Investing in Equities. Find your path to smarter equity investing.

Transcription

1 Investing in Equities. Find your path to smarter equity investing.

2 Eagle Strategies LLC (Eagle) is an investment adviser registered with the Securities and Exchange Commission and is notice filed with appropriate state securities authorities. Registration with the SEC does not imply a certain level of skill or training. Eagle is an indirect wholly owned subsidiary of New York Life Insurance Company. Eagle is not a broker dealer or insruance company and does not offer insurance products or brokerage services. All investments involve risks including loss of principal. Securities of companies with smaller market capitalization tend to be more volatile and less liquid than large company stocks. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. Diversification does not guarantee profit or protect against loss in declining markets. No portion of this material should be construed as an offer or solicitation for the purchase or sale of any security. References to specific managers and strategies are for illustrative purposes only and are not intended to be, and should not be interpreted as a recommendation of said manager or strategy.

3 Table of Contents Importance of equity investing...02 Key benefits Why Eagle Strategies?...07 Additional information INVESTING IN EQUITIES 1

4 Importance of equity investing. Whether an investor is looking for long-term growth to maintain purchasing power or achieve a higher level of diversification, equities represent an important component of a well-diversified, balanced portfolio. Prudent investing in high quality companies as part of a diversified portfolio offers a greater opportunity for capital appreciation in the long-term. Asset Class Diversification. When investing in equities, it is important to review the different asset classes available and their distinguishing characteristics. Each asset class can provide different risk and return exposures. Some distinguishing company and asset class focuses are: MARKET CAPITALIZATION Market capitalization, commonly known as market cap, represents the size of a company as measured by the value of its outstanding shares. This value can be calculated by multiplying the stock price by the number of shares outstanding. The three main categories that represent market cap are large cap, mid cap, and small cap. GROWTH VS. VALUE Growth stocks are stocks in which the manager has a belief that they will experience faster than average growth. Value stocks are stocks where the manager has a belief that the stock is trading at a lower price relative to the stock s fundamental worth. COUNTRY EXPOSURE Domestic U.S., International Developed Markets, and International Emerging Markets portfolios contain stocks primarily specific to their respective country subset. Global portfolios hold stocks from companies across the globe including the U.S. SECTOR EXPOSURE The equity market is divided into different sector categories, which represent the industry of the respective companies. Some examples are the healthcare, energy, and technology sectors. Managers may overweight or underweight their portfolios to specific sectors, which can create divergence in performance between the portfolio and the respective benchmark. 2 INVESTING IN EQUITIES

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6 Key benefits. Equity strategies have historically had a low correlation to fixed income investments and can be an important diversification component of your portfolio. As a result, they may benefit your portfolio in the following ways: 01 Growth potential. Having exposure to equity securities can be an important growth contributor to a diversified portfolio. If you were to have 50% of your portfolio allocated to equities over the past 30 years, you could have generated over $50k of excess return over a fixed income only portfolio.¹ Dollar Cost Averaging (DCA) contributions into a portfolio over time may help to manage the volatility associated with the growth potential of equity investments. Past performance is no guarantee of future results. Growth of $10,000 Over 30 Years (4/1/1986-3/31/2016) $140,000 $120,000 $100,000 Ending Portfolio Value 50% Stock & 50% Bond $121, % Bond $67,824 Excess return generated by $53,421 the Stock/Bond Portfolio $80,000 $60,000 50% Stock & 50% Bond Portolio 100% Bond Portfolio $40,000 $20,000 $0 3/31/1986 3/31/1991 3/31/1996 3/31/2001 3/31/2006 3/31/2011 3/31/ Bond portfolio represented by Barclays U.S. Aggregate Bond Index. Stock portfolio represented by the Russell 1000 Index. Numbers based on initial investment of $10,000 on April 1, 1986, rebalanced quarterly until March 31, An index is a statistical measure that shows the changes in the economy or financial markets and serves as a benchmark against which economic and financial performance is measured. Indices are not available for direct investment; its performance does not reflect expenses associated with the management of an actual portfolio. For more information on the indices presented above, refer to the section entitled Additional information at the end of this document. 4 INVESTING IN EQUITIES

7 02 Purchase power preservation. Stocks have traditionally performed well when compared to other long-term financial assets and have typically outpaced inflation. If investors own only fixed income investments, it may become difficult to maintain the manner in which they have become accustomed to living due to the risk of inflation and outliving their assets. 2 Annualized Returns (4/1/2001-3/31/2016) 12.0% 10.0% 9.94% 8.0% 6.0% 6.59% 7.11% 4.0% % 2.0% 2.65% 0.0% Nominal Real.81% Stock Bond T-Bills Inflation 2. Source: Morningstar Direct 4/1/2001-3/31/2016. Stocks as measured by the Russell Bonds as measured by the Barclays U.S. Aggregate. T-Bills as measured by the Citi Treasury Bill 3 Mon USD. For more information on the indices presented above, refer to the section entitled Additional information at the end of this document. INVESTING IN EQUITIES 5

8 Key benefits. (continued) 03 Achieve a higher level of portfolio diversification. When equities are combined with a portfolio of fixed income investments, they may help investors achieve broader diversification and create more efficient portfolios¹ due to their low, or even negative, correlation with fixed income investments. Exposure to different and uncorrelated assets in a portfolio can result in enhanced diversification. Equities also diversify the liquidity of holdings in a portfolio when combined with fixed income securities, as the equity market tends to have higher trading volume and quicker execution. Diversification does not assure or protect against a loss in a declining market. Investing in Stocks with Low Correlation to Bonds May Enhance Portfolio Diversification Large Cap Mid Cap Small Cap International Barclay U.S. Aggregate Bond Low Diversification High Diversification HIGH ( ) MODERATELY HIGH (0.7-.9) MODERATE ( ) LOW ( ) NEGATIVE (<0.0) 1. Source: Morningstar Direct 4/1/2001-3/31/2016. This table shows the correlations of various equity investment strategies to bonds, as measured by several indices including the Russell Total Return, Barclays U.S. Aggregate, Russell 2000 Total Return, Russell Mid Cap Total Return, MSCI EAFE Net Return Measured on a scale of -1.0 to A correlation of +1.0 means investments move in perfect tandem with each other, whereas -1.0 means that one investment will move by an equal amount in the opposite direction from the other. Past performance is no guarantee of future results. An investment cannot be made directly into an index. For more information on the indices presented above, refer to the section entitled Additional information at the end of this document. 6 INVESTING IN EQUITIES

9 Why Eagle Strategies? Eagle Strategies offers a broad array of equity solutions for your investing goals. Our Financial Advisors have access to leading asset managers through our investment programs. We partner with non-proprietary managers that can stand up to our Investment Research and Due Diligence team s rigorous requirements. Before an asset manager is added to our program, it is thoroughly vetted and continuously monitored to ensure it meets our stringent investment criteria. Additionally, our team regularly evaluates our roster of managers to ensure we offer you the breadth and depth of managers necessary to help you meet your financial goals. Investors seeking to diversify and enhance a traditional portfolio may want to consider equity solutions as part of their core investment strategy. Our investment managers specialize in all areas of the equity market, including: large cap mid cap small cap international developed equities emerging markets equities global equities To learn more about the benefits of investing in equities, please contact your Financial Advisor. INVESTING IN EQUITIES 7

10 Additional information. Barclays U.S. Aggregate Bond Index is a broad-based index that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related, and corporate securities, mortgage-backed securities (MBS), asset-backed securities (ABS), and commercial mortgage-backed securities (CMBS). Citi Treasury 3 Month is an unmanaged index representing monthly return equivalents of yield averages of the last 3 month Treasury Bill issues. The instruments are not marked to market. For example, the U.S. 3-Month Treasury Bill Index is an average of the last three 3 month Treasury Bill month-end rates. MSCI EAFE Index is recognized as the pre-eminent benchmark in the United States to measure international equity performance. It comprises the MSCI country indexes that represent developed markets outside of North America: Europe, Australasia, and the Far East. Russell 1000 Total Return Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market. The Russell 1000 Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected. Russell 2000 Total Return Index measures the performance of the small-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately the 2,000 smallest companies in that index based on a combination of their market cap and current index membership. The Russell 2000 represents approximately 8% of the U.S. market. The Russell 2000 index is constructed to provide a comprehensive and unbiased barometer for the small-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected. Russell Mid Cap Total Return Index measures the performance of the mid-cap segment of the U.S. equity universe. It is a subset of both the Russell 1000 and Russell 3000 Indexes that includes approximately the smallest 800 companies from the Russell 1000 based on a combination of their market cap and current index membership. The Russell Mid Cap represents approximately 25% of the U.S. market. The Russell Mid Cap index is constructed to provide a comprehensive and unbiased barometer for the mid-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected. 8 INVESTING IN EQUITIES

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12 Eagle Strategies LLC (Eagle) is an investment adviser registered with the Securities and Exchange Commission and is notice filed with appropriate state securities authorities. Registration with the SEC does not imply a certain level of skill or training. Eagle is an indirect wholly owned subsidiary of New York Life Insurance Company. Eagle is not a broker-dealer or an insurance company and does not offer insurance products or brokerage services. Eagle Strategies LLC 51 Madison Avenue New York, NY ES.ThEq.3Q16 SMRU# (Exp: 8/31/2017)