Investing Concepts - Private Briefing for clients of Mike Gegen Data - PowerPoint PPT Presentation

Investing Concepts - Private Briefing for clients of Mike Gegen Data Updated as of December 2014 W ealth Managem ent | Capital Markets – I nvestm ent Banking | Private Equity | Asset Managem ent Chicago Frankfurt London Milwaukee Shanghai w w w .rw baird.com

Corrections are Not Uncommon…Even in a Rising Market S&P 500 Annual Returns and Maximum I ntra-Year Losses As shown in this chart, even in years of strong gains the market can experience pronounced 50 temporary losses. It is important to remember that markets can be volatile and overreactions to losses (or gains) can be detrimental. 40 38 32 33 30 29 29 26 20 23 16 21 16 15 14 10 11 Gain/ Loss (% ) Full Calendar Year 5 5 2 Return 0 -1 -9 -12 -4 -10 -6 -6 -6 -7 -8 -8 -8 -9 -10 Largest Intra-Year -12 -14 -22 Loss -20 -16 -17 -18 -30 -26 -28 -37 -31 -40 -45 -50 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Standard and Poor’s, Baird analysis. The S&P 500, computed by the Standard & Poor's Corporation, is a well known gauge of stock market movements determined by the weighted capitalization of the 500 leading U.S. common stocks. Intra-year losses are calculated as the largest point-to-point loss in a given year, calculated on a weekly basis. Indices are unmanaged, and are not available for direct investment. Past performance is not a guarantee of future results. Robert W. Baird & Co.

Despite Setbacks the Market has Persevered Growth of $1,000 in the S&P 500 I ndex (Since 1927) $10,000,000 9/ 11 Attacks $1,000,000 S&L Dot-Com Financial & Crisis Bubble Credit Burst Crisis Operation Desert Storm $100,000 Black Vietnam War Monday ‘87 Oil Embargo $10,000 The Crash of ’29 The Great Depression Korean War $1,000 World War I I $100 Dec-27 Dec-29 Dec-31 Dec-33 Dec-35 Dec-37 Dec-39 Dec-41 Dec-43 Dec-45 Dec-47 Dec-49 Dec-51 Dec-53 Dec-55 Dec-57 Dec-59 Dec-61 Dec-63 Dec-65 Dec-67 Dec-69 Dec-71 Dec-73 Dec-75 Dec-77 Dec-79 Dec-81 Dec-83 Dec-85 Dec-87 Dec-89 Dec-91 Dec-93 Dec-95 Dec-97 Dec-99 Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Source: Standard and Poor’s, Ibbotson Associates, Baird Research. As of December 31, 2014. Past performance is not a guarantee of future results. Performance is calculated on a total return basis with dividend reinvestment. The S&P 500, computed by the Standard & Poor's Corporation, is a well known gauge of stock market movements determined by the weighted capitalization of the 500 leading U.S. common stocks. Indices are unmanaged and are not available for direct investment. Robert W. Baird & Co.

You Must be Present to Win How Missing Large Market Moves I mpacts Wealth Creation (Growth of $10,000) Attempting to time the market’s gains or losses is a $20,947 tricky proposition and can come at a great cost. This chart illustrates how missing even one month in the market can impact longer-term results. $18,883 While ongoing portfolio modifications can be beneficial, large and frequent allocation changes are often detrimental. $15,821 $12,639 $9,031 Fully Invested Miss Best 1 Month Miss Best 3 Months Miss Best 6 Months Miss Best 12 Months Source: Standard and Poor’s, Morningstar Direct, Baird Research. For the 10-year period ending 12/31/14 (total 120 months). Past performance is not a guarantee of future results. Performance is calculated on a total return basis with dividend reinvestment. The S&P 500, computed by the Standard & Poor's Corporation, is a well known gauge of stock market movements determined by the weighted capitalization of the 500 leading U.S. common stocks. Indices are unmanaged and are not available for direct investment. Past performance is not a guarantee of future results. Robert W. Baird & Co.

The Stock Market Rises More Often Than Falls S&P 500 I ndex Annual Returns (1926 – Present) % Posit ive Annual Ret urns 73% Average Posit ive Ret urn 22% % Negat ive Annual Ret urns 27% 21% 20% of years Average Negat ive Ret urn -14% of years Average Ret urn (all years) 12% 1927: + 37% 1926: + 12% 17% 1928: + 44% 1949: + 19% of years 1933: + 54% 15% 1952: + 18% 1935: + 48% 13% of years 1959: + 12% 1942: + 20% 1936: + 34% of years 1964: + 16% 1943: + 26% 1938: + 31% 1947: + 6% 1965: + 12% 1944: + 20% 1945: + 36% 1929: -8% 1948: + 6% 1968: + 11% 1951: + 24% 1950: + 32% 1932: -8% 1956: + 7% 1971: + 14% 1961: + 27% 1954: + 53% 1934: -1% 1960: + 1% 1972: + 19% 1963: + 23% 1955: + 32% 7% 1939: -0% 1970: + 4% 1979: + 18% 1967: + 24% 1958: + 43% of years 1946: -8% 1978: + 7% 1986: + 18% 1976: + 24% 1975: + 37% 1953: -1% 1984: + 6% 1988: + 17% 1982: + 21% 1980: + 32% 3% 3% 1940: -10% 1962: -9% 1987: + 5% 1993: + 10% 1983: + 23% 1985: + 32% of years of years 1941: -12% 1969: -9% 1992: + 8% 2004: + 11% 1996: + 23% 1989: + 31% 1957: -11% 1977: -7% 1994: + 1% 2006: + 16% 1998: + 29% 1991: + 31% 1931: -43% 1930: -25% 1966: -10% 1981: -5% 2005: + 5% 2010: + 15% 1999: + 21% 1995: + 37% 1937: -35% 1974: -26% 1973: -15% 1990: -3% 2007: + 5% 2012: + 16% 2003: + 29% 1997: + 33% 2008: -37% 2002: -22% 2001: -12% 2000: -9% 2011: + 2% 2014: + 14% 2009: + 26% 2013: + 32% -30% or more -20% t o -30% -10% t o -20% -10% t o 0% 0% t o + 10% + 10% t o + 20% + 20% t o + 30% + 30% or more Distribution of Annual Returns Source: Standard and Poor’s, Ibbotson Associates, Baird Research. Past performance is not a guarantee of future results. Performance is calculated on a total return basis with dividend reinvestment. The S&P 500, computed by the Standard & Poor's Corporation, is a well known gauge of stock market movements determined by the weighted capitalization of the 500 leading U.S. common stocks. Indices are unmanaged and are not available for direct investment. Robert W. Baird & Co.

Most Investors Underperform How the Average I nvestor Has Fared 10 9.2 Over the 20-year period ending December 2013, the average investor underperformed both the broad stock and bond markets. Investors also failed to keep pace with inflation. Poor investment 7.7 8 selection and knee-jerk reactions are key reasons 20-Year Annualized Ret urn (% ) for this underperformance. 6 5.0 4 2.8 2 0.7 0 Average Equity S&P 500 Index Avg. Bond Barclays Inflation (CPI) Investor Investor Aggregate Bond Index Source: Dalbar, Inc. “Quantitative Analysis of Investor Behavior, Advisor Edition.” April 2014. Average equity and bond investor returns are calculated using data from the Investment Company Institute for the 20-year period ending December 31, 2013. The “average” investor refers to the universe of all mutual fund investors whose actions and financial results are restated to represent a single investor. These returns are represented by a change in assets, excluding sales charges, fees, expenses and any other costs. While we believe this information to be accurate, no guarantees can be made to its authenticity or accuracy. Indices are unmanaged, and are not available for direct investment. Past performance is not a guarantee of future results Robert W. Baird & Co.