbar, Inc. Quantitative Analysis of Investor Behavior – 2003. Represents average annually compounded returns of equity indices vs. equity mutual fund investors; based on the length of time shareholders actually remain invested in a fund and the historic performance of the fund’s appropriate index. Returns are from the time period January 1984 to December 2002. Past performance if no guarantee of future results. Investors cannot invest directly in an index.
www.moneyconcepts.com
14Source: Gavin Quill. November 2001. “Investors Behaving Badly” Journal of Financial Planning. 2001 Data Period: 1990 – 1999. Flows calculated by Morningstar category
Mutual Fund – Performance Chasing
$91
$6
$-
$10$20
$30
$40$50
$60
$70
$80$90
$100
After Best Quarter After Worst Quarter
Net Flows Into All Mutual Funds
www.moneyconcepts.com
15
Don’t Allow Emotions To Dictate Decisions
Riding The Emotional Wave Of Investing
ConfidentTime To Invest
EuphoricInvest Everything Aggressively
DefeatedSell Everything
Confident
HopefulMaybe Things Are Turning Around (I’ll Wait And See)
NervousWhat’s Going On
The Very Ease Of Moving Investments From One To The Other Carries With It The Risk
Of Being Emotionally Whipsawed Into Selling At The Bottom And Buying At The Top
www.moneyconcepts.com
16
Common Stocks Returns
Twenty-YearHolding Periods
1926-2007
Risk ReducesOver Time
Source: Ibbotson & Associates And Thomson Financial
Investors Need To Overcome Short-Term Volatility To Obtain Long-Term Results!
1926 1930 1940 1950 1960 1970 1984 20060
2
4
6
8
10
12
14
16
18
20
www.moneyconcepts.com
17
Lack Of Diversification And Asset Allocation
100
10
1
# of # of StocksStocks
Risk Ratio
AdvantagesAdvantages
Mutual FundMutual Fund
124
1050
100
6.63.8 2.41.61.11.0
Diversification# Of Stocks Risk Ratio
www.moneyconcepts.com
18
MXXIX16.36%
MOPAX20.00%
PZFVX14.64%
SSAIX29.00%
TSVOX20.00%
MXXIX
MOPAX
PZFVX
SSAIX
TSVOX
Asset AllocationThree Major Benefits To An Investor
1. It Provides Management Discipline.
2. It Emphasizes The Development Of An Asset Allocation Policy.
3. When Followed Over Several Market Cycles, It May Deliver A Higher Return For The Risk Taken.
www.moneyconcepts.com
19
Efficient Frontier
Risk% – Standard Deviation
Re
turn
– %
Low Risk Low Return
Medium Risk Medium Return
High Risk High Return
A Portfolio Above This Curve Is Impossible
Optimal Portfolios Should Lie On This Curve Which Is The Efficient Frontier.
Portfolio’s That Lie Below The Curve Are Not Efficient, Because For The Same Risk One Could Achieve A Greater Return.
www.moneyconcepts.com
20
0%
10%
20%
30%
40%50%
60%
70%
80%
90%
1985 1999
Fixed Income Equities
Asset AllocationWithout RebalancingWithout Rebalancing
Without Periodic Rebalancing Your Asset Allocation Can Drift Substantially From Your
Targets Peak Equity Exposures Occur At Peaks In the Equity
Market, Increasing Your RiskData is from December 1985 to December 1999. Fixed Income is represented by the Lehman Brothers Aggregate Index. Equities are represented by the S&P 500 Index. The Starting portfolio of 50% fixed income and 50% equities is not rebalanced for the entire period shown.
50% 50%
77%
23%
Fixed IncomeEquities
1985 1999
www.moneyconcepts.com
21
11.49% 11.46%8.24%
10.34%
-12.60%
-27.30%-30.00%
-25.00%
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
Return Standard Deviation Worst Loss
Rebalanced
Not Rebalanced
Data is from January 1981 – March 2005. Portfolios consist of 12% International Stocks (MSCI EAFE), 10% small-mid capitalization stocks (Russell 2500), 28% Large-cap stocks (SP500) and 50% (Lehman Brothers Aggregate), Rebalanced portfolio is rebalanced quarterly. Source: MPI Style, LFA
Rebalancing Helps Reduce Risk1981 - 2005
www.moneyconcepts.com
22
If An Investment Product Offered:Guarantee Against Principal Loss, And/OrGuarantee Minimum Annual Return With Further Upside
Potential…
… How Would It Affect Your Investment Behaviors?
Source: February, 2006 Retirement Red Zone Research Study Conducted by Prudential Financial.All guarantees are based on the claims-paying ability of the issuing insurance company.
74%74%
72%72%
63%63%
• Stay In Stock Market Even If Short-Term Losses
• Choose More Aggressive Investments With Greater
Potential For Returns• Invest For Longer-Term
Horizon
Guarantees Help People Think Differentlyabout Risk
www.moneyconcepts.com
23
Early Market Decline Late Market Decline
Annual Return Account Balance Annual Return Account Balance
Starting account value $250,000 $250,000
Age 62 -17.6% $193,500 16.6% $279,000
Age 63 -12.8% $155,857 7.4% $286,771
Age 64 -3.5% $137,141 12.0% $307,922
Age 69 7.1% $108,440 11.3% $394,055
Age 70 16.9% $110,932 14.9% $416,444
Age 77 -3.2% $34,841 -3.2% $605,061
Age 79 14.9% $0 16.9% $690,067
Age 88 11.3% $0 7.1% $1,132,926
Age 89 12.0% $0 -3.5% $1,065,507
Age 90 7.4% $0 -12.8% $900,523
Age 91 16.6% $0 -17.6% $712,574
Average annual rate of return for 30-year period 7.0% 7.0%
The Effect of Market Returns on Portfolio Balances
Hypothetical Example*(5% Withdrawals Begin At Age 62)
Source: February, 2006 Retirement Red Zone Research Study Conducted by Prudential Financial.* This example does not represent the performance of any particular investment.
24
www.moneyconcepts.com
Money Concepts International. Inc.11440 N. Jog Road
Palm Beach Gardens, FL 33418
Tel:. 561.472.2000
www.moneyconcepts.com
All Securities Through Money Concepts Capital Corp. Member FINRA/SIPCMoney Concepts Advisory Service Is A Registered Investment Advisor With The SEC
All Non Securities And Non Advisory Products Through Money Concepts International, Inc.
Providers of Financial Services Since 1979