stocks - edward jones · pdf filemd-3358h-a-sl ep 30 apr 2018 © 2016 edward d. jones...
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1MKD-3358I-A-SL EXP 30 APR 2020 © 2018 EDWARD D. JONES & CO, L.P. ALL RIGHTS RESERVED.
THE NUTS AND BOLTSStocks
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5 - ST E P P R O C E SS
®HOW CAN I STAY ON TRACK?
WHEREAM ITODAY?
WHEREWOULD ILIKE TO BE?
CANI GETTHERE?
HOWDO I GETTHERE?
MYFINANCIAL
NEEDS
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Stock Basics
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CO M M O N STO C K VS . P R E F E R R E D STO C K
Common Stock
Preferred Stock
Ownership stake in the company Yes Yes
Dividend payments
Dividend amount may fluctuate. Dividends can be suspended or
eliminated at any point without notice.
Dividend amount is fixed and is usually a percentage
of the stock’s par value. Dividends can be suspended or eliminated at any point
without notice.
Priority if the company goes bankrupt
Paid last in the event of bankruptcy or liquidation
Paid before common stockholders but after
creditors in the event of bankruptcy or liquidation
Voting rights One vote per share Few or no voting rights
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H OW STO C KS M A K E M O N E Y
• Capital gains
• Dividends - Dividend yield
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• Quality
• Diversification
• Long-term perspective
INVESTMENT STRATEGY
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Quality
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S E L E C T I N G STO C KS : T H E P R O C E SS M AT T E R S
Stock Selection Process
Country
Longevity
Risk
Size
Analysis
Filter Stocks
65,000
18,000
9,000
8,000
750
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Diversification
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I N V E ST M E N T PY R A M I D
Aggressive
Growth
Growth & Income
Income
Cash
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D I V E R S I F I C AT I O N BY I N D U ST RY
Communication ServicesTelecom & Cable
Consumer DiscretionaryConsumer Services, Home & Auto,Media, Retail & Apparel
Consumer StaplesFood & Beverages, Household &Personal, Staples Retail, Tobacco
EnergyExploration & Production, IntegratedEnergy, Refiners, Services & Drillers
Financial ServicesBanking, Capital Markets, ConsumerFinance, Insurance, Real EstateInvestment Trusts (REITs)
UtilitiesDiversified, Electric, Natural Gas, Water
TechnologyHardware, Semiconductors,Software & Services, Internet
Materials
IndustrialsAerospace & Defense,Infrastructure, Transportation
Health CareBiopharmaceuticals, Health CareServices, Medical Technology & Equipment
11%
3% 3%
10%
9%
17%15%
10%
3%
19%
Diversification does not guarantee a profit or protect against loss.
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D I V E R S I F I C AT I O N BY S E C TO R
Sector Price Relative to the Market
Sens
itiv
ity
to E
cono
my
Mor
eLe
ss
MoreLess
Energy
Industrials
Technology
Financials
Discretionary
Materials
Health CareStaples
UtilitiesCommunications
OFFENSE
DEFENSE
Diversification does not guarantee a profit or protect against loss.
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DIVERSIFICATION BY COMPANY SIZE
• Large-cap: More than $10 billion
• Mid-cap: $2 billion to $10 billion
• Small-cap: Less than $2 billion
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D I V E R S I F I C AT I O N E XA M P L E
Technology stock declines
Consumer staples stock rises
Diversification does not guarantee a profit or protect against loss.
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D I V E R S I F I C AT I O N E XA M P L E
Stock D outperforming the rest
StockA
StockB
StockC
StockD
StockE
StockF
Diversification does not guarantee a profit or protect against loss.
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D I V E R S I F I C AT I O N E XA M P L E
StockA
StockB
StockC
StockD
StockE
StockF
Solutions• Add funds
• Rebalance portfolioRebalance
Add Funds
Diversification does not guarantee a profit or protect against loss.
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R I S I N G I N CO M E : CO M B AT I N G I N F L AT I O N
Source: Bureau of Labor Statistics; U.S. Department of Agriculture; Centers for Medicare & Medicaid Services; The Wall Street Journal
1982 2008 2033 (est.)
Monthly Groceries $142 $553 $1,947
Health Care (per capita) $1,386 $7,804 $38,661
New Car $9,865 $20,600 $40,733
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Long-term Perspective
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TIME IN THE MARKET IS BETTER THAN TIMING THE MARKET
Source: Ned Davis Research, Edward Jones calculations. 12/31/1979–12/31/2015. These calculations assume the best days, as defined as the top percentage gains for the S&P 500, including dividends, for the time period designated. These calculations do not include any commissions or transaction fees that an investor may have incurred. If these fees were included, it would have a negative impact on the return. The S&P 500 is an unmanaged index and is not available for direct investment. Past performance is not a guarantee of future results. Dividends can be increased, decreased or eliminated at any point without notice.
Copyright © 2016 Ned Davis Research, Inc. All rights reserved. Further distribution prohibited without prior permission.
Invested entire period
Missed 10 best days
Missed 20 best days
Missed 30 best days
Missed 40 best days
Missed 50 best days
Value of a $10,000 investment in the S&P 500 (Dec. 1979–Dec. 2015)
Val
ue
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
$490,538
11.4%Average Annual Return
$237,111
9.2%$144,993
7.7% $93,8446.4% $63,216
5.3%$43,380
4.2%
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• 5-step Process
• Systematic Investing
DISCIPLINED APPROACH
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SYST E M AT I C I N V E ST I N G / D O L L A R CO ST AV E R AG I N G
Systematically Investing vs. Lump-sum Investment
Lump Sum – $5,000
02468
1012141618
202224
$26
Jan Apr May Jun Jul Aug Sep Dec
Shar
e P
rice
Average Price: $20/share
Total Purchased: 250 Shares
NovMarFeb Oct
Dollar Cost Averaging – $417/Month
02468
1012141618
202224
$26
Jan Apr May Jun Jul Aug Sep Dec
Shar
e P
rice
26 28
35 32
26 28
2119
24
1921
Number of Shares Purchased
Average Price: $17/share
Total Purchased: 300 Shares
21
NovMarFeb Oct
Source: Edward Jones. These charts are for illustrative purposes only and are not intended to represent the performance of any security. These illustrations do not include commissions or fees. Past performance does not guarantee future results.
Equity investments will fluctuate in value and, when sold, may be worth more or less than the original investment.
Systematic investing does not guarantee a profit or protect against loss. Such a strategy involves continual investment in securities regardless of fluctuating price levels of such securities. You should consider your financial ability to continue the purchases through periods of low price levels.
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• Mutual Funds
• ETFs
• UITs
OTHER WAYS TO OWN STOCK
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PAS S I V E VS . AC T I V E : B E N E F I TS A N D T R A D E - O F F S
Passive Active
Benefits
• Likely to perform close to index
• Generally lower fees
• Typically more tax efficient
• Opportunity to outperform index
• Potential for limiting the downside
• Buy/sell decisions based on research
Trade-offs
• Unlikely to outperform index
• Participate in all of index downside
• Buy/sell decisions based on index, not research
• Potential to underperform index
• Generally higher fees
• Typically less tax efficient
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• Stock basics• How to make money with stocks - Dividends - Capital gains
• Principles of Stock Investing - Quality - Diversification - Long-term perspective
RECAP
Diversification does not guarantee a profit or protect against loss.
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&AnswersQuestions
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PLEASE COMPLETE YOUR EVALUATION NOW
Thank You
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I M P O R TA N T CO N S I D E R AT I O N S
The contents of this presentation are for informational purposes only. While the information is believed to be accurate, it is not guaranteed and is subject to change without notice.