Putnam Volatility

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Navigating your way through today’s volatile markets.

Text of Putnam Volatility

  • 1. Not FDIC May Lose No Bank Insured Value Guarantee EO077 275129 5/12 |1
  • 2. The stock markethas been choppyMonthly stock market returns (%) +10.93 +4.48 +4.32 +3.29 +2.96 +0.04 -0.22 +1.02 -1.13 -1.67 -2.03 -5.43 -7.03March March2011 2012Source: Standard & Poors. Stocks are represented by the S&P 500 Index, an unmanaged index of common stock performance.You cannot invest directly in an index. Past performance does not guarantee future results. EO077 275129 5/12 |2
  • 3. How to weather the storm Adjust your sails Dont abandon ship! Keep an even keel Keep your eyes on the horizonDiversification does not assure a profit or protect against loss. It is possible to losemoney in a diversified portfolio. EO077 275129 5/12 |3
  • 4. Adjust your sails EO077 275129 5/12 |4
  • 5. When stocks were choppy,bonds were often stableAnnual market results (%) 40 U.S. stocks 30 20 10 0-10-20 U.S. bonds-30-40 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Data is as of 12/31/11 and is historical. Past performance does not guarantee future results. Stocks are represented by the S&P 500 Index,which is an unmanaged index of common stock performance. Bonds are represented by the Barclays Capital Aggregate Bond Index, anunmanaged index of U.S. investment-grade fixed-income securities. It is not possible to invest directly in an index. EO077 275129 5/12 |5
  • 6. Dont abandon ship! EO077 275129 5/12 |6
  • 7. Cash yields are now near zeroCurrent yields as of 3/31/12 6-month T-bill 0.14% 6-month CD 0.50%Source: Federal Reserve, 2012. T-bills are represented by the 6-month Treasury bill (secondary market) rate quoted on an investment basis. CDsare represented by the 6-month Treasury bill (secondary market) rate quoted on a discount basis. Past performance is not indicative of future results.Unlike stocks or bonds, which incur more risk, certificates of deposit (CDs) offer a fixed rate of return, and the interest and principal on CDs willgenerally be insured by the FDIC up to $250,000. EO077 275129 5/12 |7
  • 8. And cash has barely kept pacewith inflation over time 9.8%Returns for asset classes19262011 6.8% 5.7% 3.6% 2.7% 0.6%Returnsafterinflation Cash Bonds StocksSource: Putnam Investments. Returns are annualized and assume a historical average inflation rate of 3%. Stocks are represented by the S&P 500Total Return Index. Bonds are represented by the Long-Term Government Bond Total Return Index. Cash is represented by the U.S. Treasury BillIndex. All indexes are unmanaged and measure common sectors of the stock and bond indexes. You cannot invest directly in an index. Pastperformance is not indicative of future results. EO077 275129 5/12 |8
  • 9. How long does it take torecover from a downturn?In an economic downturn with a 50% loss in themarket, it would take you 35years to recover yourinvestments if you earned 2% per yearIf you earned 10% per year, you would recoveryour investment in 7 yearsThis hypothetical illustration is based on mathematical principles and assumes monthly compounding. It is not meant as a forecast of future events oras a statement that prior markets may be duplicated. EO077 275129 5/12 |9
  • 10. Investors who shifted in andout of the market have suffered20-year annualized returns19872007Buy and hold20-year investment 11.8%in the S&P 500Average equityfund investor 4.5%holding various fundsfor just over 3 yearsSource: DALBAR, Quantitative Analysis of Investor Behavior, 2008. Study is based on data as of 12/31/07, which is the most recent dataavailable. The average equity fund investors portfolio is composed of 95% domestic equity and 5% domestic fixed-income holdings.Past performance does not guarantee future results. There are no guarantees that prior markets will be duplicated. The S&P 500 Index is anunmanaged index of common stock performance. It is not possible to invest directly in an index. EO077 275129 5/12 | 10
  • 11. Missing even a few of themarkets best days can hurtInvesting $10,000 in the Dow Jones Industrial Average15-year period, 12/31/9612/31/11If you stayed fullyinvested for 15 years 6.63%If you missed the markets10 best days 1.97%If you missed the markets20 best days -1.05%Data is historical. Past performance is not a guarantee of future results. The best time to invest assumes shares are bought when market prices are low.The Dow Jones Industrial Average is an unmanaged index of common stock performance. Indexes assume reinvestment of all distributions and do nothave a sales charge. It is not possible to invest directly in an index. The securities in the Putnam funds will differ from those in the index, and the fundsperformance will differ. EO077 275129 5/12 | 11
  • 12. Keep aneven keel EO077 275129 5/12 | 12
  • 13. Diversify to own moreof each years winnersChanges in market performance, 19912011 1991 1996 2001 2006 2011Highe