© 2010 American Funds Distributors, Inc.AI-99998 Figures are past results and are not predictive of...
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Transcript of © 2010 American Funds Distributors, Inc.AI-99998 Figures are past results and are not predictive of...
© 2010 American Funds Distributors, Inc. AI-99998
Figures are past results and are not predictive of results in future periods.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
© American Funds Distributors, Inc. AI-33380
The impact
of risk on retirement income
New thinking is required
© American Funds Distributors, Inc. AI-33381
… the tools that have been developed over the last 30 years … that are applicable to the savings side of the life cycle … are not applicable to the dis-savings side of the life cycle….
— Moshe Milevskyon William Sharpe’s researchInvestment NewsMay 9, 2005
© American Funds Distributors, Inc. AI-33382
Some assumptions don’t apply
Before retirement Cash flow not an issue
Known time horizon
Risk = standard deviation
Cash flow is critical
Unknown time horizon
Risk = loss of capital
During retirement
70
75
80
85
90
95
One spouselives to age…
Source: Milevsky and Abaimova, “Applied Risk Management During Retirement,” June 19, 2005, Society of Actuaries RP-2000 table.
Longevity risk
© American Funds Distributors, Inc. AI-33383
99.5%
97.2
90.6
75.9
50.3
22.1
Married couples, age 65
Probability
Market declines are inevitable
© American Funds Distributors, Inc. AI-33385
S&P 500 Index monthly returns, 1973–2009
Results reflect reinvestment of all distributions.
— 8 since ’73
– 25
– 20
– 15
– 10
– 5
0
5
10
15
20%
10/9/07 –3/9/09
7/17/98 –8/31/98
7/16/90 –10/11/90
8/25/87 –12/4/87
11/28/80 –8/12/82
9/21/76 –3/6/78
1/11/73 –10/3/74
3/24/00 –10/9/02
Market high to low
Avg. annualtotal return
– 55.2%– 19.1%– 19.2%– 32.8%– 20.2%– 13.5%– 44.8% – 47.4%
Declines can erode retirement income
© American Funds Distributors, Inc. AI-33386
10/9/07 3/9/09
$100,000
80,000
60,000
40,000
20,000
0
S&P 500 Index, hypothetical $100,000 initial investment, monthly withdrawals totaling 5% annually, 10/9/07 – 3/9/09
Withdrawals amount to 5% a year of the initial investment. Results reflect reinvestment of all distributions.
12.3%withdrawal rate
5%withdrawal rate
$40,738
Hypothetical $100,000 initial investments, monthly withdrawals totaling 5% annually, increasing 4% each year, 8/31/98 – 12/31/09Figures are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so you may lose money. For current information and month-end results, visit americanfunds.com. Fund results are for Class A shares and reflect deduction of the 3.50% sales charge applicable to a $100,000 investment.
© American Funds Distributors, Inc. AI-33387Withdrawals amount to 5% a year of the initial investment. Results reflect reinvestment of all distributions.
8/31/98Market low
3/24/00Market high
12/31/09Present
10/9/02Market low
10/9/07Market high
The value of professionally managed funds
0
50,000
100,000
150,000
200,000
$250,000
$181,809 WGI
$99,030 ICA
$78,843 WMIF
$67,429 S&P
$117,235 FI
$89,351 AMF
3/9/09Market low
Total withdrawals: $69,998
© American Funds Distributors, Inc. AI-33388
Sample portfolioAllocation and attributes, as of 12/31/09
10%NPF
20%WMIF
20%AMBAL
50%BFA
More than 280 stocks
More than 1,240 bonds
23 portfolio counselors with an average of 29 years of industry experience*
0.68% expense ratio†
*Data reflects industry experience for the portfolio counselors reported in each fund’s most recent prospectus. Counselor responsibilities may have changed since the date of the prospectus.†Expense ratio is a weighted average, based on each fund’s Class A expense ratio for the most recent fiscal year-end.
Taking income — 20 years
© American Funds Distributors, Inc. AI-33389
Hypothetical $100,000 initial investment, monthly withdrawals totaling 5% annually, increasing 4% each year, 1/1/90 – 12/31/09
*The Index blend consists of 20% S&P 500 Composite Index, 50% Barclays Capital U.S. Aggregate Index, 10% MSCI World Index and 20% blend of 65% S&P 500 Composite Index/35% Barclays Capital U.S. Aggregate Index. Withdrawals amount to 5% a year of the initial investment. Results reflect reinvestment of all distributions.
Figures are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share price and return will vary, so you may lose money. For more current information and month-end results, visit americanfunds.com. Fund results are for Class A shares and reflect deduction of the 3.50% sales charge applicable to a $100,000 investment.
Total withdrawn
$148,890
Index blend*
$153,666
AF portfolio
$170,998
American Funds investment resultsAverage annual total returns for periods ended 6/30/10
© American Funds Distributors, Inc. AI-91470
American Balanced Fund® 6.53% 0.16% 4.43% 0.67%American Mutual Fund® 7.67 – 0.38 3.66 0.67The Bond Fund of AmericaSM 8.70 2.38 4.83 0.65 Capital World Growth and Income FundSM 2.15 2.01 4.81 0.83Fundamental InvestorsSM 6.29 0.98 1.59 0.69 The Investment Company of America® 3.59 – 1.31 0.72 0.66New Perspective Fund® 6.85 2.90 1.84 0.85Washington Mutual Investors FundSM 6.62 – 2.32 1.88 0.70
Expense1 year 5 years 10 years ratio
Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share price and return will vary, so investors may lose money. For more current information and month-end results, visit americanfunds.com. Fund results are for Class A shares and reflect deduction of the maximum sales charge (5.75% for equity funds, 3.75% for fixed-income funds).
Results are based on an initial $1,000 investment at the beginning of the stated periods. The maximum sales charge for fixed-income funds was 4.75% prior to 1/10/00. Investment results assume all distributions are reinvested and reflect applicable fees and expenses. Expense ratios are as of each fund’s most recent fiscal year-end. From 9/1/04–12/31/08, the investment adviser to the American Funds and the business manager for Washington Mutual Investors Fund waived a portion of their management fees. Investment results in this presentation reflect the waivers, without which the results would have been lower. Please see the fund’s most recent shareholder report or prospectus for details.
Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in each fund’s summary prospectus and/or prospectus, which can be obtained from your financial professional and should be read carefully before investing.
© American Funds Distributors, Inc. AI-99980
© American Funds Distributors, Inc.
Barclays Capital U.S. Aggregate Index represents the U.S. investment-grade fixed-rate bond market.
MSCI World Index is a free-float-adjusted market-capitalization-weighted index that measures equity market results of developed markets. The index consists of more than 20 developed market country indexes, including the United States.
Standard & Poor's 500 Composite Index is a market-capitalization-weighted index based on the average weighted results of 500 widely held common stocks.
Indexes are unmanaged. Their results include reinvested dividends and/or distributions but do not reflect sales charges, commissions or expenses.
AI-44440
© American Funds Distributors, Inc.
This presentation is authorized for use only when preceded or accompanied by the current summary prospectus and/or prospectus for the fund(s) being offered.
If used after September 30, 2010, this presentation must be accompanied by a current American Funds quarterly statistical update.
Equity investments are subject to market fluctuations.
Investing outside the United States involves additional risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries.
Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds.
The return of principal in bond funds, as well as in funds with significant bond holdings, is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks that are associated with the underlying bonds owned by the fund(s). Bond prices and a bond fund’s share price will generally move in the opposite direction of interest rates.
Diversifying investments does not insure against market loss.
AI-44440
© 2010 American Funds Distributors, Inc. AI-99997