1. BUILD WITH PRECISION Pursue your risk and return goals
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BUILD WITH PRECISION Pursue your risk and return goals
Keep in mind that all investments carry a certain amount of risk including the possible loss of the principal amount invested.
Past performance is no guarantee of future results. No forecasts can be guaranteed. It is not possible to invest directly in an index.
MFS Fund Distributors, Inc. may have sponsored this seminar by paying for all or a portion of the associated costs. Such sponsorship may create a conflict of interest to the extent that the broker dealer's financial advisor considers the sponsorship when rendering advice to customers.
Hello and thanks for joining me today.
Let’s start with a question…
Why do we invest? [POLL AUDIENCE]
Let’s say you’re investing for retirement.
Show of hands if you have an IRA.
How about a 401(k)?
Some other employer-sponsored plan?
How well do you manage those investments?
Well enough to achieve your goals?
If you’re not 100% without-a-doubt sure, no need to panic, because you may not be that far off.
And you’re certainly not alone.
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MFS Fund Distributors, Inc., Boston, MA mfsp-aa1-pres

2. SURVEYS REVEAL INVESTORS IN NEED
The % of investors that indicate their reliance on their primary advisor will increase over the next few years.1
Overall 55%
Gen Y 63%
Gen X 59
Boomers 51
Silent 43
1 Source: MFS, through Research Now, an independent research firm, sponsored an online survey from December 14-January 9, 2017, of 1,002 individual US investors who met the following criteria: ages 21-81, household income of at least $50,000, own mutual funds, and consult a financial advisor. MFS was not identified as the sponsor of the survey. Segments were defined as follows:  Gen Y (age <36), Gen X (age 36-50), Boomers (age 51-69), and Silent (age 70+)
According to surveys of investors, they have a real need for professional advice in managing their investments.
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The good news is that we can definitely do something to make sure you are investing confidently toward your goals starting right now.

3. TWO COMMON, COSTLY MISTAKES
Loss aversion
First let’s see what investors do to put themselves behind the eight ball.
They give in to what behavioral finance professionals call “loss aversion.”
No one likes to lose money.
When it happens, it hurts.
They say the pain of loss is three times more painful than the pleasure of gain.
That sounds about right to me.
So when the market takes a dive, what are you tempted to do?
Loss-averse investors tend to cut and run.
And, historically, that has been a bad idea.
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4. TWO COMMON, COSTLY MISTAKES
Regret aversion
Another costly mistake is called “regret aversion.”
It’s when an investor changes his or her behavior in order to correct or avoid making a regrettable decision, trying to exert some level of control.
In doing so, they tend to…
make hasty, often poor, decisions
follow the investment crowd
buy high into rising markets
sell low and lock in losses
lose their discipline
shake up their plans
assume even more risk
Historically, this also has been a bad idea.
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5. TAKE A DISCIPLINED 3-STEP APPROACH1.
Allocate 2.
Diversify 3.
Rebalance
ADR
Now let’s take a look at a disciplined, three-step investment approach, which, by the way, has historically been a good idea.
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Step 1… Allocate – Which is spreading your investment dollars across the major asset classes – stocks, bonds, and cash – to help you pursue the optimal returns for a certain level of assumed risk. [CLICK]
Step 2… Diversify – You then spread your allocations within each asset class to help reduce overall portfolio volatility. [CLICK]
Step 3… Rebalance – And then you periodically rebalance your portfolio to help ensure it works as designed, keeping the allocation and diversification mix in sync with your specific goals, time horizon, and tolerance for risk.
Now let’s look at each of these steps in a little more detail.
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No investment strategy, including ADR, can guarantee a profit or protect against a loss.

6. FIRST, ALLOCATE
93.6% of the variability of performance was driven by an asset allocation policy.
Only 6.4% of the variability of performance was driven by security selection and timing of investment.
Source: Study by Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower, “Determinants of Portfolio Performance,” Financial Analysts Journal, January/February The study analyzed data from 91 large corporate pension plans with assets of at least $100 million over a 10-year period beginning in 1974 and concluded that asset allocation policy explained, on average, 93.6% of the variation in total plan return.
First, allocate.
According to a well-known study, the variability of your portfolio’s performance will likely depend LARGELY on your asset allocation decisions and FAR LESS on any individual securities you choose or the timing of your investment selections.
While this particular study focused on corporate pension plans, we believe the same results hold true for individual investors, with some degree of variability.
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7. NEXT, DIVERSIFY Next, diversify.
 International:
Investing in foreign and/or emerging market securities involves interest rate, currency exchange rate, economic, and political risks. These risks are magnified in emerging or developing markets as compared with domestic markets.
 Small/Mid Cap stocks:
Investing in small and/or mid-sized companies involves more risk than that customarily associated with investing in more-established companies.
 Bonds:
Bonds, if held to maturity, provide a fixed rate of return and a fixed principal value. Bond funds will fluctuate and, when redeemed, may be worth more or less than their original cost.
The historical performance of each index cited is provided to illustrate market trends; it does not represent the performance of a particular MFS® investment product. It is not possible to invest directly in an index. Index performance does not take into account fees and expenses. Past performance is no guarantee of future results. The investments you choose should correspond to your financial needs, goals, and risk tolerance. For assistance in determining your financial situation, consult an investment professional. For more information on any MFS fund, including performance, please visit mfs.com.
Standard deviation reflects a portfolio’s total return volatility, which is based on a minimum of 36 monthly returns. The larger the portfolio’s standard deviation, the greater the portfolio’s volatility.
1 Citigroup 3-month T-bill Index is derived from secondary market Treasury bill rates published by the Federal Reserve Bank. 2 Bloomberg Barclays U.S. Aggregate Bond Index measures the US bond market. 3 JPMorgan Global Government Bond Index (Unhedged) measures government bond markets around the world. 4 Russell 1000 Value Index measures large-cap US value stocks. 5 Bloomberg Commodity Index is composed of futures contracts on physical commodities. 6 MSCI EAFE Index measures the non-US stock market. 7 Russell 1000 Growth Index measures large-cap US growth stocks. 8 Russell 2500 Index measures small- and mid-cap US stocks. 9 FTSE NAREIT All REITs Total Return Index tracks the performance of commercial real estate across the US economy. It is not possible to invest directly in an index.
Next, diversify.
Here we have a 20-year chart that tracks the annual returns of several broad-based asset classes. The performance is ranked with the best each year at the top and the worst at the bottom.
See how often the leadership changes – and how unpredictable the market can be.
Now track the black boxes. That’s a well-diversified portfolio, covering all the asset classes except cash.
What do you think would be the best way to get from one end of the chart to the other, over 20 rocky years?
Trying to pick the winner every year or taking a more consistent, direct route?
Here the answer is clear.
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8. AND REBALANCE WHEN NECESSARY
Source: Time periods above, reflecting a strong stock market and a strong bond market, respectively, are based on performance of the following indices: Stocks are represented by the Standard & Poor’s 500 Stock Index, which measures the broad U.S. stock market. Bonds are represented by the Bloomberg Barclays U.S. Aggregate Bond Index. Index performance does not reflect the deduction of any investment-related fees and expenses. It is not possible to invest directly in an index.
And rebalance when necessary.
Plain and simple, to stay on track, you’ll need to review your portfolio periodically and rebalance it when necessary.
This is the one step that many investors let slide.
But they shouldn’t. Here are two perfect examples why.
As you can see, the top left portfolio had an original allocation of 50% stocks and 50% bonds at the start of Stocks performed very well over the next three or so years. As a result, the original allocation changed dramatically. Going into the market decline with 62% in stocks, this portfolio carried much more unintended risk and likely experienced greater volatility when the stock market declined in 2008.
Now look at the bottom left portfolio, which was equally allocated between stocks and bonds in October, This time, bonds ruled the roost over the next three or so years. By March of 2009, this portfolio would have been far too conservative to fully benefit from the big stock market rally later in the year.
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9. TALE OF THREE INVESTORS
Each hypothetical investor followed a different strategy for investing $1,000 each year over a 20-year period ($20,000 total from 1/1/97 through 12/31/16)
Chased Performance
INVESTOR #1 — Each year she invested in the previous year’s best-performing market segment.
$38,765
For purposes of this comparison, we have divided the overall market into the following eight indices — the Bloomberg Barclays U.S. Aggregate Bond Index, the MSCI EAFE Index, the Russell 1000 Growth Index, the Russell 1000 Value Index, the Russell 2500 Index, the FTSE NAREIT ALL REITs Total Return Index, the JPMorgan Global Government Bond Index (unhedged), and the Bloomberg Commodity Index. Index performance does not reflect the deduction of any investment-related fees and expenses. It is not possible to invest directly in an index.
Hypothetical examples are for illustrative purposes only and are not intended to represent the future performance of any MFS product.
The use of a systematic investing program does not guarantee a profit or protect against a loss in declining markets.
You should consider your financial ability to continue to invest through periods of low prices.
Past performance is not guarantee of future results.
So, just how well could these three steps work together over time?
To give you an idea, we’ll look at a tale of three well-intentioned investors.
Here’s the setup… At the start of 1997, let’s assume three people invest $1,000 per year for 20 years.
But each employed a different strategy.
Investor #1 chased performance, investing $1,000 per year in the previous year’s best-performing market segment.
How’d she do after 20 years? ? [CLICK FOR COLUMN]
Her $20,000 total investment grew to $38,765.
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10. TALE OF THREE INVESTORS
Each hypothetical investor followed a different strategy for investing $1,000 each year over a 20-year period ($20,000 total from 1/1/97 through 12/31/16)
Chased Performance
INVESTOR #1 — Each year she invested in the previous year’s best-performing market segment.
$38,765
Went for the rebound
INVESTOR #2 — Each year she invested in the previous year’s worst-performing market segment, hoping for a rebound the next year.
$34,869
For purposes of this comparison, we have divided the overall market into the following eight indices — the Bloomberg Barclays U.S. Aggregate Bond Index, the MSCI EAFE Index, the Russell 1000 Growth Index, the Russell 1000 Value Index, the Russell 2500 Index, the FTSE NAREIT ALL REITs Total Return Index, the JPMorgan Global Government Bond Index (unhedged), and the Bloomberg Commodity Index. Index performance does not reflect the deduction of any investment-related fees and expenses. It is not possible to invest directly in an index.
Hypothetical examples are for illustrative purposes only and are not intended to represent the future performance of any MFS product.
The use of a systematic investing program does not guarantee a profit or protect against a loss in declining markets.
You should consider your financial ability to continue to invest through periods of low prices.
Past performance is not guarantee of future results.
Investor #2 invested $1,000 every year in the previous year’s worst-performing market segment, hoping for a rebound.
How did she do after 20 years? [CLICK FOR COLUMN]
Slightly less than #1.
The value of her portfolio was to $34,869.
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11. TALE OF THREE INVESTORS
Each hypothetical investor followed a different strategy for investing $1,000 each year over a 20-year period ($20,000 total from 1/1/97 through 12/31/16)
Chased Performance
INVESTOR #1 — Each year she invested in the previous year’s best-performing market segment.
$38,765
INVESTOR #2 — Each year she invested in the previous year’s worst-performing market segment, hoping for a rebound the next year.
Went for the rebound
$34,869
INVESTOR #3 — She remained equally invested in eight different asset classes each year. She also rebalanced her portfolio’s assets each quarter so that they stayed equally distributed among the asset classes.
Practiced ADR*
$40,804
For purposes of this comparison, we have divided the overall market into the following eight indices — the Bloomberg Barclays U.S. Aggregate Bond Index, the MSCI EAFE Index, the Russell 1000 Growth Index, the Russell 1000 Value Index, the Russell 2500 Index, the FTSE NAREIT ALL REITs Total Return Index, the JPMorgan Global Government Bond Index (unhedged), and the Bloomberg Commodity Index. Index performance does not reflect the deduction of any investment-related fees and expenses. It is not possible to invest directly in an index.
Hypothetical examples are for illustrative purposes only and are not intended to represent the future performance of any MFS product.
The use of a systematic investing program does not guarantee a profit or protect against a loss in declining markets.
You should consider your financial ability to continue to invest through periods of low prices.
Past performance is not guarantee of future results.
Investor #3 put ADR to work.
She invested $1,000 every year in an equal mix of the eight asset classes.
She also rebalanced her portfolio every quarter to maintain her original allocation.
How did she do after 20 years? [CLICK FOR COLUMN]
Her $20,000 total investment would have grown to $40,804.
While no investment strategy can guarantee a profit or protect against a loss, in this case the ADR investor clearly would have had the winning strategy.
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12. SAMPLE INVESTOR QUESTIONNAIRE: DETERMINE YOUR RISK/RETURN PROFILE
But how do you pinpoint the appropriate risk/return or allocation profile that may be right for you?
(If an MFS representative is presenting)
This sample investor questionnaire could get you started. Working with your financial advisor, you’ll select a time horizon based on your age and when you expect to draw from your investments.
(If a Financial Advisor is presenting)
This sample investor questionnaire could get you started. Working together we can determine a time horizon based on your age and when you expect to draw from your investments.
[READ 2 QUESTIONS UNDER “TIME HORIZON” SECTION]
You’ll also make selections about your long-term goals and expectations.
[READ 3 QUESTIONS UNDER “LONG TERM GOALS” SECTION]
You’ll identify your tolerance of short-term risk as well.
[READ 2 QUESTIONS UNDER “SHORT TERM RISKS” SECTION]

13. BUILD WITH PRECISION Pursue your risk and return goals
Thank you
BUILD WITH PRECISION Pursue your risk and return goals
We covered a lot of ground today, but hopefully this concept of ADR is helpful as you think about your overall portfolio. Let’s take one more minute before we go to review.
First… Loss and regret aversion are two of the biggest behavioral mistakes you can avoid. That will help you manage your long-term assets successfully.
How? By using Allocate, Diversify, Rebalance (or “ADR”), a disciplined long-term strategy that can help you avoid overreacting to the inevitable ups and downs of the market while pursuing long-term goals. And when we looked at a tale of three hypothetical investors, the one who practiced ADR clearly came out on top.
Last… Is how important it is to first determine your specific goals, time horizon, and risk tolerance, and then align those, along with any other considerations, with the right investment vehicles for your needs. This is one thing every long-term investor really needs to get right.
Does anyone have any questions?
Thanks so much for joining me today.