Learning from the Lessons of TIME Brochure - Legg Mason [PDF]

INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE. LEARNING FROM. THE LESSONS. OF TIME ...

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L  EARNING FROM  THE LESSONS OF   TIME

INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE

THE ISSUES THAT WORRY INVESTORS TODAY AREN’T NEW Staying focused despite the day-to-day distractions of the market is never easy, especially during periods of economic uncertainty. However, investors who seek the guidance of a trusted Financial Professional and remain committed to their investment plans, even when it’s tempting to head to the sidelines, are better positioned to realize their short- and long-term goals. A few “history lessons” to consider For every bear, there’s a bull … and for every bull, there’s a bear The chart below shows how dramatically the stock market (as represented by the S&P 500) bounced back from its lowest point during four bear markets over the last few decades. Of course, investors during these periods couldn’t possibly have known their investment would grow so dramatically … but they could have remained fully invested, confident in the knowledge that markets recover over time.

Cumulative total returns of the S&P 5001 (%) Peak to trough (market high to market low)

500

1973–1974 Bear market

1-year after end

1987 Bear market

5-years after end

2000–2002 Bear market

10-years after end

2007–2009 Bear market

456.10

400 300 267.23

200

205.84

100 0 -100

25.99 74.66 -48.20

23.33 -33.51

122.09

24.40 -49.15

105.12 120.82

70.58

N/A

-54.89

Source: Standard & Poor’s, a division of the McGraw-Hill Companies, Inc., GPW (Legg Mason internal system) and Morningstar. Past performance is no guarantee of future results. This chart is for illustrative purposes only and is not indicative of performance of any specific investment. All investments involve risks, including loss of principal. Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. This chart illustrates the historical performance of the Standard & Poor’s 500 Index (S&P 500) before and after the bear market bottoms of October 3, 1974, December 4, 1987, October 9, 2002 and March 9, 2009. Cumulative total returns include reinvestment of dividends and capital gains. The S&P 500 Index is an unmanaged index of 500 stocks that is generally a representation of the performance of larger companies in the U.S. 1

Don’t let emotions drive your decisions Emotions can lead to irrational decision making and impulsive decisions that compromise the realization of stated goals. Before you react impulsively, make a list of your concerns, revisit your goals and review your strategy. If your goals and/or priorities have changed, or if you believe your strategy is no longer appropriate given the economic environment, contact your Financial Professional. When there is fear and uncertainty in the air, when there is scary news that makes you question what you should do, that’s when it’s most important to talk to your Financial Professional. He or she can provide the perspective you need to understand the situation at hand and how it relates to your individual goals and strategy.

Be diversified2 Despite the best efforts of investment professionals, it’s virtually impossible to guess in advance which asset class will have the best return in any given year. Spreading your investment dollars between different asset classes is an important tool to manage investment risk, especially during periods of market volatility.

Understand your tolerance for risk Risk is part of investing. You can limit it, you can defend against it, but you can’t eliminate it. The important thing is to have a well-informed understanding of how much risk you can tolerate by working closely with your Financial Professional. By having a well-informed understanding of your tolerance for risk, your Financial Professional can construct a long-term investment strategy suited to your needs.

Work closely with a trusted Financial Professional A trusted Financial Professional works with you to identify your goals, needs and aspirations to align your short- and long-term goals with your own risk tolerance. A Financial Professional also offers much-needed perspective by helping to identify the consequences of impulsive and irrational decisions. Most importantly, your Financial Professional, backed by the resources of his/her own firm, helps you achieve your goals by providing valuable insight and guidance on economic issues, the markets, specific investments and strategies.

Stay invested Investors who stay the course have historically been rewarded for their patience. When you look at market performance over decades rather than just a year or two, you find that while it may contract, it also expands — with the gains often concentrated in a handful of trading days.

Market returns (%) S&P 500 Index from January 2, 1998-December 29, 20173 Price-only performance 5.37

Fully invested 1.67

Missed the top 10 days Missed the top 20 days

-0.75

Missed the top 30 days

-2.85 -4.78

Missed the top 40 days Missed the top 50 days Missed the top 100 days

2 3

-6.54 -13.60

Diversification does not assure a profit or protection against market loss. Source: Morningstar. All investments involve risks, including loss of principal. The chart provided is for illustrative purposes only and represents an unmanaged index in which investors cannot directly invest. Past performance is no guarantee of future results.

THE DATES MAY CHANGE, BUT THE HEADLINES STAY THE SAME It’s human nature to be concerned about the future, and doom-and-gloom headlines command attention in both good and bad times. Yet a look back at history shows that neither bull or bear markets last forever — and that short-term worries may not be a good indicator to where the market is going. What matters is keeping a clear head — and recognizing that markets will go both up and down, and at times may even move in opposite directions. When in doubt, talk to your Financial Professional. Revisiting your long-term goals and the logic behind your investment decisions can provide much-needed perspective and help avoid impulsive moves that may work against you in the future. Source: FactSet and Morningstar. Past performance is no guarantee of future results. This chart is for illustrative purposes only and is not indicative of performance of any specific investment. An investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. The Dow Jones Industrial Average (DJIA) is a widely followed measurement of the stock market. The average is comprised of 30 stocks that represent leading companies in major industries. These stocks, widely held by both individual and institutional investors, are considered to be all blue-chip companies. TIME and Time Inc. are not affiliated with, and do not endorse products or services of, Legg Mason, Inc. The magazine covers in this brochure are all from TIME. Date of Issue and Publication Year are listed under each cover. © 2018 Time Inc., used under license. 4 Source: “Empty Pockets on a Trillion Dollars a Year,” Time, March 13, 1972. 5 Source: “Seeking Relief from a Massive Migraine,” Time, September 9, 1974. 6 “Unemployment On the Rise,” by James Kelly, Time, February 8, 1982. 7 “Banking Takes A Beating,” by William Blaylock, Adam Zagorin, Stephen Koepp, Time, December 3, 1984. 8 “Who’s in Charge?,” Time cover image, November 9, 1987. 9 “All Shook Up,” by John Greenwald, Time, October 15, 1990. 10 ”Jobs in the Age of Insecurity,” by George J. Church, Time, November 22, 1993. 11 “Everyone, Back in the Labor Pool,” by Daniel Kadlec, Time, July 29, 2002. 12 “The New President’s Economy Problem,” by Justin Fox, Time, May 26, 2008. 13 “It’s Only Going to Get Worse in Washington,” by Michael Scherer; Alex Altman, Time, October 14, 2013. 14 “Make America Solvent Again,” by James Grant, Time, April, 25, 2016.

Mar. 13, 1972

JAN 1972

Sep. 9, 1974

JAN 1973

Dec. 9, 1974

JAN 1974

JAN 1975

Jul. 14, 1975

JAN 1976

Feb. 23, 1976

JAN 1977

JAN 1978

Sep. 30, 1977

JAN 1979

JAN 1980

Oct. 22, 1979

JAN 1981

Feb. 8, 1982

JAN 1982

Dec. 3, 1984

JAN 1983

JAN 1984

Nov. 10, 1986

JAN 1985

JAN 1986

Nov. 2, 1987

JAN 1987

Oct. 15, 1990

Nov. 9, 1987

JAN 1988

JAN 1989

JAN 1990

Sep. 28, 1992

JAN 1991

JAN 1992

Nov. 22, 1993

JAN 1993

Mar. 20, 1995

JAN 1994

Sep. 14, 1998

JAN 1995

JAN 1996

Mar. 26, 2001

JAN 1997

JAN 1998

Feb. 4, 2002

JAN 1999

Jul. 29, 2002

JAN 2000

JAN 2001

May 26, 2008

JAN 2002

Oct. 13, 2008

JAN 2003

JAN 2004

Nov. 9, 2009

JAN 2005

Mar. 29, 2010

JAN 2006

JAN 2007

Aug. 15, 2011

JAN 2008

Nov. 19, 2012

JAN 2009

JAN 2010

Oct. 14, 2013

JAN 2011

Nov. 17, 2014

JAN 2012

Feb. 2, 2015

JAN 2013

JAN 2014

Apr. 25, 2016

JAN 2015

JAN 2016

Apr. 3, 2017

JAN 2017

DEC 2017

JAN 2017

DEC 2017

APRIL 25, 2016

30,000

You owe

42,998.12

$

That’s what every American man, woman and child would need to pay to erase the $13.9 trillion U.S. debt

25,000

Make America Solvent Again By James Grant

time.com

20,000

“Can a nation with a trillion dollar economy be running out of money?”4

15,000



10,000

5,000

Inflation and oil crisis

“The   stock market has scarcely been so shaky since 1929. Just about everybody who buys, sells, borrows or invests has that overall feeling of unease.”5

“Bankers now face their most strenuous survival test since the Great Depression.”7

“It is doubly trouble-some that the ranks of the jobless are growing at a time when many of the cushions softening the pain of unemployment have been deflated.”6

“Banks   and insurance firms are tottering beneath huge portfolios of bad real estate mortgages.”9

“The crash on Wall Street spotlights America’s Leadership Crisis.”8

“But   Americans have a new menu of economic woes — among them a real estate crash, a credit crisis, a broken health-care system and nagging job insecurity.”12

“Americans   are more worried about their financial future than at any other time since the turbulent 70s.”11

“All sorts of people who never thought they would be on the jobless lines ... are looking for jobs and not finding them.”10

“The nation has been carved up into echo chambers; increasingly, we hear only the sound of our own passions and fears reverberating.”13

“We owe more than we can easily repay. We spend too much and borrow too much.”14

Iraq invades Kuwait

Exxon Valdez oil disaster

President Reagan shot Iran hostage crisis

LTCM collapse; 9/11 terrorist Tech Russian debt attacks bubble bursts default

Asian currency crisis emerges

Housing/Credit market turmoil

Market meltdown

S&P downgrades U.S. debt

Government shutdown

0 JAN 1972

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JAN 2010

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JAN 2015

JAN 2016

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Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional. Legg Mason, Inc., its affiliates and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transactions(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. © 2018 Legg Mason Investor Services, LLC. Member FINRA, SIPC. Legg Mason Investor Services, LLC and all entities mentioned above are subsidiaries of Legg Mason, Inc. 780422 TAPX011501 3/18

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