HFM_volatile markets_for slide show

Slide1: 

Maintaining perspective in volatile markets

Importance of avoiding the emotional roller coaster: 

Importance of avoiding the emotional roller coaster GREED FEAR Apprehension Dejection Hope Cheer Enthusiasm Exhilaration Enthusiasm Confidence Confidence Panic

Global events can affect our emotions: 

Global events can affect our emotions Global terrorism on the rise Debt crisis lingers in the U.S. and Europe Afghan war now longest in U.S. history Middle East and North Africa remain volatile

Economic events – and headlines – can seem even worse: 

Economic events – and headlines – can seem even worse U.S. economy sees worst downturn since Great Depression S&P downgrades U.S. debt for the first time in history U.S. deficit seems out of control 4

Slide5: 

“The only thing we have to fear, is fear itself.” – Franklin Delano Roosevelt Source: Morey Engle, The Harry M. Rhoads Photograph Collection, Denver Public Library.

In the short term, markets can go in 3 directions: 

In the short term, markets can go in 3 directions Remain flat Move up Move down

Long term, the market trend has been up: 

Long term, the market trend has been up Historical growth of the S&P 500® Index, January 1980–July 2011. Initial investment of $10,000. Returns include the reinvestment of dividends and other earnings. This chart is for illustrative purposes only and does not represent actual or future performance of any investment program. All market indices are unmanaged. It is not possible to invest directly in an index. See end of presentation for index definitions.

Sudden events can disrupt the long-term view: 

$0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 12/80 12/82 12/84 12/86 12/88 12/90 12/92 12/94 12/96 12/98 12/00 12/02 12/04 12/06 12/08 12/10 7/11 Sudden events can disrupt the long-term view Historical growth of the S&P 500 Index, January 1980–July 2011. Initial investment of $10,000. Returns include the reinvestment of dividends and other earnings. This chart is for illustrative purposes only and does not represent actual or future performance of any HFM investment program. Past performance is no guarantee of future results. All market indices are unmanaged. It is not possible to invest directly in an index. See end of presentation for index definitions. 9/11 Global financial crisis Iraq War Dot-com bubble bursts World Trade Center bombing Iraq invades Kuwait Start of S&L crisis Black Monday

History is not repeating itself: 

History is not repeating itself The situation has markedly improved since 2008: Corporate balance sheets are stronger Corporate profits are robust Banks are better capitalized Interest rates are starting low and staying low Leading economic indicators are improving 9

How often does the market move by at least 10%?: 

Source: Ned Davis Research, 2/20/28–8/22/11. Bull and bear markets defined as -10/+10% reversals in the S&P 500 Index. Past performance is no guarantee of future results. All market indices are unmanaged. It is not possible to invest directly in an index. Index performance is not meant to represent that of any HFM investment program. See end of presentation for index definitions. How often does the market move by at least 10%? Average period of gain: 223 days Average frequency: once a year Average period of loss: 102 days 0% 50% 100% 150% 200% 250% -50% 34% Average loss Average gain

How often does the market move by at least 20%?: 

0% 50% 100% 150% 200% 250% -50% How often does the market move by at least 20%? Average period of gain: 885 days Average frequency: once every 3 ½ years Average period of loss: 299 days Source: Ned Davis Research, 2/20/28–8/22/11. Bull and bear markets defined as -20/+20% reversals in the S&P 500 Index. Past performance is no guarantee of future results. All market indices are unmanaged. It is not possible to invest directly in an index. Index performance is not meant to represent that of any HFM investment program. See end of presentation for index definitions. -36% Average loss Average gain

How often does the market move by at least 30%?: 

How often does the market move by at least 30%? Source: Ned Davis Research, 2/20/28–8/22/11. Bull and bear markets defined as -30/+30% reversals in the S&P 500 Index. Past performance is no guarantee of future results. All market indices are unmanaged. It is not possible to invest directly in an index. Index performance is not meant to represent that of any HFM investment program. See end of presentation for index definitions. Average period of gain: 1,887 days Average frequency: once every 6 years Average period of loss: 497 days Average loss Average gain 0% 50% 100% 150% 200% 250% -50% 247%

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Periods of gains are longer and stronger than periods of decline

Most recent rebound has been strong as well: 

Most recent rebound has been strong as well Cumulative returns from market bottom of recent recession Source: FMRCo, 3/9/09-12/31/10. U.S. stock market returns are represented by total return of Dow Jones Industrial Average, NASDAQ and S&P 500 Index. International stocks and emerging markets are represented by MSCI® EAFE® and MSCI Emerging Markets, respectively. Past performance is no guarantee of future results. All market indices are unmanaged. It is not possible to invest directly in an index. Index performance is not meant to represent that of any HFM investment program. See end of presentation for index definitions.

Trying to time the market can be costly: 

Trying to time the market can be costly Average annual returns for stocks for 30-year period ending 6/30/11 Source: FactSet, 6/30/81–6/30/11. Stock returns represented by total return of the S&P 500 Index. Past performance is no guarantee of future results. All market indices are unmanaged. It is not possible to invest directly in an index. Index performance is not meant to represent that of any HFM investment program. See end of presentation for index definitions. 6.4% 5.4% 3.7% 0% 2% 4% 6% 8% Missing 0 days By missing 5 best days By missing 10 best days By missing 20 best days 8.0%

Staying the course has been a solid strategy: 

Source: Morningstar EnCorr. Stocks are represented by the S&P 500 Index. Past performance is no guarantee of future results. All market indices are unmanaged. It is not possible to invest directly in an index. Index performance is not meant to represent that of any HFM investment program. See end of presentation for index definitions. Staying the course has been a solid strategy Stocks have rebounded within a year of decline -60% -40% -20% 0% 20% 40% 60% 1/73–9/74 1/77–2/78 12/80–7/82 9/87–11/87 6/90–10/90 7/98–8/98 4/00–9/02 11/07–3/09

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Investors who kept investing have seen more gains since 2008 Fidelity Workplace defined contribution data based on nearly 20,500 recordkept plans and more than 11.6 million recordkept participants as of June 30, 2011. Average account balance growth for continuous participants from 9/30/08 through 6/30/11. The analyses exclude tax-exempt accounts and nonqualified plans, but include participant and plan data from the Fidelity Advisor 401(k) Program. · Column 1: 25.8% represents 49,900 participants. Column 2: 51.2% represents 76,900 participants. Column 3: 63.8% represents 3.1 million participants. Past performance is no guarantee of future results. Average account balance growth for continuous investors Stopped investing and subsequently restarted Stopped investing and did not restart Did not stop investing 0% 20% 40% 60% 80% 25.8% 51.2%

Slide18: 

“The key to making money in the stock market is not to get scared out of it." – Peter Lynch

Market returns have been much more powerful than cash: 

Market returns have been much more powerful than cash Average annual returns: 1981–2010 Source: Morningstar EnCorr 2011. This chart represents the average annual return percentage for the investment categories shown for the 30-year period of 1981–2010. Returns include the reinvestment of dividends and other earnings. This chart is for illustrative purposes only and does not represent actual or implied performance of any investment option. Inflation, cash and equivalents, bonds, international stocks, and U.S. stocks are represented by the Consumer Price Index (CPI), Ibbotson U.S. 30-Day T-Bill Index, the Ibbotson U.S. Intermediate Government Bond Index, MSCI EAFE, and the S&P 500 Index, respectively. Past performance is no guarantee of future results. All market indices are unmanaged. It is not possible to invest directly in an index. See end of presentation for index definitions. Inflation Cash and equivalents Bonds International stocks 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 3.2% 8.5% 9.7% U.S. stocks 10.7% 12.0% 5.1%

Diversification is an effective investment approach: 

Diversification is an effective investment approach Source: FMRCo, 12/31/01–12/31/10. Diversification does not ensure a profit or guarantee against a loss. Bonds, high yield bonds, short-term investments, small-cap stocks, large-cap stocks, and international stocks are represented by the Barclays Capital U.S. Aggregate Bond Index, BofA Merrill Lynch U.S. High Yield Master II Index, Ibbotson U.S. 30-Day T-Bill Index, Russell 2000® Index, S&P 500 Index, and MSCI EAFE Index, respectively. Past performance is no guarantee of future results. All market indices are unmanaged. It is not possible to invest directly in an index. Index performance is not meant to represent that of any HFM investment program. See end of presentation for index definitions.

Slide21: 

What have we learned? Since 2008 the details have changed, but the conclusions remain the same. Tactical adjustments help reduce portfolio volatility. Moving entirely to cash has been costly, while staying in the market has paid off. 21

Slide22: 

Let’s have a conversation Review whether your financial picture has changed Discuss your attitude about risk and response to investment losses Analyze your portfolio’s ability to withstand market volatility Track your progress Maintain your confidence Learn about tactical changes by HFM

Maintain your confidence: 

Maintain your confidence GREED FEAR Apprehension Dejection Hope Cheer Enthusiasm Exhilaration Enthusiasm Confidence Confidence Panic Remember, the market is cyclical but long term trends have been positive

Contact us to discuss your personal situation: 

Contact us to discuss your personal situation 860-218-2645 www.hfmonline.com cdavis@hfmonline.com

Slide25: 

Index definitions Standard & Poor's 500 Index (S&P 500) is an unmanaged market capitalization-weighted index of 500 widely held U.S. stocks and includes reinvestment of dividends. Dow Jones Industrial Average (DJIA) is an unmanaged average of common stocks comprised of major industrial companies and assumes reinvestment of dividends. NASDAQ Composite Index is an unmanaged market capitalization-weighted index that is designed to represent the performance of the National Market System which includes stocks traded only over-the-counter and not on an exchange. MSCI EAFE (Europe, Australasia, Far East) Index is an unmanaged market capitalization-weighted index that is designed to represent the performance of developed stock markets outside the United States and Canada. MSCI Emerging Markets Index is an unmanaged market capitalization-weighted index of equity securities of companies domiciled in various countries. The index is designed to represent the performance of emerging stock markets throughout the world and excludes certain market segments unavailable to U.S. based investors. Consumer Price Index, (CPI) is a widely recognized measure of inflation, calculated by the U.S. government. Ibbotson U.S. 30-Day T-Bill Index is an unmanaged unweighted index which measures the performance of one-month maturity U.S. Treasury Bills. Each month a one-bill portfolio containing the shortest-term bill having not less than one month to maturity is constructed. To measure holding period returns for the one-bill portfolio, the bill is priced as of the last trading day of the previous month-end and as of the last trading day of the current month. Ibbotson U.S. Intermediate Government Bond Index is an unmanaged market value-weighted index of U.S. government fixed-rate debt issues with maturities between one and 10 years. Barclays Capital U.S. Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. Russell 2000 Index is an unmanaged market capitalization-weighted index of the stocks of the 2,000 smallest companies included in the 3,000 largest U.S.-domiciled companies. BofA Merrill Lynch U.S. High Yield Master II Index is an unmanaged index that tracks the performance of below investment grade U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market. Important information

Slide26: 

HFM Wealth Management would like to thank FMR LLC for its assistance in providing research and content for this presentation. FMR LLC does not endorse or recommend any Registered Investment Adviser to individual investors and HFM Wealth Management maintains no affiliation with FMR LLC or any of its related companies. Past performance is no guarantee of future results. All market indices are unmanaged. It is not possible to invest directly in an index. Index performance is not meant to represent that of any HFM investment program. Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. The securities of smaller, less well-known companies can be more volatile than those of larger companies. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets. In general the bond market is volatile, and fixed-income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed-income securities also carry inflation, credit, and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so holding them until maturity to avoid losses caused by price volatility is not possible. Lower-quality bonds can be more volatile and have greater risk of default than higher-quality bonds. Third-party trademarks and service marks are the property of their respective owners. All other trademarks and service marks are the property of FMR LLC or an affiliated company. Important information 1.908564.101 0911

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860-218-2645 www.hfmonline.com cdavis@hfmonline.com