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The Planning Center and IEEE

The Planning Center and IEEE. Preparing for Retirement in Days of Uncertainty. Purpose of Today. To Introduce To Inform To Educate. Introduce. Introduce Personnel. The Planning Center. Introducing The Planning Center. Financial Planning Firm Registered Investment Advisor

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The Planning Center and IEEE

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  1. The Planning Center andIEEE Preparing for Retirement in Days of Uncertainty

  2. Purpose of Today • To Introduce • To Inform • To Educate

  3. Introduce

  4. Introduce Personnel • The Planning Center

  5. Introducing The Planning Center • Financial Planning Firm • Registered Investment Advisor • NASD licensed with a Broker / Dealer • Purveyor of Order and Value

  6. What is Financial Planning? • Process for meeting life’s goals • Consists of six steps • Establishing and defining relationship • Gathering client data, including goals • Analyzing and evaluating financial status • Developing recommendations • Implementing the desired recommendations • Monitoring

  7. What is a Financial Planner? A Big Question!!!

  8. .

  9. Why Certified Financial Planner? • Education • Examination • Experience • Code of Ethics • Practice Standards • Re-Certified every two years

  10. Educate How do markets work?

  11. Educate 4 years of the DJIA 4/22/1999 – 4/22/2003

  12. Educate

  13. Educate

  14. Educate

  15. Educate

  16. Educate • S&P 500 Index • Return in 1962 -8.7% • Return 1962 to 1972 8.1% • Return 1962 to 1974 3.1% • Return 1962 to 1984 8.0% • Return 1962 to 1992 10.7% • Return 1962 to 1999 12.2% • Return 1999 to 2002 -16.09% • Return 1982 to 2002 11.98%

  17. Educate

  18. Educate

  19. Educate

  20. Large Cap Stock Market Returns 1926 - 1999 1999 1997 1993 1988 1996 1991 1977 1992 1986 1983 1989 1969 1987 1979 1982 1985 1962 1990 1984 1971 1972 1976 1980 1981 1973 1946 1978 1968 1964 1967 1955 1995 1966 1940 1953 1994 1956 1965 1952 1963 1998 1950 1975 1957 1932 1939 1970 1948 1959 1949 1951 1961 1938 1945 1958 1954 1931 1937 1974 1930 1941 1929 1934 1960 1947 1926 1944 1942 1943 1936 1927 1928 1935 1933 -60 -55 -50 -45 -40 -35 -30 -25 -20 -15 -10 -5 0 5 10 15 20 25 30 35 40 45 50 55 60 -27.0 Two Standard Deviations -6.9 One Standard Deviation 13.3 (Mean) 33.4 One Standard Deviation 53.6 Two Standard Deviations

  21. Educate

  22. U.S. Inflation Returns 1926 - 1999 1999 1996 1995 1994 1993 1992 1998 1991 1997 1985 1986 1984 1965 1983 1982 1964 1963 1972 1962 1971 1961 1967 1960 1966 1959 1957 1958 1956 1989 1955 1948 1988 1953 1945 1987 1981 1954 1952 1944 1976 1978 1949 1940 1943 1970 1990 1973 1939 1936 1937 1968 1977 1947 1980 1938 1933 1928 1935 1951 1975 1942 1979 1932 1931 1930 1926 1934 1950 1969 1941 1974 1946 1929 1927 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24 -5.7 Two Standard Deviations -1.3 One Standard Deviation 7.6 One Standard Deviation 12.1 Two Standard Deviations 3.2 (Mean)

  23. Investing in Stocks

  24. Stock Market Performance Small Company Stocks $6,641 12.6% 1925 - 1999 Ending Wealth Average Return $10,000 Large Company Stocks $2,846 11.3% $1,000 $100 $10 $1 $0 1925 1935 1945 1955 1965 1975 1985 1999 Hypothetical value of $1 invested at year-end 1925. Assumes reinvestment of income and no transaction costs or taxes.

  25. Small Value $19,764 14.7% Small Growth $749 9.6% Growth and Value Investing 1927 - 1999 EndingWealth AnnualReturn $100,000 Large Value Large Growth $10,000 $5,379 12.7% $1,189 10.3% $1,000 $100 $10 $1 $.1 1927 1937 1947 1957 1967 1977 1987 1999

  26. Company Risk Stock Diversification Market Risk Risk 1 2 4 6 8 16 30 50 100 1000 Number of Stocks in Portfolio

  27. Periods with Gain Periods with Loss 74 One-Year Periods 70 Five-Year Periods 60 Fifteen-Year Periods 10% 27% 100% 90% 73% Risk of Stock Market Loss over Time 1926 - 1999

  28. 6.6% Subsequent 3 years Do Stock Winners Repeat? Top Ten Performing Stocks 1980 - 1999 Average Returns 200% 130.9% First 3 years 150% 100% Annualized Return 50% 0% -50% 1980 1985 1990 1996 Annualized returns of equal-weighted portfolio of top 10 stocks by3-year return and return in subsequent 3-year period (excluding the smallest 20% of the market).

  29. Recovery Period Length Period Length Amount 7/32-1/455/47-10/493/57-7/571/58-7/587/62-4/6310/66-3/677/70-3/7110/74-6/763/78-7/788/82-10/8212/87-5/8911/90-2/919/98-11/98 151 months 30 months 5 months 7 months 10 months 6 months 9 months 21 months 5 months 3 months 18 months 4 months 3 months Market Downturns and Recovery 1926 - 1999 Downturn 34 months 9/29-6/326/46-4/478/56-2/578/57-12/571/62-6/622/66-9/6612/68-6/701/73-9/741/77-2/7812/80-7/829/87-11/876/90-10/907/98-8/98 -83.4%-21.0%-10.2% -15.0%-22.3%-15.6%-29.3%-42.6%-14.1%-16.9%-29.5%-14.7%-15.4% 11 months 7 months 5 months 6 months 8 months 19 months 21 months 14 months 20 months 3 months 5 months 2 months

  30. Principles of Investing

  31. Stocks without Reinvestment Bonds without Reinvestment $13,615 13.9% $1,345 1.5% Power of Reinvesting 1979 - 1999 Stocks with Reinvestment $100,000 EndingWealth AnnualReturn Bonds with Reinvestment $26,817 17.9% $10,000 $7,617 10.7% $1,000 $100 1979 1984 1989 1994 1999 Hypothetical value of $1,000 invested at year-end 1979.

  32. Stock Allocation Bond Allocation 78% 63% 60% 56% 44% 40% 37% 22% Importance of Rebalancing 1979 - 1999 Target Asset Mix: 50% Stocks, 50% Bonds 100% 80% 60% 50% 50% Portfolio Weightings 40% 20% 0% 1979 1984 1989 1994 1999 Assumes reinvestment of income and no transaction costs or taxes. Stocks: 50% Large and 50% Small Company Stocks. Bonds: Intermediate-Term Government Bonds.

  33. $17.07 S&P 500 minus best 40 months Dangers of Market Timing Hypothetical Value of $1 Invested from Year-End 1925 - 1999 $3,000 $2,846 $2,500 $2,000 $1,500 $1,000 $500 $15.64 $0 Treasury Bills S&P 500

  34. $6.81 S&P 500 minus best 15 months Dangers of Market Timing Hypothetical Value of $1 Invested from Year-End 1979 - 1999 $30 $26.82 $25 $20 $15 $10 $5 $3.79 $0 Treasury Bills S&P 500

  35. Year-End 1989-1999 $133,600 $40,000 Investor B 10 $4,000 Power of Compounding Hypothetical Investment in Stocks Year-End 1979-1999 Total Amount Invested Compounded Value at Year-End 1999 $295,400 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $20,000 $0 Investor A 10 $2,000 Years Contributing: Annual Amount Contributed:

  36. 5-Year Holding Periods 20-Year Holding Periods Compound Average Return 12.6% 5.1% 11.3% 3.8% Reduction of Risk over Time 1926 - 1999 1-Year Holding Periods 150% 125% 100% 75% 50% 25% 0% -25% -50% SmallCompany Stocks LargeCompanyStocks GovernmentBonds Treasury Bills -75% Each bar shows the range of compound annual returns for each asset class over the period 1926-1999.

  37. Educate

  38. 50/50 Portfolio $24,107 $912 Can You Stay on Track? $1,400 Stocks $100,000 Bonds $53,378 $1,200 $10,000 $9,413 $1,091 $1,000 $1,000 $800 $747 $600 $100 1971 1972 1973 1974 1974 1984 1994 1999

  39. OUR JOB To help you stay on track!

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