Securities offered through Triad Advisors. Member FINRA/SIPC The Helmstar Group is independently owned and operated.

Transcription

1 BUILDING A SUCCESSFUL INVESTMENT MANAGEMENT TEAM: The Baseball Analogy Securities offered through Triad Advisors. Member FINRA/SIPC The Helmstar Group is independently owned and operated. 1

2 The Stock Market Can Be a Roller-Coaster Ride: Be Careful When You Get Off! Over the short-term, stocks are volatile and difficult to predict Market response to concern about subprime mortgages and other recessionary concerns: Investor panic that the economy would collapse Dow drops by 416 points on February 27 Biggest one-day fall since the 9/11 attacks Dow then reaches a record high of 13,633 on May 30 Breaks record 4 more times, reaching 14,164 on October 9 4 th Quarter pullback stretches into 2008 Dow closes at 12,099 on January 18 (down 8.8% in 2008) Dow opens 400 points down at the opening bell on January 22 Federal funds rate cut by three quarters of a percentage point Resist market panic, and evaluate buy/sell decisions with your Advisor 7

3 If a Recession is Underway, It Would Keep the Market in Retreat But It Could Also Lead to an Investment Opportunity Based on the 10 post-war recessions, we see that the markets could recover relatively quickly and investors could miss the rebound with market timing. The 10 post-war recessions have lasted a median of 10 months Average Performance Before, During & After recession 20% 15% 14.4% Average & Median Performance from S&P500 Low During Recession (i.e. Rebound) 40% 35% 10% 5% 0% 3.2% 30% 25% 20% 15% 10% -5% -10% -4.3% Year Leading to Recession -4.8% Six Months After Recession Begins Year After Recession Begins Year After Recession Ends Source: Ned Davis Research; S& P 500 Index returns based 10 post-war recessions, Recession Could Lead to Table Pounding Buy, January 14, % 0% 3 Months 6 Months 9 Months 12 Months Average Median 8

4 The Stock Market Delivers Over the Long-term From 1966 through 2005, the S&P 500 has returned an average of 10.53% However, the returns received each year varied greatly, from 26% to +37% Source: Ibbotson Associates, SEI S&P 500 Annual Returns ( ) 0 Below -20% -20% to -10% -10% to 0 0 to +10% +10% to +20% Over +20% The indices illustrated herein are unmanaged indices. You cannot invest directly in an index. Index returns do not reflect the impact of any management fees, transactions costs, or expenses. The information seen is for illustrative purposes only and are not reflective of the performance of any SEI funds. Past performance is no guarantee of future results. 9

5 Market Timing: Moving In and Out of Cash During Volatile Times Can Be Costly Investment Period Average Annual Total Return Fully Invested (2,519 days) 5.89% Minus 10 Best Days 1.91% Minus 20 Best Days -0.82% Minus 30 Best Days -3.23% Minus 40 Best Days -5.25% Treasuries* 2.65% Source: S & P 500 Index: 01/01/98 to12/31/07 * Lehman US Short Treasury Bills 10

6 Building Your Investment Management Team MEET YOUR TEAM Our investment approach strives to bring great CAPABILITY to each important decision in the investment process. 2

7 The Baseball Analogy to Building an Investment Team Management Team Investor Owner Your Advisor General Manager Portfolio Strategist Coach Investment Managers Players 3

8 Investment Advisor vs. General Manager Advisor General Manager Assemble the team - Bring together and organize the right resources. Analyze your current financial situation and help you determine your Risk/Return Profile Prepare a written Investment Policy Statement Determine which Portfolio Strategist is appropriate for your individual circumstances Assemble the team - Bring together and organize the right resources. Analyze the team s current financial situation and help determine which direction is the most profitable. Hire a Coach that will managing a winning team consistent with the owners philosophy. 4

9 Investment Advisor vs. General Manager Advisor General Manager Interact and communicate with you on an ongoing basis Deliver Quarterly Performance Reviews Monitor performance relative to your goals and objectives Suggest changes to your investment strategy when and if your financial circumstances change Interact and communicate with the owner on an ongoing basis Monitor performance of the team and its profitability relative to the owners goals and objectives Suggest changes in coaching staff when and if the circumstances warrant. 5

10 Portfolio Strategist vs. Coach Portfolio Strategist Coach Select asset classes Determine target asset mix Analyze investment managers for style and performance Select and monitor investment managers Reallocate and rebalance Portfolios Determine the best strategy to win each game. (i.e. playing style, positioning of players, etc.) Analyze which players would be best for each position. Monitor the players performance and replace when necessary. Adjust players to best defend the opponent. (i.e. bringing the infield in on a bunt) 6

11 Investment Managers vs. Players Investment Managers Players Analyze and identify specific investments based on their area of expertise Maintain a disciplined investment process and consistent investment style Provide competitive performance relative to peer group or asset class benchmark Analyze each situation and make the most appropriate play based on their area expertise. Constantly train and push themselves to be competitive at their assigned position. Provide competitive performance relative to other choices for the same position 7

12 Asset Allocation vs. Defending a Batter Cash Real Estate Bonds Stocks Asset allocation is the process of allocating investment funds to specific asset classes so that expected return is maximized for a given level of risk. Positioning nine players so that they have the best chance of fielding any hit. 8

13 Bunt 9

14 Left-Handed Hitter 10

15 U.S. Bonds International Stocks Large Value Large Blend Large Growth Market Mid Value Mid Blend Mid Growth Turmoil International Bonds Small Value Small Blend Small Growth 11

16 International Stocks International Bonds Large Growth Devaluation of Large Blend Mid Growth Mid Blend Small Growth Dollar Large Value Mid Value Small Blend Small Value 12 U.S. Bonds

17 International Bonds International Stocks 13 Large Growth Typical Large Blend Mid Growth Mid Blend Small Growth Investor Mid Value Small Blend Small Value Large Value U.S. Bonds

18 Importance Of Asset Allocation According to a respected academic study, asset allocation is responsible for over 90% of variations in portfolio performance. 91.5% Asset Allocation 4.6% Securities Selection 1.8% Timing 2.1% Other Factors Brinson, Hood & Beebower, Financial Analysts Journal, 1986 Brinson, Singer & Beebower, Financial Analysts Journal,