Guideto Asset Allocation
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Transcript of Guideto Asset Allocation
Page 1CC0000.085.0205
Welcome“The Markets and Asset Allocation”
Presented by: Troy C. Patton, CPA and Fund Manager
Take the puzzle out of the markets.
Take the puzzle out of the markets.
The Archer FundsThe Archer Funds
Page 2CC0000.085.0205 February 15, 2005
The markets can be puzzling if we don’t understand the basics.
The markets can be puzzling if we don’t understand the basics.
Shares of The Archer Funds are not deposits or obligations of any bank, are not guaranteed by any bank are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
Page 3CC0000.085.0205
What drives the Market?What drives the Market?
1968 1978 2007
Inflation and What It’s Done to Our Money
Page 4CC0000.085.0205
Inflation by Decade
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What does Inflation mean for the Markets?
What does Inflation mean for the Markets?
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
P/E
Rat
io o
f th
e S&
P 5
00
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
Yie
lds
of 10
-Yea
r Tre
asuries
PE Ratio of the S&P 500
Yield on 10-Year Treasuries
Source: Standard and Poor’s
A Guide to AssetAllocation
A Guide to AssetAllocation
The Archer Balanced FundThe Archer Balanced Fund
Page 6CC0000.085.0205 February 15, 2005
The Art of Balancing Risk and Reward To Meet Objectives
The Art of Balancing Risk and Reward To Meet Objectives
Shares of The Archer Funds are not deposits or obligations of any bank, are not guaranteed by any bank are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
Page 7CC0000.085.0205
Putting the Puzzle togetherPutting the Puzzle together
• Reasons to use asset allocationReasons to use asset allocation
• How it works and whyHow it works and why
• Reasons to use asset allocationReasons to use asset allocation
• How it works and whyHow it works and why
Asset allocation = Combining different asset classes to help reduce risk but without
necessarily reducing your potential for reward
Asset allocation = Combining different asset classes to help reduce risk but without
necessarily reducing your potential for reward
Page 8CC0000.085.0205
The Risks Are Real, Let’s Understand them(Total Returns)
The Risks Are Real, Let’s Understand them(Total Returns)
Source of chart data: Standard & Poor’s Micropal Inc. Stocks are represented by the S&P 500 Index, a widely used measure of U.S. stock market performance. Bonds are represented by the Lehman 30-Year Treasury Bellwether Index. Indices include reinvestment of income, but not transaction costs or taxes, are unmanaged and cannot be purchased directly by investors. This chart is for illustrative purposes only and does not predict or depict the performance of any investment or fund. Past performance does not guarantee future results. Stocks and bonds are subject to different risks. Stocks are different from fixed income securities in that bonds, if held to maturity, may offer both a fixed rate of return and fixed principal value. Fixed income investing entails credit risk and interest rate risk. When interest rates rise, bond prices generally fall.
-14.9%
-37.6%
-50%
-40%
-30%
-20%
-10%
0%
Bonds 1999 Stocks 2000-2002
-14.9%
-37.6%
-50%
-40%
-30%
-20%
-10%
0%
Bonds 1999 Stocks 2000-2002
Page 9CC0000.085.0205
Volatility Can Be CostlyVolatility Can Be Costly
Source of chart data: Ned Davis Research, Inc. Performance represented by hypothetical data.This chart is for illustrative purposes only and does not predict or depict the performance of any investment or index.
10.0% 10.0% 10.0%
-10.0%
34.4%
Year 1 Year 2 Year 3 Year 4 Year 5
10.0% 10.0% 10.0%
-10.0%
34.4%
Year 1 Year 2 Year 3 Year 4 Year 5
Steady Steady 10%10%
$110 $110 $121$121 $133$133 $146$146 $161 $161
VolatileVolatile $110 $110 $121$121 $133$133 $120$120 $161 $161
Page 10CC0000.085.0205
Asset Allocation Determines Variance in ReturnsAsset Allocation Determines Variance in Returns
Source of chart data: Based on the study by Gary P. Brinson, Randolph L. Hood, and Gilbert L. Beebower, “Determinants of Portfolio Performance,” Financial Analysts Journal, January/February 1995. The study analyzed data from 91 large corporate pension plans with assets of at least $100 million. Source: Terrance Odean, “Do Investors Trade Too Much?,” July 1997.
Timing the Market and Other
4%
Timing the Market and Other
4%
Asset Allocation93%
Asset Allocation93%
Security Selection3%
Security Selection3%
$96,000
$99,000
90,000
95,000
100,000
10% Up and Down 20% Up and Down
$96,000
$99,000
90,000
95,000
100,000
10% Up and Down 20% Up and Down
Page 11CC0000.085.0205
If You Start With $100,000...If You Start With $100,000...
Conclusion: Limiting volatility may increase returns
Conclusion: Limiting volatility may increase returns
Source of chart data: Ned Davis Research. Portfolio performance based on hypothetical data. This chart is for illustrative purposes only and does not predict or depict the performance of any investment or index. Asset Allocation and diversification does not protect against losses in declining markets.
Page 12CC0000.085.0205
Why Asset Allocation?Why Asset Allocation?
• Manage portfolio volatility.Manage portfolio volatility.
• Increase potential returns.Increase potential returns.
• Mitigate common decision-making errors.
• Manage portfolio volatility.Manage portfolio volatility.
• Increase potential returns.Increase potential returns.
• Mitigate common decision-making errors.
Page 13CC0000.085.0205
Investments Did Well, Investors Not So Well (Average Annual Returns 1984-2003)(Average Annual Returns 1984-2003)
Investments Did Well, Investors Not So Well (Average Annual Returns 1984-2003)(Average Annual Returns 1984-2003)
Sources of chart data: Dalbar, Inc., Quantitative Analysis of Investor Behavior, July 2004 update.
3.51% 3.06%
-3.29%
12.98%
-10%
-5%
0%
5%
10%
15%
Stocks HypotheticalEquity Fund
Investor
Inflation
3.51% 3.06%
-3.29%
12.98%
-10%
-5%
0%
5%
10%
15%
Stocks HypotheticalEquity Fund
Investor
Inflation
Hypothetical Equity Fund
Market Timer
Page 14CC0000.085.0205
How We Make Investment DecisionsHow We Make Investment Decisions
The disposition effect refers to people’s The disposition effect refers to people’s tendency to:tendency to:
• Hang on to losersHang on to losers• Sell the winnersSell the winners
• Allows us to enjoy the feeling Allows us to enjoy the feeling of winning and defer the pain of lossof winning and defer the pain of loss
The disposition effect refers to people’s The disposition effect refers to people’s tendency to:tendency to:
• Hang on to losersHang on to losers• Sell the winnersSell the winners
• Allows us to enjoy the feeling Allows us to enjoy the feeling of winning and defer the pain of lossof winning and defer the pain of loss
Page 15CC0000.085.0205
Which Would You Choose?Which Would You Choose?
• 80% chance to win $5000, and80% chance to win $5000, and20% chance to lose $100020% chance to lose $1000
or
• 10% chance to win $5000, and 10% chance to win $5000, and 90% chance to lose nothing90% chance to lose nothing
This is known as “narrow framing”, the tendency to make This is known as “narrow framing”, the tendency to make decisions using relatively narrow frames of reference.decisions using relatively narrow frames of reference.
• 80% chance to win $5000, and80% chance to win $5000, and20% chance to lose $100020% chance to lose $1000
or
• 10% chance to win $5000, and 10% chance to win $5000, and 90% chance to lose nothing90% chance to lose nothing
This is known as “narrow framing”, the tendency to make This is known as “narrow framing”, the tendency to make decisions using relatively narrow frames of reference.decisions using relatively narrow frames of reference.
Page 16CC0000.085.0205
How We Make Investment DecisionsHow We Make Investment Decisions
To avoid losses, we may engage in:To avoid losses, we may engage in:• Narrow framingNarrow framing• Disposition effectDisposition effect
Other behaviors that may undermineOther behaviors that may undermineinvestment success: investment success:
• Mental accountingMental accounting• HerdingHerding
To avoid losses, we may engage in:To avoid losses, we may engage in:• Narrow framingNarrow framing• Disposition effectDisposition effect
Other behaviors that may undermineOther behaviors that may undermineinvestment success: investment success:
• Mental accountingMental accounting• HerdingHerding
Page 17CC0000.085.0205
Asset Allocation: The Anti-Timing ToolAsset Allocation: The Anti-Timing Tool
• Seeks to limit short-term portfolio lossesSeeks to limit short-term portfolio losses
• Bases sales decision on need to stay Bases sales decision on need to stay on target on target
• Focuses on “big picture,” the goal of Focuses on “big picture,” the goal of achieving overall wealthachieving overall wealth
• Uses sophisticated quantitative Uses sophisticated quantitative diversification techniquesdiversification techniques
• Seeks to limit short-term portfolio lossesSeeks to limit short-term portfolio losses
• Bases sales decision on need to stay Bases sales decision on need to stay on target on target
• Focuses on “big picture,” the goal of Focuses on “big picture,” the goal of achieving overall wealthachieving overall wealth
• Uses sophisticated quantitative Uses sophisticated quantitative diversification techniquesdiversification techniques
Page 18CC0000.085.0205
Every Asset Class Is Positive Over Time…Average Annual Total Return, 1928-2004Average Annual Total Return, 1928-2004
Every Asset Class Is Positive Over Time…Average Annual Total Return, 1928-2004Average Annual Total Return, 1928-2004
Source of chart data: Ned Davis Research, as of 12/31/04. Stocks are represented by the S&P 500 Index, a widely used measure of U.S. stock market performance, bonds by the Ibbotson Long-Term Government Bond Index and cash by the 91-day Treasury Bill Index. Indices include reinvestment of income, but not transaction costs or taxes, are unmanaged and cannot be purchased directly by investors. This chart is for illustrative purposes only and does not predict or depict the performance of any investment or fund. Past performance does not guarantee future results. Stocks and bonds are subject to different risks. Stocks are different from fixed income securities in that bonds, if held to maturity, may offer both a fixed rate of return and fixed principal value. Fixed income investing entails credit risk and interest rate risk. When interest rates rise, bond prices generally fall.
10.1%
5.4%
3.9%
0%
2%
4%
6%
8%
10%
12%
Stocks Bonds Cash
10.1%
5.4%
3.9%
0%
2%
4%
6%
8%
10%
12%
Stocks Bonds Cash
Page 19CC0000.085.0205
Source of chart data: Ned Davis Research, as of 12/31/04. Stocks are represented by the S&P 500 Index, a widely used measure of U.S. stock market performance. Bonds are represented by the Ibbotson Long-Term Government Bond Index. Indices include reinvestment of income, but not transaction costs or taxes, are unmanaged and cannot be purchased directly by investors. This chart is for illustrative purposes only and does not predict or depict the performance of any investment or fund. Past performance does not guarantee future results. Stocks and bonds are subject to different risks. Stocks are different from fixed income securities in that bonds, if held to maturity, may offer both a fixed rate of return and fixed principal value. Fixed income investing entails credit risk and interest rate risk. When interest rates rise, bond prices generally fall.
…But Has Volatility……But Has Volatility…
1928 - 20041928 - 2004 StocksStocks BondsBonds
Average annual Average annual total returntotal return 10.1%10.1% 5.4%5.4%
No. of 10%+ downturnsNo. of 10%+ downturns 8787 1111
Average durationAverage duration 104 days104 days 396 396 daysdays
Average declineAverage decline -19.4%-19.4% -13.5%-13.5%
Page 20CC0000.085.0205
Source of chart data: Standard & Poor’s Micropal Inc., as of 12/31/04. Stocks are represented by the S&P 500 Index, a widely used measure of U.S. stock market performance. Bonds are represented by the Lehman Aggregate Bond Index. Indices include reinvestment of income, but not transaction costs or taxes, are unmanaged and cannot be purchased directly by investors. This chart is for illustrative purposes only and does not predict or depict the performance of any investment or fund. Past performance does not guarantee future results. Stocks and bonds are subject to different risks. Stocks are different from fixed income securities in that bonds, if held to maturity, may offer both a fixed rate of return and fixed principal value. Fixed income investing entails credit risk and interest rate risk. When interest rates rise, bond prices generally fall.
And Its Own TimingAnd Its Own Timing
WhenWhen stocksstocks fell fell
BondsBonds had had positive positive resultsresults
When When bondsbonds fellfell
Stocks Stocks had had positive positive resultsresults
19971997 3.0%3.0% 19941994 1.3%1.3%
19811981 6.3%6.3% 19991999 21.0%21.0%
19901990 9.0%9.0%
20002000 11.6%11.6%
20012001 8.4%8.4%
20022002 10.3%10.3%
Page 21CC0000.085.0205
Source of chart data: Standard & Poor’s Micropal Inc. For 10 years ended 12/31/04. Stocks are represented by the S&P 500 Index, a widely used measure of U.S. stock market performance, bonds by the Lehman 10-Year Treasury Bellwether Index and cash by a 91-day Treasury Bill Index. Treasury indices are total return indices held at constant maturities. Indices include reinvestment of income, but not transaction costs or taxes, are unmanaged and cannot be purchased directly by investors. This chart is for illustrative purposes only and does not predict or depict the performance of any investment or fund. Past performance does not guarantee future results. Stocks and bonds are subject to different risks. Stocks are different from fixed income securities in that (i) Government bonds and Treasury notes and bills are backed by the full faith and credit of the U.S. Government and (ii) bonds, if held to maturity, may offer both a fixed rate of return and fixed principal value. Fixed income investing entails credit risk and interest rate risk. When interest rates rise, bond prices generally fall.
Fact: Asset Classes Move IndependentlyMajor Asset Class Correlations (1995-2004)Major Asset Class Correlations (1995-2004)
Fact: Asset Classes Move IndependentlyMajor Asset Class Correlations (1995-2004)Major Asset Class Correlations (1995-2004)
StocksStocks BondsBonds CashCash
StocksStocks 1.001.00
BondsBonds -0.03-0.03 1.001.00
CashCash 0.300.30 0.240.24 1.001.00
Page 22CC0000.085.0205
Combine Asset Classesfor Smoother ResultsCombine Asset Classesfor Smoother Results
Source of chart data: Standard & Poor’s Micropal Inc., as of 12/31/04. Stocks are represented by the S&P 500 Index, a widely used measure of U.S. stock market performance. Bonds are represented by the Lehman Aggregate Bond Index. Indices include reinvestment of income, but not transaction costs or taxes, are unmanaged and cannot be purchased directly by investors. This chart is for illustrative purposes only and does not predict or depict the performance of any investment or fund. Past performance does not guarantee future results. Stocks and bonds are subject to different risks. Stocks are different from fixed income securities in that bonds, if held to maturity, may offer both a fixed rate of return and fixed principal value. Fixed income investing entails credit risk and interest rate risk. When interest rates rise, bond prices generally fall.
-30
-20
-10
0
10
20
30
40
50
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Stocks
Bonds
50% Stocks/50% Bonds
Page 23CC0000.085.0205
Different Times, Different StylesGrowth vs. Value Growth vs. Value (Annual Returns 1995–2006)(Annual Returns 1995–2006)
Different Times, Different StylesGrowth vs. Value Growth vs. Value (Annual Returns 1995–2006)(Annual Returns 1995–2006)
Source of chart data: Standard and Poor’s Micropal Inc., 12/31/04. Growth performance is represented by the S&P BARRA Growth Index. Value performance is represented by the S&P BARRA Value Index. There are special risks in both styles: with growth investments, there is the possibility of increased volatility; with value investing, there is the possibility that the market may not recognize a stock as undervalued and might not appreciate as expected. The indices are unmanaged, includes reinvested income and cannot be purchased directly by investors. This chart is for illustrative purposes only and does not predict or depict the performance of any investment or fund. Past performance does not guarantee future results.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
GrowthValue
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
GrowthValue
50%
0
–30
–20
–10
10
20
30
40
Page 24CC0000.085.0205
Different Times, Different Market SegmentsSmall Cap vs. Mid Cap vs. Large Cap Small Cap vs. Mid Cap vs. Large Cap (Annual Returns 1995–2006)(Annual Returns 1995–2006)
Different Times, Different Market SegmentsSmall Cap vs. Mid Cap vs. Large Cap Small Cap vs. Mid Cap vs. Large Cap (Annual Returns 1995–2006)(Annual Returns 1995–2006)
Source of chart data: Standard and Poor’s Micropal Inc., 12/31/04. Large-cap stocks are represented by the S&P 500 Index, a broad-based index of domestic stocks; mid-cap stocks are represented by the S&P MidCap 400 Index; small-cap stocks are represented by the Russell 2000 Index. Small-cap stocks may be subject to greater volatility than mid-cap or large-cap stocks. The indices are unmanaged, include reinvested income and cannot be purchased directly by investors. This chart is for illustrative purposes only and does not predict or depict the performance of any investment or fund. Past performance does not guarantee future results.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Large CapMid CapSmall Cap
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Large CapMid CapSmall Cap
50%
0
–30
–20
–10
10
20
30
40
Page 25CC0000.085.0205
Adding Asset Classes May Enhance Your ReturnsAdding Asset Classes May Enhance Your Returns
Source of chart data: Standard & Poor’s Micropal Inc. Large-cap stocks are represented by the S&P 500 Index; mid-cap stocks by the S&P MidCap 400 Index; small-cap stocks by the Russell 2000 Index; foreign stocks by the MSCI EAFE Index; short-, intermediate- and long-term bonds by the Lehman 1-3 year Government, 5-year Treasury and 10-year Treasury Indices, respectively; cash by the 91-day Treasury Bill Index. Treasury indices are total return indices held at constant maturities. Indices include reinvestment of income, but not transaction costs or taxes, are unmanaged and cannot be purchased directly by investors. This chart is for illustrative purposes only and does not predict or depict the performance of any investment or fund. Past performance does not guarantee future results. Stocks and bonds are subject to different risks. Stocks are different from fixed income securities in that (i) Government bonds and Treasury notes and bills are backed by the full faith and credit of the U.S. Government and (ii) bonds, If held to maturity, may offer both a fixed rate of return and fixed principal value. Fixed income investing entails credit risk and Interest rate risk. When interest rates rise, bond prices generally fall.
Best Best PerformingPerforming
Worst Worst PerformingPerforming
20002000 20012001 20022002 20032003 20042004
Mid-capMid-capStocksStocks
Short-termShort-termBondsBonds
Long-termLong-termBondsBonds
Small-capSmall-capStocksStocks
ForeignForeignStocksStocks
Long-termLong-termBondsBonds
IntermediateIntermediateBondsBonds
IntermediateIntermediateBondsBonds
ForeignForeignStocksStocks
Small-capSmall-capStocksStocks
IntermediateIntermediateBondsBonds
Long-termLong-termBondsBonds
Short-termShort-termBondsBonds
Mid-capMid-capStocksStocks
Mid-capMid-capStocksStocks
Short-termShort-termBondsBonds
CashCash CashCash Large-capLarge-capStocksStocks
Large-capLarge-capStocksStocks
CashCash Small-capSmall-capStocksStocks
Mid-capMid-capStocksStocks
IntermediateIntermediateBondsBonds
Long-termLong-termBondsBonds
Small-capSmall-capStocksStocks
Mid-capMid-capStocksStocks
ForeignForeignStocksStocks
Short-termShort-termBondsBonds
IntermediateIntermediateBondsBonds
Large-capLarge-capStocksStocks
Large-capLarge-capStocksStocks
Small-capSmall-capStocksStocks
Long-termLong-termBondsBonds
CashCash
ForeignForeign Stocks Stocks
ForeignForeignStocks Stocks
Large-capLarge-capStocksStocks
CashCash
Short-termShort-termBondsBonds
Page 26CC0000.085.0205
Asset Allocation: Picking Your MixWhich is the correct asset allocation? Which is the correct asset allocation? Asset Allocation: Picking Your MixWhich is the correct asset allocation? Which is the correct asset allocation?
Stocks60%
Stocks60%Bonds
30%Bonds30%
Cash10%Cash10%
Stocks20%
Stocks20%
Bonds60%
Bonds60%
Cash20%Cash20%
Page 27CC0000.085.0205
Is there Risk in All Portfolios? Is there Risk in All Portfolios?
• Two Portfolios with the same Stock/Bond Two Portfolios with the same Stock/Bond Allocation could have completely different Allocation could have completely different risks.risks.
• One may have higher growth stocks while One may have higher growth stocks while the other focuses on Value or a certain the other focuses on Value or a certain sector.sector.
• Bond classes have different risk levels as Bond classes have different risk levels as well.well.
• Two Portfolios with the same Stock/Bond Two Portfolios with the same Stock/Bond Allocation could have completely different Allocation could have completely different risks.risks.
• One may have higher growth stocks while One may have higher growth stocks while the other focuses on Value or a certain the other focuses on Value or a certain sector.sector.
• Bond classes have different risk levels as Bond classes have different risk levels as well.well.
Page 28CC0000.085.0205
Combinations for Different Risk/Reward ProfilesThe Efficient Frontier, Stocks and Bonds (1980-2004)The Efficient Frontier, Stocks and Bonds (1980-2004)
Combinations for Different Risk/Reward ProfilesThe Efficient Frontier, Stocks and Bonds (1980-2004)The Efficient Frontier, Stocks and Bonds (1980-2004)
Source of chart data: Standard & Poor’s Micropal Inc., for 25 years ended 12/31/04. Stocks are represented by the S&P 500 Index, a widely used measure of U.S. stock market performance. Bonds are represented by the Lehman Aggregate Bond Index. Indices include reinvestment of income, but not transaction costs or taxes, are unmanaged and cannot be purchased directly by investors. This chart is for illustrative purposes only and does not predict or depict the performance of any investment or fund. Past performance does not guarantee future results. Stocks and bonds are subject to different risks. Stocks are different from fixed income securities in that bonds, If held to maturity, may offer both a fixed rate of return and fixed principal value. Fixed income investing entails credit risk and Interest rate risk. When interest rates rise, bond prices generally fall.
8%
9%
10%
11%
12%
13%
14%
4% 6% 8% 10% 12% 14% 16% 18%
Risk
Re
turn
100%Stocks
50%Stocks
50%Stocks
50%Bonds50%
Bonds
100%Bonds
Page 29CC0000.085.0205
Asset Allocation Mix Choices: Asset Allocation Mix Choices:
Source of chart data: Standard & Poor’s Micropal Inc. Stocks are represented by the S&P 500 Index, a widely used measure of U.S. stock market performance. Bonds are represented by the Lehman Aggregate Bond Index. Indices include reinvestment of income, but not transaction costs or taxes, are unmanaged and cannot be purchased directly by investors. This chart is for illustrative purposes only and does not predict or depict the performance of any investment or fund. Past performance does not guarantee future results. Stocks and bonds are subject to different risks. Stocks are different from fixed income securities in that bonds, If held to maturity, may offer both a fixed rate of return and fixed principal value. Fixed income investing entails credit risk and Interest rate risk. When interest rates rise, bond prices generally fall.
PORTFOLIO MIXPORTFOLIO MIX(%)(%)
If the total return on stocks is:If the total return on stocks is:
20%20% 10%10% 0%0% ––10%10% ––20%20%
Stocks Stocks BondsBonds The weighted average return on the portfolio is:The weighted average return on the portfolio is:
100% 0% 20.0% 10.0%10.0% 0.0% –10.0% –20.0%
90 10 18.7 9.79.7 0.7 –8.3 –17.3
80 20 17.4 9.49.4 1.4 –6.6 –14.6
70 30 16.1 9.19.1 2.1 –4.9 –11.9
60 40 14.8 8.88.8 2.8 –3.2 –9.2
50 50 13.5 8.58.5 3.5 –1.5 –6.5
40 60 12.2 8.28.2 4.2 0.2 –3.8
30 70 10.9 7.97.9 4.9 1.9 –1.1
20 80 9.6 7.67.6 5.6 3.6 1.6
10 90 8.3 7.37.3 6.3 5.3 4.3
0 100 7.0 7.07.0 7.0 7.0 7.0Notes/Bonds Notes/Bonds
Return 7%Return 7%
Page 30CC0000.085.0205
Keep your Investments in Shape
Keep your Investments in Shape
Your portfolio can become overly risky with timeRebalancing may help shed some risk
Keep your Investments in Shape
Keep your Investments in Shape
CC0000.024.0304 March 15, 2004
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
1 2 3
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
1 2 3
1. Jan. 1970 to Dec. 2004
2. Jan. 1980 to Dec. 2004
3. Jan. 1990 to Dec. 2004
12.8%
10.4% 10.1%
12.7%
9.4%
11.1%
11.0%
11.3%
11.7%
12.1%
8.8%
9.4%
Your portfolio can become overly risky with timeRebalancing may help shed some risk
Rebalanced portfolio
Not rebalanced portfolio
Risk Return
Page 31CC0000.085.0205
Know who is Managing Your Money…Know who is Managing Your Money…
You should ask:You should ask:
• Does the manager have his/her own Does the manager have his/her own money invested in the fund?money invested in the fund?
• Does the manager have at least five Does the manager have at least five years experience?years experience?
• Do those years include a bear market?Do those years include a bear market?
• I can answer, “yes” to each question!I can answer, “yes” to each question!
• 95% of my long-term assets are 95% of my long-term assets are invested right with yours!invested right with yours!
You should ask:You should ask:
• Does the manager have his/her own Does the manager have his/her own money invested in the fund?money invested in the fund?
• Does the manager have at least five Does the manager have at least five years experience?years experience?
• Do those years include a bear market?Do those years include a bear market?
• I can answer, “yes” to each question!I can answer, “yes” to each question!
• 95% of my long-term assets are 95% of my long-term assets are invested right with yours!invested right with yours!
Page 32CC0000.085.0205
Implement Your Plan Implement Your Plan
You will need access to:You will need access to:
• Someone who understands your plan Someone who understands your plan and is going to give you first class and is going to give you first class advice. You do not have to pay advice. You do not have to pay commissions to get this! commissions to get this!
• A First-class money manager.A First-class money manager.
• Investments that are true to their Investments that are true to their designated rolesdesignated roles
You will need access to:You will need access to:
• Someone who understands your plan Someone who understands your plan and is going to give you first class and is going to give you first class advice. You do not have to pay advice. You do not have to pay commissions to get this! commissions to get this!
• A First-class money manager.A First-class money manager.
• Investments that are true to their Investments that are true to their designated rolesdesignated roles
Page 33CC0000.085.0205
Maintain Your Plan’s IntegrityMaintain Your Plan’s Integrity
• Set up your plan and live by it, just like Set up your plan and live by it, just like brushing your teeth every morning. If you brushing your teeth every morning. If you don’t brush, you know the outcome! don’t brush, you know the outcome!
• Maintain tactical rebalancing or invest in a Maintain tactical rebalancing or invest in a vehicle that does it for you.vehicle that does it for you.
• Update/revise to reflect changing goals Update/revise to reflect changing goals and personal circumstances as needed.and personal circumstances as needed.
• CollegeCollege
• Second HomeSecond Home
• Set up your plan and live by it, just like Set up your plan and live by it, just like brushing your teeth every morning. If you brushing your teeth every morning. If you don’t brush, you know the outcome! don’t brush, you know the outcome!
• Maintain tactical rebalancing or invest in a Maintain tactical rebalancing or invest in a vehicle that does it for you.vehicle that does it for you.
• Update/revise to reflect changing goals Update/revise to reflect changing goals and personal circumstances as needed.and personal circumstances as needed.
• CollegeCollege
• Second HomeSecond Home
Page 34CC0000.085.0205
Implementing a Successful Plan with The Archer Funds.Implementing a Successful Plan with The Archer Funds.
• Experienced, professional investment Experienced, professional investment managermanager
• Historically competitive total returnsHistorically competitive total returns
• Reduced Risk (beta)Reduced Risk (beta)
• Experienced, professional investment Experienced, professional investment managermanager
• Historically competitive total returnsHistorically competitive total returns
• Reduced Risk (beta)Reduced Risk (beta)
Page 35CC0000.085.0205
By working with The Archer Funds, I will assist you to: By working with The Archer Funds, I will assist you to:
Develop your plan
Define your goals
Manageyour money
Monitoryour progress
Page 36CC0000.085.0205
Asset Allocation: One Way to aSuccessful Investment PlanAsset Allocation: One Way to aSuccessful Investment Plan
• Maintain a long-term horizonMaintain a long-term horizon• Understand your tolerance for riskUnderstand your tolerance for risk• Save on a regular basisSave on a regular basis• Plan well and review your decisionsPlan well and review your decisions
• Maintain a long-term horizonMaintain a long-term horizon• Understand your tolerance for riskUnderstand your tolerance for risk• Save on a regular basisSave on a regular basis• Plan well and review your decisionsPlan well and review your decisions
Are you managing your asset allocation?
The Archer Balanced Fund, a no-load fund, will at all times maintain an asset allocation model by investing in stocks and bonds at various percentages. Within the stock and bond portfolio, the Fund will be further allocated among asset classes such as pharmaceuticals, financials, utilities, short- and long-term notes and bonds. These allocations will be managed with the goal of enhancing the Fund’s total return while keeping the risk, or volatility of the Fund, below that of the broader market.
Page 38CC0000.085.0205
Thank YouThank YouPast performance does not guarantee future results. Due to ongoing market volatility, current performance may be more or less than the results shown in this presentation. For performance data of The Archer Funds current to the most recent month end, visit us at www.archerbalancedfund.com or call us at 1.800.671.5872. The performance information shown in this presentation does not show the effects of income taxes on an individual’s investment. Taxes may reduce your actual investment returns or any gains you may realize if you sell your investment. An investor’s shares, when redeemed, may be worth more or less than the original cost.
Shares of The Archer Funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
You should carefully consider the investment objectives, potential risks, management fees, and charges and expenses of the Fund before investing. The Fund’s prospectus contains this and other information about the Fund, and should be read carefully before investing. You may obtain a current copy of the Fund’s prospectus by calling 1-800-238-7701 or by visiting www.thearcherfunds.com. Past performance is no guarantee of future results. Your fund shares, when redeemed, may be worth more or less than their original cost.
Distributed byUnified Financial Services, Inc. Member NASD431 North Pennsylvania Street P.O. Box 6110Indianapolis, IN 46204 Indianapolis, IN 46206-6110(800) 238-7701
A Guide to AssetAllocation
A Guide to AssetAllocation
The Archer FundsThe Archer Funds
Page 39CC0000.085.0205 February 15, 2005
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