Transcript stock market investing

Investing in a Volatile Market
AFN45598
Agenda
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Today’s market environment
Is this time different?
Learning from the past
Gauging volatility
Investing strategies in a volatile market
Looking ahead
The Recent Exceptional Market
Environment
RMS External Wholesalers
Source: Standard & Poor’s; based on the closing price of the S&P 500 index from September 1, 2007, through December 31, 2012.
Behind the Bear
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Bursting real estate bubble
Subprime crisis
Institutional bankruptcies and bailouts
Economic slump
Growing risk aversion of banks
Changing consumer attitudes
Changing demographics
Is This Time Different?
Recent Bear*
1970’s Bear
1930’s Bear
Japan's
"Lost Decade"
57%
48%
86%
80%
17 months*
19 months
39 months
161 months
Annualized Real GDP
Growth
-0.70%
1.5%
-9.4%
1.5%
Recession/Depression
Duration
16 months*
16 months
43 months
Over 12 years
Drop in Market Value (peak
to trough)
Duration
Sources: Standard & Poor’s; Bureau of Economic Analysis; International Monetary Fund; Economic Planning Agency (Japan); National Bureau of
Economic Research. GDP data is based on quarterly data for the most recent bear market and the 1970’s bear market; it is based on annual data
otherwise. Periods of economic contraction do not exactly coincide with bear markets.
Learning From the Past:
Bear Markets Since 1950
Source: Standard & Poor’s. For the period from January 1, 1950, through December 31, 2012. Stocks are represented by the daily closing price of
the Standard & Poor's 500. Past performance is not a guarantee of future results. (CS000144)
Learning From the Past:
Stock Markets and Economic Contractions
Source: Standard & Poor’s. For the period from January 1, 1950, through December 31, 2012. U.S. stocks are represented by Standard & Poor’s
Composite Index of 500 Stocks, an unmanaged index that is generally considered representative of the U.S. stock market. Economic contractions are as
defined by the National Bureau for Economic Research. (CS000228)
Learning From the Past: Conclusions
• Economic cycles don’t tell the whole story
• Every bear is unique
• Fundamental investing concepts and
strategies still apply
Gauging Volatility: Standard Deviation
S&P 500 Standard Deviation — 1959-2012
Source: Standard & Poor's. Represents the annualized monthly standard deviation of the total returns of the S&P 500 index for rolling 10-year periods
from January 1959 to December 2012. Past performance is not a guarantee of future results.
Gauging Volatility: VIX
Source: Chicago Board Options Exchange. For the period from January 1990 to December 2012.
Five Investing Strategies for a Volatile
Market
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Don’t panic
Take advantage of asset allocation
Diversify by sector, size, and style
Keep a long-term perspective
Consider buying opportunities
Don’t Panic
Source: Standard & Poor’s. This chart shows how a $10,000 investment would have been affected by missing the market's top-performing days over the 20-year period ended December 31,
2012. Stocks are represented by Standard & Poor’s Composite Index of 500 Stocks, an unmanaged index that is generally considered representative of the U.S. stock market. Past performance
is not a guarantee of future results. (CS000076)
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Take Advantage of Asset Allocation
All Stock Portfolio
60% Stock Portfolio
40% Stock Portfolio
Cash
10%
Stocks
100%
Stocks
60%
Bonds
30%
Cash
20%
Stocks
40%
Bonds
40%
Total
Return
Risk*
Total
Return
Risk*
Total
Return
Risk*
1-year
16.0%
10.08%
10.86%
6.11%
8.08%
3.97%
5-year
1.66%
19.04%
3.28%
11.57%
3.59%
7.87%
10-year
7.10%
14.77%
6.28%
8.96%
5.55%
6.12%
20-year
8.22%
15.12%
7.46%
9.19%
6.77%
6.30%
*Annualized monthly standard deviation. Sources: Standard & Poor’s, Barclays Capital. For the periods ended December 31, 2012. Stocks represented by
the S&P 500 index. Bonds represented by the Barclays U.S. Aggregate Bond index. Cash represented by the Barclays 3-Month Treasury-Bills index. Past
performance is not a guarantee of future performance.
Diversify by Sector, Size, and Style
Sector outperformance varies with the economic cycle
Source: Standard & Poor’s. Sector performance represented by the performance of the 10 GICS sectors within Standard & Poor's Composite Index of 500 Stocks. Past performance is not a
guarantee of future results. (CS000172)
Keep a Long-Term Perspective
The longer the holding period, the lower the variability in returns
Source: Standard & Poor’s. For all indicated holding periods between January 1, 1926, and December 31, 2012. Domestic stocks are represented by
the total returns of Standard & Poor's Composite Index of 500 Stocks, an unmanaged index that is generally considered representative of the U.S.
stock market. Past performance is not a guarantee of future results. (CS000070)
Consider Buying Opportunities
Market Valuation Metrics in Selected Bull and Bear Markets
Price/Earnings Ratio
2000-02 bull market peak (2000)
30.0
2000-02 bear market bottom (2002)
25.9
2007 bull market peak (2007)
19.9
Average bull market peak since 1950
19.6
Average bear market bottom since 1950
16.9
Average all markets since 1950
17.8
Source: Standard & Poor’s. For the period from January 1, 1950, through December 31, 2012. Price/earnings ratios are based on 4-quarter trailing earnings. Average bull and bear market
peak and bottom ratios based on final month average in cycle.
Special Considerations for
Retirement Plan Assets
• Reallocate, don’t cut
• Never cut contributions below employer match
• If employer cuts match, contributing still
makes sense
Looking Ahead
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Economy still in a downturn
Housing slump continues
Administration and Congress are confronting the issues
Increased government oversight of financial markets
will come
• Other structural changes to markets and economy are
likely
= Market volatility is likely to remain a given
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Forward, Not Back
• Steps to recovery in process
• Upside greater than downside
• Using time-proven investing strategies is the
best way to deal with continued market
volatility
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Questions?
Investment options are offered through a group variable annuity contract (Forms 902-GAQC-09 or 902-GAQC-09(CT) or 902-GAQC09(OR)) underwritten by United of Omaha Life Insurance Company for contracts issued in all states except New York. United of Omaha
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responsibility for each of their respective contractual obligations under the contract but does not guarantee any contributions or investment
returns except as to the Guaranteed Account and the Lifetime Guaranteed Income Account as provided under the contract. Neither United
of Omaha Life Insurance Company, Companion Life Insurance Company, nor their representatives or affiliates offers investment advice in
connection with the contract.
Group variable annuities are long-term investment vehicles designed to accumulate money on a tax-deferred basis for retirement purposes.
Distributions may be subject to ordinary income tax and, if taken prior to age 59½, a 10 percent federal tax penalty may apply. Investing in
a group variable annuity involves risk, including possible loss of principal. Investors should consider the investment objectives, strategies,
risk factors, charges and expenses of the underlying portfolios carefully before investing. For additional information about the investment
options, contact your plan administrator or visit www.getretirementright.com. Plan sponsor directed withdrawals may be subject to a market
value adjustment charge.
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