Introduction to Investing Preston D. McSwain Senior Vice President Neuberger Berman Private Asset...

Introduction to Investing

Preston D. McSwainSenior Vice PresidentNeuberger Berman

Private Asset Management(617) 619-4630

[email protected]

smartwomansecurities

2006 Smart Woman Securities. All materials are for SWS

members’ use only

October 3, 2006

We would like to thank Neuberger Berman and Lehman Brothers for their generous offer to use of many of the firm’s slides and research in this presentation.

Why Do You Invest?

• Winning is reaching your goals…….. not beating the neighbors

• Investing is a means to your ends…….. Not a contest

Your Investing Enemies:

• Gut Instincts

• Intuition

• Friends & Family

Three Main Asset Classes

One way to minimize the risks of investing in stocks is to educate

yourself about them!

Stocks growth

Bonds income

Cash liquidity

Stocks (Primary Source for Growth)

• Size Market Cap– Large-cap $5 billion+– Mid-cap $1-5 billion– Small-cap below $1 billion

• Investment style– Value– Growth

• Domestic and International

• Taxable fixed income – Bank CDs - safety and insurance– U.S. Treasuries - safety– Corporate - high/medium quality– High yield - lower quality (“junk

bonds”)

• Tax-exempt – Municipal - federal, state, local

Bonds (Primary Source for Income)

• Checking Accounts with Interest

• Bank Money Market Funds

• Mutual Fund Money Market Funds – Taxable– Tax-exempt

• Short-Term Bonds (less than one year) – Treasury Bills

Cash (Primary Source for Stability)

• Allocate / Invest Funds to Match Your Specific Goals

• Diversify Among Various Investment Options / Asset Classes to Reduce Risk

• Be Disciplined – Stick to Your Plan

Investment Plan Basics

1. Take a Long Term View

2. Stay Emotionally Balanced

3. Remain Diversified

4. Remember Taxes

Four Step Plan

$10

$100

$1,000

$10,000

Dec-4

9

Sep-5

3

Jun-5

7

Mar-

61

Dec-6

4

Aug-6

8

May-7

2

Feb-7

6

Nov-7

9

Aug-8

3

May-8

7

Jan-9

1

Oct-

94

Jul-98

Apr-

02

Dec-0

5

Source: Neuberger Berman and Standard & Poor’s. Please see Additional Disclosures page for complete index description. The data presented herein represents securities industry market data as of the dates specified. It does not represent Neuberger Berman performance nor does it reflect the fees and expenses associated with managing a portfolio. Indices are unmanaged, and the figures for the index shown do not reflect any fees or expenses. Investors cannot invest directly in an index. We strongly recommend that these factors be considered before an investment decision is made. Past performance is no guarantee of future results. Please note: This chart is presented in a logarithmic scale, which shows the index’s gains or losses on a percentage basis, for ease of comparison.

(Log. Scale)

S&P 500 Index – Month-End Values (January 1950 – December 2005)

Escalation of Vietnam War;Kent State Shootings

1962 Market Panic;Cuban Missile Crisis

Prime Rate Hits 21%

Persian Gulf War

1987 Market Panic

9/11 Attacks

Korean Conflict Heightens

Dollar Hits All-Time Low

Price Controls; Nixon Resigns;Oil Embargo

War in Iraq

1. Take a Long Term View

0

Year to Date - through December 31, 2002

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 0 2

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

0.0

%

31.

7%

23.

9%

18.

4%

-1.0

%

52.

6%

31.

6%

6.5

%

-10.

8%

43.

4%

12.

0%

0.5

%

26.

9%

-8.7

%

22.

8%

16.

5%

12.

5%

-10.

1%

24.

0%

11.

1%

-8.5

%

3.9

%

14.

3% 19.

0%

-14.

7%

-26.

5%

37.

2%

23.

9%

-7.2

%

6.6

%

18.

6%

32.

5%

-4.9

%

21.

5%

22.

6%

6.3

%

31.

7%

18.

7%

5.3

%

16.

6%

31.

7%

-3.1

%

30.

5%

7.6

% 10.

1%

1.3

%

37.

6%

23.

0%

33.

4%

28.

6%

21.

0%

-9.1

%

-11.

9%

-22.

1%

Percentage Gain or Loss

Copyright © 2003 CRANDALL, PIERCE & COMPANY • All rights reserved. • 14047 West Petronella Drive • Libertyville, Illinois 60048 • 1-800-272-6355 • Internet: www.crandallpierce.com

Sources: Standard & Poor's Corporation; Copyright © 2003 Crandall, Pierce & Company • All rights reserved.This copyright protected illustration is for internal use only. Under no circumstances may this illustration be copied, reproduced or redistributed in whole or in part including the data contained herein, without prior written permission from Crandall, Pierce & Company.

The information presented herein was compiled from sources believed to be reliable. It is intended for illustrative purposes only, and is furnished without responsibility for completeness or accuracy. Past performance does not guarantee future results.

405313

75%100%25%

20.94%13.19%-10.65%

PositiveAll YearsNegative

Number of Years

Percentage of Years

Average Return

0

Stocks Can Be Negative But …

Source: Standard & Poor’s, Neuberger Berman. Please see Additional Disclosures page for complete index description.

The data presented herein represents securities industry market data as of the dates specified. It does not represent Neuberger Berman performance nor does it reflect the fees and expenses associated with managing a portfolio. Indices are unmanaged, and the figures for the index shown do not reflect any fees or expenses. Investors cannot invest directly in an index. We strongly recommend that these factors be considered before an investment decision is made. Past performance is no guarantee of future results.

-1%

4%

9%

14%

19%

1935

1937

1939

1941

1943

1945

1947

1949

1951

1953

1955

1957

1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Best 10 Years: 20.08%95th Percentile:

18.32%Median : 11.07%5th Percentile: 01.50%Worst 10 Years:

-00.85%

S&P 500: 10-Year Rolling ReturnsAnnualized, 1935-2005

… Make Money Over Time And ...

$0

$1

$10

$100

$1,000

$10,000

$100,000

Dec

-26

Dec

-28

Dec

-30

Dec

-32

Dec

-34

Dec

-36

Dec

-38

Dec

-40

Dec

-42

Dec

-44

Dec

-46

Dec

-48

Dec

-50

Dec

-52

Dec

-54

Dec

-56

Dec

-58

Dec

-60

Dec

-62

Dec

-64

Dec

-66

Dec

-68

Dec

-70

Dec

-72

Dec

-74

Dec

-76

Dec

-78

Dec

-80

Dec

-82

Dec

-84

Dec

-86

Dec

-88

Dec

-90

Dec

-92

Dec

-94

Dec

-96

Dec

-98

Dec

-00

Dec

-02

Dec

-04

Large Company Stocks Inflation

Small Company Stocks Government Bonds

Cash$13,706 12.7%

$63 5.3%

EndingValue

AverageReturn

$2,657 10.4%

$18 3.7%

$11 3.0%

Hypothetical value of $1 invested in 1926.Source: Ibbotson Associates, Neuberger Berman. Past performance is not indicative of future results. Small Company stocks represented by the fifth capitalization quintile of stocks on the NYSE for 1926-1981 and performance of the Dimensional Fund Advisors (DFA) Small Company Fund thereafter, Large Company Stocks represented by the S&P 500 Index which is an unmanaged group of securities and considered to be representative of the stock market in general; Government Bonds represented by 5-year US Government Bonds; Cash is represented by the 30-day U.S. Treasury Bill. Please note that indices are unmanaged and do not take into account any fees or expenses of investing in the individual securities that they track, and that individuals cannot invest directly in an index. Data about the performance of these indices is prepared or obtained by Neuberger Berman and includes reinvestment of all dividends and capital gain distributions. See Appendix for complete description of each index.

1926-2005

Over the Long Term Outperform

1. Avoid making rash investment decisions based on breaking news

2. Recipe for losing money: rushing into the bull market and pulling out of a bear market

2. Stay Emotionally Balanced

“How could I havebeen so wrong?”

“Temporary set back - I’m a long-term investor.”

“Wow, am I smart.”

Point of MaximumFinancial Opportunity -

Investors Realize Investment Opportunity

Point of MaximumFinancial Risk -

Investors Beware of Higher Investment Risk

The Cycle Can Be Difficult

________________Source: Strategic Insight.Indices are unmanaged, and the figures for the index shown include reinvestment of all dividends and capital gain distributions and do not reflect any fees or expenses.Investors cannot invest directly in an index. We strongly recommend that these factors be considered before an investment decision is made. The data presented herein represents securities industry market data as of the date specified. It does not represent Neuberger Berman performance nor does it reflect the fees and expenses associated with managing a portfolio. Past performance is not indicative of future results.

Mutual Fund Flows – Tech / Telecom

– At the height of the technology market bubble, investors flocked to tech funds at precisely the wrong moment

-20

0

20

40

60

Jun-99 Dec-99 Jun-00 Dec-00

($ billions)

March 13, 2000: NASDAQ peaks at 5049

Don’t Follow the Herd

9.1%

4.0%

0.2%

-3.0%-4%

-2%

0%

2%

4%

6%

8%

10%

Fully Invested Minus 10 Best Days Minus 20 Best Days Minus 30 Best Days

Source: Standard & Poor’s, Neuberger BermanPlease see Additional Disclosures page for complete index description. The data presented herein represents securities industry market data as of the dates specified. It does not represent Neuberger Berman performance nor does it reflect the fees and expenses associated with managing a portfolio. Indices are unmanaged, and the figures for the index shown do not reflect any fees or expenses. Investors cannot invest directly in an index. We strongly recommend that these factors be considered before an investment decision is made. Past performance is no guarantee of future results.

S&P 500 Index Average Annualized Returns

An

nu

aliz

ed R

etu

rn

10 Years Ending December 31, 2005

Avoid Market Timing

Start with $1,000, earning 10% each year and add $1,000 every year

$2,104 $3,325 $7,807 $19,009 $67,760

$199,732

$556,987

$1,128,011

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

After 1Year

After 2Years

After 5Years

After 10Years

After 20Years

After 30Years

After 40Years

After 47Years

Time is On Your Side

*Invested from 1986-1995. From 1995-2004 investment grew. This is for illustrative purposes only and not indicative of any investment. Past performance is no guarantee of future results. Source: Ibbotson Associates. The hypothetical results presented herein are based on historical index returns of the S&P 500. The results do not represent the performance of any Neuberger Berman managed account or product and do not reflect the fees and expenses associated with managing a portfolio. These returns are used for discussion purposes only. They are not intended to represent, and should not be construed to represent a prediction of future rates of return. See Appendix for complete description of each index. Results are on a pre-tax basis. Investment is made at the beginning of each year.The data presented herein represents securities industry market data as of the dates specified. It does not represent Neuberger Berman performance nor does it reflect the fees and expenses associated with managing a portfolio. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Indices are unmanaged, and the figures for the index shown include reinvestment of all dividends and capital gain distributions and do not reflect any fees or expenses. Investors cannot invest directly in an index. We strongly recommend that these factors be considered before an investment decision is made.

Investor A Investor B Investor CYears Contributing: 20 10 10*Annual Amount Contributed: $2,000 $4,000 $2,000

$20,000

$40,000$40,000

$97,787

$49,436

$122,505

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

Total Amount Invested

Compounded Value atYear-End 2005

1996-2005

1986-2005 1986-2005

Power of Compounding

• Invest Based Upon Your Risk Profile

• No One Allocation of Any Type of Investments is Correct for Everyone

• Diversify Among Stocks, Bonds and Cash

• Have a Mix of Various Types of Stocks(Growth, Value, Large, Mid, Small, Across Sectors)

If you continue with SWS into the spring semester, please note that we are currently investing only in stocks. However, we recognize that a successful investment portfolio is one that is diversified. We hope that by learning about how to pick stocks in which to invest, students will gain knowledge about evaluating other asset classes as well. In the spring, we anticipate having

additional classes on bonds, derivatives, and other more complicated investment tools as well.

3. Remain Diversified

Annual Percentage Returns (1986-2005)

Source: Standard & Poor’s, Frank Russell Co., Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Callan Associates. This is for illustrative purposes only and not indicative of any investment. The data presented herein represents securities industry market data as of the dates specified. It does not represent Neuberger Berman performance nor does it reflect the fees and expenses associated with managing a portfolio. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. This material is not intended to be a formal research report and should not be construed as an offer to sell or the solicitation of an offer to buy any security. Indices are unmanaged and the figures for the indices presented herein include reinvestment of all dividends and capital gain distributions and do not reflect any fees or expenses. Investors cannot invest directly in a index. Past performance is not indicative of future results. See Market Index Descriptions in the disclosures at the end of this presentation.

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

MSCI EAFE

MSCI EAFE

MSCI EAFE

S&P/ BARRA

500 Growth

LB Aggregate

Bond

S&P MidCap

400

Russell 2000

MSCI EAFE

MSCI EAFE

S&P/ BARRA

500 Growth

NAREIT-Equity TR

S&P/ BARRA

500 Growth

S&P/ BARRA

500 Growth

S&P/ BARRA

500 Growth

NAREIT-Equity TR

NAREIT-Equity TR

LB Aggregate

Bond

Russell 2000

NAREIT-Equity TR

MSCI EAFE

69.94 24.93 28.59 36.40 8.95 50.10 18.41 32.94 8.06 38.13 35.26 36.52 42.16 28.25 26.36 13.93 10.27 47.25 31.58 14.02

S&P/ BARRA

500 Value

S&P/ BARRA

500 Growth

Russell 2000

S&P MidCap

400

S&P/ BARRA

500 Growth

Russell 2000

NAREIT-Equity TR

NAREIT-Equity TR

NAREIT-Equity TR

S&P 500S&P/

BARRA 500 Growth

S&P 500 S&P 500MSCI EAFE

S&P MidCap

400

LB Aggregate

Bond

NAREIT-Equity TR

MSCI EAFE

MSCI EAFE

S&P MidCap

400

21.67 6.50 24.89 35.54 0.20 46.05 14.59 19.65 3.17 37.43 23.96 33.36 28.58 27.3 17.51 8.42 3.81 39.17 20.70 12.55

NAREIT-Equity TR

S&P 500S&P/

BARRA 500 Value

S&P 500 S&P 500S&P/

BARRA 500 Growth

S&P MidCap

400

Russell 2000

S&P/ BARRA

500 Growth

S&P/ BARRA

500 ValueS&P 500

S&P MidCap

400

MSCI EAFE

Russell 2000

LB Aggregate

Bond

Russell 2000

S&P MidCap

400

NAREIT-Equity TR

Russell 2000

NAREIT-Equity TR

19.16 5.23 21.67 31.49 -3.17 38.37 11.91 18.91 3.13 36.99 23.07 32.26 20.33 21.26 11.63 2.49 -14.51 37.14 18.33 12.16

S&P 500S&P/

BARRA 500 Value

S&P MidCap

400

S&P/ BARRA

500 Value

S&P MidCap

400

NAREIT-Equity TR

S&P/ BARRA

500 Value

S&P/ BARRA

500 ValueS&P 500

S&P MidCap

400

S&P/ BARRA

500 Value

S&P/ BARRA

500 Value

S&P MidCap

400S&P 500

S&P/ BARRA

500 Value

S&P MidCap

400

MSCI EAFE

S&P MidCap

400

S&P MidCap

400

S&P/ BARRA

500 Value18.47 3.68 20.87 26.13 -5.12 35.70 10.53 18.6 1.31 30.94 21.99 29.98 19.12 21.04 6.09 -0.61 -15.66 35.61 16.48 6.33S&P

MidCap 400

LB Aggregate

BondS&P 500

Russell 2000

S&P/ BARRA

500 ValueS&P 500 S&P 500

S&P MidCap

400

S&P/ BARRA

500 Value

Russell 2000

S&P MidCap

400

Russell 2000

S&P/ BARRA

500 Value

S&P MidCap

400

Russell 2000

S&P/ BARRA

500 Value

Russell 2000

S&P/ BARRA

500 Value

S&P/ BARRA

500 ValueS&P 500

16.21 2.75 16.81 16.24 -6.85 30.55 7.67 13.96 -0.64 28.44 19.2 22.36 14.67 14.72 -3.02 -11.71 -20.48 31.79 15.71 4.91LB

Aggregate Bond

S&P MidCap

400

NAREIT-Equity TR

LB Aggregate

Bond

NAREIT-Equity TR

S&P/ BARRA

500 Value

LB Aggregate

BondS&P 500

Russell 2000

LB Aggregate

Bond

Russell 2000

NAREIT-Equity TR

LB Aggregate

Bond

S&P/ BARRA

500 ValueS&P 500 S&P 500

S&P/ BARRA

500 ValueS&P 500 S&P 500

Russell 2000

15.29 -2.03 13.49 14.53 -15.35 22.56 7.40 9.99 -1.82 18.48 16.49 20.29 8.67 12.72 -9.11 -11.88 -20.85 28.70 10.87 4.55

S&P/ BARRA

500 Growth

NAREIT-Equity TR

S&P/ BARRA

500 Growth

MSCI EAFE

Russell 2000

LB Aggregate

Bond

S&P/ BARRA

500 Growth

LB Aggregate

Bond

LB Aggregate

Bond

NAREIT-Equity TR

MSCI EAFE

LB Aggregate

Bond

Russell 2000

LB Aggregate

Bond

MSCI EAFE

S&P/ BARRA

500 GrowthS&P 500

S&P/ BARRA

500 Growth

S&P/ BARRA

500 Growth

S&P/ BARRA

500 Growth

14.50 -3.64 11.95 10.80 -19.51 16.00 5.07 9.75 -2.92 15.27 6.36 9.68 -2.55 -0.83 -13.96 -12.73 -22.10 25.67 6.13 3.46

Russell 2000

Russell 2000

LB Aggregate

Bond

NAREIT-Equity TR

MSCI EAFE

MSCI EAFE

MSCI EAFE

S&P/ BARRA

500 Growth

S&P MidCap

400

MSCI EAFE

LB Aggregate

Bond

MSCI EAFE

NAREIT-Equity TR

NAREIT-Equity TR

S&P/ BARRA

500 Growth

MSCI EAFE

S&P/ BARRA

500 Growth

LB Aggregate

Bond

LB Aggregate

Bond

LB Aggregate

Bond

5.68 -8.77 7.89 8.84 -23.19 12.49 -11.85 1.68 -3.57 11.55 3.61 2.06 -17.51 -4.62 -22.08 -21.21 -23.59 4.11 4.34 2.43

No Asset Class Leads Every Year

• Risks of No Diversification- Large Cap Growth Stocks -22.42%- Small Cap Growth -22.43%

• Rewards of Prudent Diversification- Small Cap Value Stocks 22.43%- Bonds - Fixed Income 11.85%- Large Cap Value 7.01%

1 Year Returns – Period Ending 12/31/00

Source: Frank Russell Co., and Lehman Brothers Holdings Inc. Large Cap Growth - Russell 1000 Growth, Large Cap Value - Russell 1000 Value, Small Cap Value Russell 2000 Value, Fixed Income - Lehman Govt. Corp This is for illustrative purposes only and not indicative of any investment. The data presented herein represents securities industry market data as of the dates specified. It does not represent Neuberger Berman performance nor does it reflect the fees and expenses associated with managing a portfolio. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. This material is not intended to be a formal research report and should not be construed as an offer to sell or the solicitation of an offer to buy any security. Indices are unmanaged and the figures for the indices presented herein include reinvestment of all dividends and capital gain distributions and do not reflect any fees or expenses. Investors cannot invest directly in a index. Past performance is not indicative of future results. See Market Index Descriptions in the disclosures at the end of this presentation.

Risks & Rewards of Diversification

Source: Ibbotson Associates. Selected years shown represent all calendar years from 1929 to 2005 in which the S&P 500 Index had a negative total return.U.S. Long-Term Government Bonds are represented by the 20-year U.S. Government Bond and U.S. Long-Term Corporate Bonds are represented by the Citigroup U.S. Broad Investment Grade Index.Past performance is not indicative of future results. Please note that indices are unmanaged and do not take into account any fees or expenses of investing in the individual securities that they track, and that individuals cannot invest directly in an index. Data about the performance of these indices are prepared or obtained by Neuberger Berman and include reinvestment of all dividends and capital gain distributions. See Appendix for complete description of each index. The data presented herein represents securities industry market data as of the dates specified. It does not represent Neuberger Berman performance nor does it reflect the fees and expenses associated with managing a portfolio. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. This material is not intended to be a formal research report and should not be construed as an offer to sell or the solicitation of an offer to buy any security. A bond’s value may fluctuate based on interest rates, market conditions, credit quality and other factors. You may have a gain or loss if you sell your bonds prior to maturity. Of course, bonds are subject to the credit risk of the issuer. Government bonds and Treasury Bills are backed by the full faith and credit of the United States Government as to the timely payment of principal and interest.

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

19

29

19

30

19

31

19

32

19

34

19

37

19

39

19

40

19

41

19

46

19

53

19

57

19

62

19

66

19

69

19

73

19

74

19

77

19

81

19

90

20

00

20

01

20

02

S&P 500 Index

U.S. Long-Term Government Bonds

U.S. Long-Term Corporate Bonds

When Stocks Are NegativeBonds Tend to Be Positive

BondBondPricesPrices

InterestInterestRatesRates

Bonds Don’t Always Appreciate

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00

1yr 3yr 5yr 7yr 15yr 25yr

Treasury GO-AAA

MATURITYMATURITY

As of June 30, 2004

Source: Bloomberg. The data presented herein represents securities industry market data as of the date specified. It does not represent the performance of any Neuberger Berman account or product nor does it reflect the fees and expenses associated with managing a portfolio. See Additional Disclosure page.

PO

TE

NT

IAL

P

OT

EN

TIA

L

YIE

LD

(%

)Y

I EL

D (

%)

Longer Term Bonds Tend to Pay Higher Interest Rates to Investors

-7.4%

-12.5%

-4.1%

-15%

-10%

-5%

0%

4.3%

8.1%

15.4%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

But Long Term Bonds Have Greater Risk

% PRINCIPAL GAIN

% PRINCIPAL LOSS

Rates Down 1%Rates Down 1% Rates Up 1%Rates Up 1%

5-Year5-Year

10-Year10-Year30-Year30-Year

*Based on current 5-year ( 3 7/8% 5/15/09), 10-year (4 3/4% 05/15/14), 30-year (5 3/8% 02/15/31) U.S. Treasury Bonds.Source: CMS BondEdge, Bloomberg. CMS BondEdge simulation assumes instantaneous effect of 100 basis point parallel shift up or down the entire yield curve across all maturities. There can be no assurance the price gains indicated above will actually occur. A bond’s value may fluctuate based on interest rates, market conditions, credit quality and other factors. You may have a gain or loss if you sell your bonds prior to maturity. Of course, bonds are subject to the credit risk of the issuer. Portfolio characteristics are subject to change without notice. Please see Market Index Descriptions and Additional Disclosures page.

As of June 30, 2004

LargestLoss

The Consumer Price Index for December 2002 is preliminary.Data: Rolling 1 year returns using monthly data (624 Observations)

Stocks: Standard & Poor's 500 Stock Index • Bonds: 5 Year Treasury Bonds • Cash: 90-Day Treasury Bills • Inflation: Consumer Price IndexSources: Standard & Poor's Corporation; Ryan Labs, Inc.; Lehman Brothers; Bureau of Labor Statistics; Copyright © 2003 Crandall, Pierce & Company • All rights reserved.

Copyright © 2003 CRANDALL, PIERCE & COMPANY • All rights reserved • 14047 West Petronella Drive • Libertyville, Illinois 60048 • 1-800-272-6355 • Internet:

-19.7% -34.3% -8.1% 12.4% 18.2% 55.9% 22% 78% 71%

Portfolio Mix:

No Stocks90% Bonds10% Cash

Percent ofYear Ending Largest Average Average Average Largest Percent PercentReturns Greater

12/02 Loss Loss Return Gain Gain Negative PositiveThan Inflation

90% StocksNo Bonds10% Cash

70% Stocks20% Bonds10% Cash







12.4%55.9%

-34.3%

11.7%52.5%

-30.2%

11.1%49.1%

-26.2%

10.4%45.7%

-22.2%

9.7%42.3%

-18.2%

9.0%38.9%

-14.1%

8.3%35.5%

-10.1%

7.6%32.1%

-6.1%

7.0%28.9%

-3.9%

6.3%30.2%

-4.2%

AverageReturn

LargestGain


-16.3% -30.2% -7.0% 11.7% 16.6% 52.5% 21% 79% 71%

1.0% -10.1% -2.2% 8.3% 9.2% 35.5% 8% 92% 70%

11.4% -4.2% -1.4% 6.3% 7.2% 30.2% 10% 90% 64%

-

-9.3% -22.2% -4.9% 10.4% 13.5% 45.7% 17% 83% 71%

-5.9% -18.2% -3.7% 9.7% 12.1% 42.3% 15% 85% 70%

-2.4% -14.1% -2.8% 9.0% 10.6% 38.9% 12% 88% 70%

4.5% -6.1% -1.9% 7.6% 8.2% 32.1% 5% 95% 71%

8.0% -3.9% -1.3% 7.0% 7.4% 28.9% 5% 95% 70%

This copyright protected illustration is for internal use only. Under no circumstances may this illustration be copied, reproduced or redistributed in whole or in part including the data contained herein, without prior written permission from Crandall, Pierce & Company.The information presented herein was compiled from sources believed to be reliable. It is intended for illustrative purposes only, and is furnished without responsibility for completeness or accuracy. Past performance does not guarantee future results.

-12.8% -26.2% -6.1% 11.1% 15.0% 49.1% 19% 81% 71%

Total Return: Calendar Years 1950-2002

One Year Returns

WorstReturn

The Consumer Price Index for December 2002 is preliminary.


-0.1% -3.2% -1.2% 12.0% 12.2% 27.4% 2% 98% 82%

2.3% 0.2% ---- 10.1% 10.1% 22.9% 0% 100% 81%

1.5% -0.9% -0.9% 10.7% 10.7% 24.4% *0% 100% 81%

Portfolio Mix:


Percent of Period Ending Worst Average Average Average Largest Percent PercentReturns Greater

12/02 Return Loss Return Gain Return Negative Positive Than Inflation








12.0%27.4%

-3.2%

11.4%25.9%

-2.1%

10.7%24.4%

-0.9%

10.1%22.9%

0.2%

9.5%21.4%

1.3%

8.8%19.9%

1.9%

8.2%18.9%

2.1%

7.6%18.8%

2.3%

6.9%18.6%

2.2%

6.3%18.5%

0.7%

AverageReturn

LargestReturn


0.7% -2.1% -0.7% 11.4% 11.5% 25.9% 1% 99% 81%

3.1% 1.3% ---- 9.5% 9.5% 21.4% 0% 100% 81%

3.9% 1.9% ---- 8.8% 8.8% 19.9% 0% 100% 81%

4.7% 2.1% ---- 8.2% 8.2% 18.9% 0% 100% 80%

5.6% 2.3% ---- 7.6% 7.6% 18.8% 0% 100% 80%

6.4% 2.2% ---- 6.9% 6.9% 18.6% 0% 100% 80%

7.2% 0.7% ---- 6.3% 6.3% 18.5% 0% 100% 76%

* Less Than 0.5%

Data: Rolling 5 year returns using monthly data (576 Observations)Stocks: Standard & Poor's 500 Stock Index • Bonds: 5 Year Treasury Bonds • Cash: 90-Day Treasury Bills • Inflation: Consumer Price Index

Sources: Standard & Poor's Corporation; Ryan Labs, Inc.; Lehman Brothers; Bureau of Labor Statistics; Copyright © 2003 Crandall, Pierce & Company • All rights reserved


This copyright protected illustration is for internal use only. Under no circumstances may this illustration be copied, reproduced or redistributed in whole or in part including the data contained herein, without prior written permission from Crandall, Pierce & Company.The information presented herein was compiled from sources believed to be reliable. It is intended for illustrative purposes only, and is furnished without responsibility for completeness or accuracy. Past performance does not guarantee future results.


Five Year Returns

The Consumer Price Index for December 2002 is preliminary.

Portfolio Mix:


Percent of Period Ending Smallest Average Average Average Largest Percent PercentReturns Greater

12/02 Gain Loss Return Gain Gain Negative Positive Than Inflation









11.3%18.0%

1.0%

10.8%17.2%

1.4%

10.2%16.5%

1.8%

9.7%15.8%

2.1%

9.2%15.1%

2.5%

8.7%14.4%

2.9%

8.1%14.0%

3.3%

7.6%13.5%

3.7%

7.1%13.1%

3.1%

6.6%12.7%

1.4%

SmallestGain

AverageReturn

LargestGain


8.0% 2.5% ---- 9.2% 9.2% 15.1% 0% 100% 81%

7.7% 2.9% ---- 8.7% 8.7% 14.4% 0% 100% 81%

7.5% 3.3% ---- 8.1% 8.1% 14.0% 0% 100% 80%

7.3% 3.7% ---- 7.6% 7.6% 13.5% 0% 100% 80%

7.1% 3.1% ---- 7.1% 7.1% 13.1% 0% 100% 80%

6.9% 1.4% ---- 6.6% 6.6% 12.7% 0% 100% 80%

8.8% 1.0% ---- 11.3% 11.3% 18.0% 0% 100% 82%

8.2% 2.1% ---- 9.7% 9.7% 15.8% 0% 100% 81%

8.4% 1.8% ---- 10.2% 10.2% 16.5% 0% 100% 82%

8.6% 1.4% ---- 10.8% 10.8% 17.2% 0% 100% 82%


Data: Rolling 10 year returns using monthly data (516 Observations)Stocks: Standard & Poor's 500 Stock Index • Bonds: 5 Year Treasury Bonds • Cash: 90-Day Treasury Bills • Inflation: Consumer Price Index

Sources: Standard & Poor's Corporation; Ryan Labs, Inc.; Lehman Brothers; Bureau of Labor Statistics; Copyright © 2003 Crandall, Pierce & Company • All rights reserved.This copyright protected illustration is for internal use only. Under no circumstances may this illustration be copied, reproduced or redistributed in whole or in part including the data contained herein, without prior written permission from Crandall, Pierce & Company.

The information presented herein was compiled from sources believed to be reliable. It is intended for illustrative purposes only, and is furnished without responsibility for completeness or accuracy. Past performance does not guarantee future results.


Ten Year Returns

• Income Tax Rate 35.0%

• Short-Term Capital Gain Rate 35.0%

• Long-Term Capital Gain Rate 15.0%

• Unrealized Capital Gain Rate 0.0%

4. Remember Taxes

Source: Ibbotson Associates.Hypothetical value of $10,000 investment returning 8% annually with a 35% marginal tax rate. The taxable account is taxed every year, while the tax-deferred account is not taxed. Tax-deferred accounts are typically subject to taxation at ordinary income rates upon withdrawal. Estimates are not guaranteed. Past performance is no guarantee of future results. The hypothetical results presented herein are based on historical index data. The results do not represent the performance of any Neuberger Berman managed account or product and do not reflect the fees and expenses associated with managing a portfolio. These returns are used for discussion purposes only. They are not intended to represent, and should not be construed to represent a prediction of future rates of return.

45,759

27,562

75,968

10,520 16,602

100,627

217,245

46,610

10,80021,589

-$20,000

$20,000

$60,000

$100,000

$140,000

$180,000

$220,000

1 Year 10 Years 20 Years 30 Years 40 Years

Taxable Account Tax-Deferred Account

Valu

e a

t End o

f Peri

od

Number of Years Elapsed

Benefits of Tax Deferral

Strive to Optimize Portfolios to Achieve Risk-Adjusted, Tax-Efficient Returns

Higher Risk

Lower Risk

Tax-Inefficient

Tax-Efficient

PrivateEquity

High TurnoverEquity

ManagementHigh YieldBonds

Hedge Funds

High Grade Bonds

Equity Indexi

ng

Municipal Bonds

Low Turnover

Equity Managemen

t STRATEGICCORE

PORTFOLIO

Asset Classes Based Upon Various Tax, Return and Risk Characteristics

Review Tax Efficiency of Investments

• Determine Your Investment Objectives:- Current Holdings- Long-Term Goals- Time Horizons

• Seriously Gauge Your Personal Risk Tolerance

• Construct Proper Asset Allocations Based Upon Your Goals

Prescriptions for Success

• Diversify, Diversify, Diversify- Stocks, Bonds, Cash- Large Cap, Mid Cap, Small Cap- Growth and Value

• Avoid Emotional Pulls of Short-Term Volatility

• Don’t Market Time – Time is On Your Side

• Review, Revise, Rebalance Based Upon Life Changes

Prescriptions for Success

Introduction to Investing Preston D. McSwain Senior Vice President Neuberger Berman Private Asset...

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Transcript of Introduction to Investing Preston D. McSwain Senior Vice President Neuberger Berman Private Asset...