Weatherproofing FINAL

Weatherproofing Your Portfolio

Agenda I. Buy & Hope Fallacy II. Benefits of Non-Stock Market Investments III. Focus On Income, Not Assets IV. The “Hidden Returns” of Cash

Agenda I. Buy & Hope Fallacy II. Benefits of Non-Stock Market Investments III. Focus On Income, Not Assets IV. The “Hidden Returns” of Cash

Will You Stick With It 8.6% 20-Year Annualized Returns (1999-2019) $100,000 @ 6.1% 6.1% 5.6% 5.4% $100,000 @ 2.5% 30 Years 3.4% 2.5% 2.2% 30 Years = = $590,828 5$.02%09,757 3.8% EGAoFldE SH&Pom5e0s0 A6v0e/r4a0ge In4f0la/6ti0on Bonds Investor Source: J.P. Morgan Asset Management; (Top) Barclays, Bloomberg, FactSet, Standard & Poor’s; (Bottom) Dalbar Inc. Average asset allocation investor return is based on an analysis by Dalbar Inc., which utilizes the net of aggregate mutual fund sales, redemptions and exchanges each month as a measure of investor behavior. Returns are annualized (and total return where applicable) and represent the 20-year period ending 12/31/19 to match Dalbar’s most recent analysis. Guide to the Markets – U.S. Data are as of April 21, 2020. Emotions Can Be Hazardous To Your Wealth

The Mathematical Catch-Up Game It is easier to make money when you don’t lose money.

Stress Test Your Portfolio

Agenda I. Buy & Hope Fallacy II. Benefits of Non-Stock Market Investments III. Focus On Income, Not Assets IV. The “Hidden Returns” of Cash

What apples can teach us about diversification

What Are Non-Stock Market Investments? Enhanced Equity Alternative Assets  Long / Short  Commodities  Market Neutral  Currency  Private Equity  Real Estate  Event Driven  Private Equity  Short Bias  Relative Value (Equity) Alternative Enhanced Fixed Income Assets  Long / Short  Absolute Return  Relative Value (Fixed Income) (Alternative (Alternative Strategies) Strategies) Traditional Equity Equities Fixed Traditional Fixed Income Income  Large Cap (Traditional  Treasuries  Mid Cap Strategies) (Traditional  Corporates  Small Cap Strategies)  High Yield  Value  MBS / ABS  Growth  Global / International  International  Emerging Markets

Benefits Of Alternative Strategies Have Investments That Go Up When Others Go Down Reduce Volatility By Owning Two Asset Classes With Low Correlation Individual Asset Classes With Negative Correlation Combined Asset Classes If everything in your portfolio goes up together, that means it will go down together!

Reduce Risk, Increase Returns

Agenda I. Buy & Hope Fallacy II. Benefits of Non-Stock Market Investments III. Focus On Income, Not Assets IV. The “Hidden Returns” of Cash

The Changed Landscape

When the Sequence of Returns Doesn’t Matter

When the Sequence of Returns Does Matter

Add Protection To Your Portfolio

Agenda I. Buy & Hope Fallacy II. Benefits of Non-Stock Market Investments III. Focus On Income, Not Assets IV. The “Hidden Returns” of Cash

Something to Think About Cash on Hand: • Those with cash can negotiate better deals • Having some cash on the sidelines allows you to be more growth oriented. • Allows you to be opportunistic in during times of turmoil • Bank balance = Greater Life Satisfaction (Ruberton, Gladston, and Lyubomirsky 2016 How Your Bank Balance Buys Happiness)

The Bucket Strategy

Goals-based wealth management Short-term goals Medium-term goals Long-term goals Includes emergency reserve 5-10 years, e.g. college, home 15+ years, e.g. retirement fund of total spending needs for 3-6 months DIVIDE AND CONQUER Cash & cash Equities Equities Aligning your investment equivalents Bonds Bonds strategy by goal can help you take different levels of risk based on varying time horizons and make sure you are saving enough to accomplish all of your goals – not just the ones that occur first. Investing Range of stock, bond and blended total returns Stocks Bonds 50/50 Annual total returns, 1950-2019 47% 43% 28% 21% 19% 16% 16% 17% 12% 14% 33% -1% 1% 2% 6% 1% 5% 23% -15% -8% –3% –2% 1% -39% 1 year 5-year 10-year 20-year rolling rolling rolling Source (top chart): J.P. Morgan Asset Management. Source (bottom chart): Barclays, Bloomberg, FactSet, Federal Reserve, Robert Shiller, Strategas/Ibbotson, J.P. Morgan Asset Management. Returns shown are based on calendar year returns from 1950 to 2019. Stocks represent the S&P 500 Shiller Composite and Bonds represent Strategas/Ibbotson for periods from 1950 to 2010 and Bloomberg Barclays Aggregate thereafter. Note: Portfolio allocations are hypothetical and are for illustrative purposes only. They were created to illustrate different risk/return profiles and are not meant to represent actual asset allocation.

Stick to Your Plan

Agenda I. Buy & Hope Fallacy II. Benefits of Non-Stock Market Investments III. Focus On Income, Not Assets IV. The “Hidden Returns” of Cash

Take Action, Today! What can you do today to take control and live a happier, more productive, less stressful life?