1. 610 Smithfield Street, Suite 400 w Pittsburgh, PA 15222
412.227.3200 w www.fragassoadvisors.com
Investment advice offered through Fragasso Financial Advisors, a registered investment advisor
3. After health,
the most common life
goal is retirement
security.
The median annual income for Americans age 65 and over*
Men
• $25,704
Women
• $15,072
Families
• $45,763
3
* With head of household 65+
* Source: A Profile of Older Americans, Administration on Aging and US Dept. of Health and Human
Services, 2011. Online at http://www.aoa.gov/AoAroot/Aging_Statistics/Profile/2011/9.aspx These
numbers are updated annually every July.
4. The average Social
Security benefit for
men in 2011:
• $1,381/ month
• $16,572 / year*
4
The average Social
Security benefit for
women in 2011:
•$1,072/ month
•$12,864/ year*
* Social Security Administration, Office of Policy, Fast Facts and Figures About
Social Security, 2012 These numbers are updated annually every July
5. 1. Determine
your life goals
2. Analyze your
current situation
3. Create a plan
to help you
reach your goals
4. Implement
the plan
5. Monitor &
adjust the plan
6. Continue to
educate yourself
Let’s talk about getting this process started…
5
7. 7
Withdraw Personal Assets First with a 7% Rate of Return
Prepared for Samuel and Barbara Sample
The Cash Flow report illustrates your income, savings, expenses, and resulting net cash flow on an annual basis.
Based upon the levels of income and spending in the Withdraw Personal Assets with a 7% Rate of Return, your portfolio assets will last
through at least 2045 (age 90/90).
Samuel's Retirement: 2020 (65)
Barbara's Retirement: 2020 (65)
First Death (Samuel): 2045 (90/90)
MONTHLY LIVING EXPENSES
Retirement: $100,000
After First Death: $60,000
Indexed at: 3.50%
Relevant Facts
Withdrawal of personal assets first allows for retirement assets to remain invested on a tax deferred basis .
FOR ILLUSTRATION PURPOSES ONLY. This data is not intended to represent actual or typical results for any individual and is
not based upon an actual investment allocation. Supporting documentation is provided when actual allocations are reviewed with
a client to support data within the graph. Past Performance is no guarantee of future results. The value of investments can
fluctuate over time, and loss of principal may occur.
8. “The great secret of success is that there are no secrets of success;
there are only timeless principles that have proven effective
throughout the centuries.”
Brian Tracy
1. Inflation
2. Taxes
3. Rate of Return
4. Risk
5. Time
6. Diversification
7. Balance
8. Asset Allocation
8
10. Medical care
Personal care
Housing
Aging parents
Golf
Travel
Grandchildren
College
Principle #1
Inflation
Our needs and interests do not become cheaper
as we get older...
Reality…
You will spend at least the same amount in retirement as
before - and many of those items are more inflation-
sensitive.
10
11. What do you notice about this historical timeline when
looking at every single year?
Past performance is no guarantee of future results. The S&P 500 is an unmanaged index which
can not be invested into directly.
Yearly Returns – 1926-2012
11
Principle #5
Time
-60
-40
-20
0
20
40
60
PercentReturn
Years
12. How does the portfolio mix impact overall performance
and risk?
Stocks are subject to market fluctuation. Sources: Standard & Poor’s and Barclay’s, NYSE & DFA.
Refer to disclosures in addendum. Past performance is no guarantee of future results. Indices
cannot be invested into directly.
1926 – 2012: Totals and Averages
12
40%S&P
40%Bonds
S&P
500
LT
Government
Bonds
Small
Stocks
50% S&P
50%Bonds
20%Small
Stocks
Average 9.9 5.7 11.4 8.4 9.3
Highest 54.0 40.4 142.9 34.1 50.1
return
Lowest -43.3 -12.9 -58.0 -24.3 -19.9
return
Spread 97.3 53.3 200.9 58.4 70.0
High/Low
Principle #7
Balance
13. It’s Purpose
• Attempts to contain volatility risk
• Attempts to engineer a return in keeping with your investment
objective.
• Avoids over-concentration in investment sectors or industries
• Potentially dampens volatility by:
o Avoiding correlation of investments chosen
o Utilizing covariance among investments chosen
13
Principle # 8
Asset
Allocation
14. 23,000 All Funds
20,000 Funds open without
restrictions
9,000 No load funds
600 Large value funds
60 Outperforming their
peers
20 Outperforming their peers:
less than average risk
12 Outperforming their peers:
less than average expense
14
Numbers referenced are estimations and are subject to change. Illustration is intended only as an example of
options available when selecting investments.
15. Is your allocation diverse enough today?
Names and allocations used in this example are for illustrative purposes only and should not be construed
as an investment recommendation to any person. Prior to investing into any security, you should seek the
advice of your Financial Advisor.
15
17. How do you determine the right financial partner for you?
17
The investment advisory industry is fragmented.
There is no shortage of
financial advice…
• Traditional brokers
• Discount brokers
• Insurance agents
• Banks
• Accountants
• Independent
advisors
18. 1. Determine
your life goals
2. Analyze your
current situation
3. Create a plan
to help you
reach your goals
4. Implement the
plan
5. Monitor &
adjust the plan
6. Continue to
educate yourself
ACTION!
18
Make an appointment now for a complimentary
consultation to start or accelerate you along the
road toward your unique financial goals.
22. Past performance is no guarantee of future results. Indices are unmanaged and
cannot be invested into directly.
• Small Company Stocks are represented by the fifth capitalized quintile of stocks on
the NYSE for 1926-1981 and by performance of the Dimensional Fund Advisors (DFA)
Small Company Fund thereafter.
• Standard & Poor’s 500 is an unmanaged group of securities and is considered to be
representative of the stock market in general.
• Government Bonds are 20-year US Government Bonds.
• Stocks, unlike Government Bonds, are not backed by the full faith and credit of the
United States government. Furthermore, small company stocks may be subject to a
higher degree of market risk than large company stocks.
22
23. BII International Bonds-- Salomon Brothers’ non-dollar denominated world bond index stated in U.S. Dollar terms.
CG Corp. Bonds – General Composite of all Corporate Bond General funds in database. Seeks income by investing
in fixed income securities, primarily corporate bonds of various quality ratings.
SBI Salomon Broad Bond Index -- Salomon Brothers’ total rate of return index for U.S. Treasury and Agency
bonds, investment grade corporate bonds (BBB or higher), and mortgage pass-through securities.
SCS Salomon Cp. Bds. 1-3 Yrs -- Salomon Brothers’ index of 1 to 3 years Corporate Bonds.
STG Salomon Treas / Govt Bonds -- Salomon Brothers index of BBB or better Government and mortgage backed
bonds with an average maturity of 9 years.
WLG Wilshire Large Co Growth -- Wilshire Associates Large Company Growth style. This style invests in the top
750 companies of the Wilshire 2500 with a market capitalization down to $960 million. The companies selected
meet certain target criteria for sales growth, return on equity, and dividend payout.
WLV Wilshire Large Value -- Wilshire Associates Large Company Value style. This style invests in the top 750
companies of the Wilshire 2500 with a market capitalization down to $960 million. The companies selected meet
certain target criteria for price/earnings, price-to-book, and yield.
WMV Wilshire Mid-Cap Value -- Wilshire Associates Mid-Cap Value style. This style invests in companies with a
market capitalization between $1.7 billion and $400 million. The companies selected meet certain target criteria
for price/earnings, price-to-book, and yield. Companies are selected by the Wilshire Mid-Cap 750 universe.
WSG Wilshire Small Co Growth -- Wilshire Associates Small Company Growth style. This style invests in the last
1750 companies of the Wilshire 2500. The market capitalizations for this range is between $960 million and $100
million. The companies selected meet certain target criteria for sales growth, return on equity, and dividend
payout.
WSV Wilshire Small Value -- Wilshire Associates Small Company Value style. This style invests in the last 1750
companies of the Wilshire 2500 with a market capitalization between $960 million and $100 million. The
companies selected meet certain target criteria for price/earnings, price-to-book, and yield.
WF International -- Composite of all funds classified as Foreign Stock. Invests in equity securities of issuers located
outside of the United States, except under adverse circumstances. Composite of mutual funds investing in
companies domiciled primarily outside of the U.S.
WW Word Wide (Equity) --Composite Index. Invests primarily in equity securities of issuers located throughout
the world, maintaining a percentage of assets (normally 25% to 53%) in the United States.
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24. 24
Reports are based on information we have provided by the client, which is assumed to be
accurate and complete. The assumptions and projections in this plan are estimates and are
meant to be used solely for illustrative purposes and as a guideline. No guarantees can be
given about future performance and this illustration shall not be construed as offering such a
guarantee.
It should be recognized that the portfolio may invest in both passive and actively managed
accounts and securities, that the actual weightings of these investments can and will vary
and, as a result, actual returns and volatility characteristics can be higher or lower than those
presented above.
The plan does not offer legal or tax advice and should be reviewed by your legal and tax
advisor before any action is taken. The information is displayed using the investments,
probability range, holding periods and time frames selected by you. Indexes are not
available for investment and they are not indicated of any particular investment.
Each point on the Frontier represents the combination of investments selected by the client
that will, hypothetically, generate the highest rate of return for each level of risk (as
measured by the standard deviation). More conservative mixes are located in the lower left
portion of the curve, while more aggressive portfolios are found on the upper right portion
of the curve.
25. The performance displayed herein is hypothetical and was compiled after the end of the time period (Time Horizon)
advertised. Such results do not represent actual trading and may not reflect the impact that material economic and
market factors might have had on the advisor’s decision making if the advisor were actually managing your money.
No attempt has been made to predict how these investments will perform in the future. Rather, this study attempts
to compare the historical relationship between specific investments and/or general investment categories, with the
hope of improving year overall portfolio balance and diversification. As such, there is no specific claim or warranty
being implied regarding future performance. Thus, past performance cannot guarantee future results.
SPECIAL RISKS
International Investments: There may be specific risks associated with investing internationally such as changes in
currency rates, foreign taxation, differences in auditing and financial standards, and other risks which may be
associated with specific country investments.
High-Yield Bonds: There may be specific risks associated with investing in high-yield bonds related to credit
worthiness, limitations on marketability of the bonds, and the ability of the borrowers to repay the debt.
Concentration of Investments: There may be increased risk and volatility in concentrating investments in one
economic sector or geographical region.
INDEXES
Indexes are not available for investment and they are not indicative of any particular investment.
Certain terms were used in this study, the definitions for which follow:
1,2,3,4,&5 Year Return
The 1,2,3,4,&5 year returns represent the “average” return for all of those rolling time periods (January to January,
February to February and so on) in the time horizon specified. For example, during a 10-year time horizon there are
108 one-year holding periods and calculations.
25
26. STANDARD DEVIATION
Standard deviation is a measure of volatility, I.e. a relative measure of how frequently actual results
varied from the mean rate of return for a given historic time period. One standard deviation will
include 68.4% of all observations within the dispersed population of results. The wider the spread
of measurements within one standard deviation, the greater the variability of return. Therefore,
the greater the historic variability from the mean rate of return, the greater the risk associated with
the investment. The validity of correlating standard deviations among several asset classes will
depend upon using the same time period of measurement. In general, assuming the same time
period is used, the greater the standard deviation of one asset in relation to another, the more
volatile that has been in relation to the other.
MAXIMUM RETURN
The portfolio’s maximum return is calculated using the portfolio’s mean rate of return, standard
deviation and a statistical “probability multiplier”. The minimum return represents the lower
boundary of a specific frequency range of returns. It is important to bear in mind that the
“Minimum” and “Maximum” rates of return referred to in this report are relative figures based on
a range established by the selected Frequency Level. As such, they are figures derived from
statistical calculations and most likely, have not actually been experienced in reality. It should also
be understood that higher and lower returns might have actually been experienced outside of the
frequency range selected for this study. No guarantees can be given about future performance and
this value shall not be construed as offering such a guarantee. It should be recognized that the
portfolio may invest in both passive and actively managed accounts and securities, that the actual
weightings of these investments can and will vary and, as a result, actual returns and volatility
characteristics can be higher or lower than those presented in this report.
Maximum Return 18.0%
Mean Return 10.0% Range or return
Minimum Return 2.0%
Mean return + (std.)(probability multiplier)
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27. MINIMUM RETURN
The portfolio’s minimum return is calculated using the portfolio’s mean rate, standard deviation and a statistical
“probability multiplier”. The minimum return represents the lower boundary of a specified range of return. It is
important to bear in mind that the “minimum” and “maximum” rates of return referred to in this report are relative
figures based on a range established by the selected Frequency Level. As such, they are figures derived from statistical
calculations and most likely, have not actually been experienced in reality. It should also be understood that higher and
lower returns might have actually been experienced outside of the probability/range selected for this study. No
guarantee can be given about future performance and this value shall not be construed as offering such as guarantee. It
should be recognized that the portfolio may invest in both passive and actively managed accounts and securities, that the
actual weightings of these investments can and will vary and, as a result, actual returns and volatility characteristics can
be higher or lower than those presented in this report.
Maximum Return 18.0%
Mean Return 10.0%
Minimum Return 2.0%
Mean return - (std.)(probability multiplier)
PROBABILITY RANGE
The Probability Range expresses how often a certain range of return occurred during a given historical time period. It is
bounded by a minimum and maximum rate of return for that period. In any statistical sample 68.4% of all observations
will be included in one standard deviation from the mean; 95.4% within two standard deviations; and 99.7% within three
standard deviations. Therefore, at the 90% probability range 90% of all prior observations fell within the minimum and
maximum rates of return displayed for the designated holding period during the selected time horizon. Conversely, 5% of
the returns fell below and 5% fell above the minimum and maximum returns respectively. Therefore, it is important to
bear in mind that the maximum and minimum rates referred to within this study are not absolute and they only describe
the relative high and low range for the given probability range and holding period selected. Probability Ranges expressed
in the system represent the percentage of times the portfolio return fell within a range of historical rates of return over
the past period being examined. This does not, in any way, guarantee that any of the displayed returns or standard
deviations will actually be realized.
Probability Range = Mean + (std.)(probability multiplier)
Multiplier may be found in a standard statistical “t” table, the numbers for which are as follows for each probability level
displayed in the reports.
Probability Level Multiplier
80% 1.202
90% 1.645
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Hinweis der Redaktion
Ask the group the question in the blue box and take a few responses.
A key message to reinforce is following the right steps and taking action is critical to financial success. The cliché “it’s never too late” does not work here. Talking about it…reflecting on it…intending to do something about it sometime…hoping that you are making the right decisions but not being sure…will not lead you to financial success.
