Principles for Successful Long-Term Investing Richard Jakotowicz CFA, CFP® Director of the Financial Planning & Wealth Management Major Purnell Hall, Room 318 302-831-7226 | richj@udel.edu

Key Topics Know your tolerance for risk Reap the benefits of compounding Avoid emotional biases Remain invested Seek asset class diversification Volatility matters Utilize multiple strategies   PRIVATE & CONFIDENTIAL

How much Risk is right for You? What is your emotional willingness towards risk? What is your financial ability to take investment risk? What is your threshold of sequence of return risk? High Ability Low Ability Low Willingness High Willingness PRIVATE & CONFIDENTIAL

The Power Of Compounding PRIVATE & CONFIDENTIAL *Assumes a hypothetical 8% annual return which is for illustrative purposes only and not intended to represent the performance of any particular investment or investment style.

The Power Of Dividends Compounding   PRIVATE & CONFIDENTIAL

Your Emotions Could Cost You Money Intra-year Lows vs Calendar Year Returns

The Cost Of Not Being Invested PRIVATE & CONFIDENTIAL

Profit needed to return to your original starting value Gains And Losses Are Not Symmetric Profit needed to return to your original starting value Losses in your Portfolio

Trying To “Time The Market” Hurts Your Return PRIVATE & CONFIDENTIAL

You Don’t Have A Crystal Ball. Invest in ALL types of assets. Return Risk

Return is NOT the only variable You need to consider how much RISK you take! We Want To Maximize The Amount Of Return Per Unit Of Risk!

Investments That Behave The Same Do Not Lower Risk How Do We Manage Risk? Investments That Behave The Same Do Not Lower Risk

Investments That Behave The Opposite Eliminate Risk How Do We Manage Risk? Investments That Behave The Opposite Eliminate Risk

We Want Investments That Have No Relationship

Asset Allocation Reduces Volatility Real Estate Returns in Blue Asset Allocation Returns in Black Utilizing return and volatility results on previous page

What Is Asset Allocation?  

Active Reallocation Strategy Hypothetical asset allocation.

Active vs Passive Mutual Funds The S&P500 Index compared to the Vanguard S&P500 Index Fund The S&P500 Index compared to an Active Mutual Fund PRIVATE & CONFIDENTIAL

Active Mutual Funds Rarely Do Better Than The Index Fund Excess Return = Did the stock do better or worse than the overall market Distribution of lifetime excess returns 1980-2014 The return of the Market 2/3rds of the stock’s returns were less than or equal to the overall market Number of stocks 2/3 of the companies can’t beat the Index. The 1/3 that do beat it have a few Googles/ Amazons, etc which pull the average to above the median 0% Did worse than the market Did better than the market PRIVATE & CONFIDENTIAL (Negative excess returns) (Positive excess returns)

Recap! Know your tolerance for risk Reap the benefits of compounding Avoid emotional biases Remain invested Seek asset class diversification Volatility matters Utilize multiple strategies   PRIVATE & CONFIDENTIAL