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Great presentation by Templeton on Why it Pays to stay invested in stocks over bonds and GICs in down markets. Contact me for further details
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1
STRONG FOCUS
ON INVESTMENT
EXCELLENCE
2
How Much Is This?
US$5,850,000,000,000 US$5,850,000,000,000 US$5.85 Trillion US$5.85 Trillion
How Much Is This?
2
3
5
Source: Money Market Accounts and CDs (Time Deposits at FDIC-insured commercial banks and savings institutions): FDIC. As of 9/30/12.
In Money Market Accounts & CDs
What Does This Number Represent?
US$5.85 Trillion
6
Source: Investor Economics, Household Balanced Sheet, as of September 30, 2012.
In Money Market Funds & GICs
A Similar Story in Canada
C$580 Billion
7
Source: Morningstar Research Inc., as of September 30, 2012. Canadian Money Market Fund Yield of 0.41% is based on the Morningstar Money Market
CAD Peer Group Average which contained 176 funds.
The Problem?
0.41% Average Money Market Fund Yield
As of September 30, 2012
8
It Won’t Buy You Much
After one year, a $10,000 investment would yield:
MONEY MARKET FUNDS 1-YEAR GICs 10-YEAR GOVERNMENT BONDS
$173 1.73%
Source: As at September 30, 2012. Money Market Funds: Morningstar Research Inc., Canadian Money Market Funds are represented by the Morningstar Money Market
CAD Peer Group Average which contained 176 funds.1-Year GICs: Bank of Canada. 10-Year Government Bonds: Bloomberg.
Yields as of
September 30, 2012
$78 0.78%
$41 0.41%
9
The Dilemma Facing Many Investors
Their investments are at a standstill
MONEY MARKET FUNDS 1-YEAR GICs 10-YEAR GOVERNMENT BONDS
10
The Dilemma Facing Many Investors
MONEY MARKET FUNDS 1-YEAR GICs 10-YEAR Government Bonds
Their investments are at a standstill
Their investment goals remain the same
BUYING A HOME UNIVERSITY EDUCATION RETIREMENT
8
The Dilemma Facing Many Investors
Their investment goals remain the same
BUYING A HOME UNIVERSITY EDUCATION RETIREMENT
12
• How We Got Here
• What Most Investors Are Missing
• Taking the Next Step
Today’s Discussion
How We Got Here
14
Seeing Is Believing
Availability Bias
Our thinking is strongly
influenced by what is
personally most relevant,
recent or dramatic.
Simply put—we remember
the PAIN.
16
The Building Blocks for a Wall of Worry
1. Source: Bloomberg LP.
2. Source: Bureau of Labor Statistics.
3. Source: RealtyTrac.
17
The Result: Prolonged Pessimism and Skepticism
Source: Kauffman Economic Outlook: A Quarterly Survey of Leading Economic Bloggers, fourth quarter 2011.
18
How Did the Market Perform? S&P 500 Annual Returns and Franklin Templeton
Annual U.S. Investor Sentiment Survey Results1
1. Source: © 2012 Morningstar. All rights reserved. The information contained herein: (1) is
proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed;
and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its
content providers are responsible for any damages or losses arising from any use of this
information. Indexes are unmanaged and one cannot invest directly in an index.
2. Source: 2010 Franklin Templeton Global Investor Sentiment Survey designed in
partnership with ORC International. Included 1,010 telephone responses from participants
age 18 and older in the U.S. from March 25, 2010 to March 28, 2010.
3. Source: 2011 Franklin Templeton Global Investor Sentiment Survey designed in
partnership with ORC International. Included 1,049 online responses from
participants age 18 and older in the U.S. from January 6, 2011 to January 7, 2011.
4. Source: 2012 Franklin Templeton Global Investor Sentiment Survey designed in
partnership with Duke University professor Dan Ariely and Qualtrics. Included 1,142
online responses from participants age 18 and older in the U.S. from January 30,
2012 to February 13, 2012.
19
Pessimism Continues to Guide U.S. Investor Decisions Equity Fund Net Flows
Source: Investment Company Institute.
Loss Aversion
Studies have shown that the
pain of a loss is almost twice
as strong as the reward felt
from a gain.
21
Used with permission.
We Learn the Pain of Loss Early
22
Perceived Safety May Come at a Cost Money Market Funds’ Average Yield Before and After Inflation
10-Year Period Ended September 30, 2012
Source: Morningstar Research Inc., as of September 30, 2012. Canadian Money Market Fund Yield of 0.41% is based on the Morningstar Money Market CAD Peer Group
Average which contained 176 funds.
23
Number of Years to Double Your Money
Can You Afford to Wait?
Bloomberg, as of September 30, 2012. Canadian Money Market Funds are represented by the Morningstar Money Market CAD Fund Category which contained 176
funds. 1-Year GICs yield data is obtained from the Bank of Canada's website. 10-Year Canadian Government Bonds yield is obtained from
Bloomberg. Average Time to Double Investment is calculated using the following formula: (Natural Log (2) / Natural Log (1+Yield)), Formula for Natural Log
is LN. Amount earned on a 1-Year $10,000 investment assumes the investment is made on the as of September 30, 2012.
24
Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general
market conditions.
Source: 2011 Franklin Templeton Investor Sentiment Survey designed in partnership with ORC International. Included 1,049 online responses from participants age 18 and
older in the U.S. from January 6, 2011 to January 7, 2011. Stocks represented 30.12% of responses.
What Do Investors Believe Over the Long Term?
Herding
We are programmed to feel
that the consensus view must
be the correct one.
26
It’s Hard to Go Against the Crowd
Used with permission from Candid Camera.
27
S&P 500 Performance vs. Equity and Bond Fund Net New Flows
This chart is for illustrative purposes only and does not reflect the performance of any Franklin, Templeton,
Mutual Series or Bissett fund. Past performance does not guarantee future results. Sources: © 2012 Morningstar; Equity and Bond Fund Flows: ICI. Flows are represented by monthly rolling 12-month net new cash flows. Indexes are unmanaged
and one cannot invest directly in an index.
The Problem of Going with the Flow
28
S&P/TSX Composite TRI Returns
20-Year Period Ended September 30, 2012
Source: Bloomberg, as of September 30, 2012. Indexes are unmanaged, one cannot invest directly in an index.
The Benefits of Staying Invested
What Most Investors
Are Missing
30
Source: Federal Reserve. Most recent data available. Based on the ratio of debt payments to disposable personal income.
U.S. Household Debt Service Has Been Decreasing Ratio of Debt Payments to Disposable Personal Income
31
U.S. Unemployment Has Declined From Its Peak
Source: U.S. Bureau of Labor Statistics.
32
Source: United Nations, World Bank, Surjit S. Bhalla, Second Among Equals: The Middle Class Kingdoms of India and China,
May 2007 and oxusinvestments.com.
The World’s Middle Class Is Growing Percentage and Size of the Middle Class Population in the World
33
Global Consumption Is Increasing Automobile Sales—China vs. U.S. (6-Month Rolling Average)
Sources: China Automobile Sales: China Automotive Information Net; U.S. Automobile Sales: Bloomberg. As of 9/30/12. Based on a six-month rolling average.
32
Global Consumption Is Increasing Automobile Sales—China vs. U.S. (6-Month Rolling Average)
34
U.S. Corporate Cash Near All-Time High S&P 500 Companies’ Total Cash as a Percentage of Total Assets
Source: Ned Davis Research Group, Inc. Based on historical data since 1977. The historical average cash level for 3/31/77–9/30/12 was 9.65%. As of 9/30/12 it
was 13.49%.
35
Payout Potential Appears Strong S&P 500 Index Dividend Payout Ratio
Source: Compustat via FactSet. © 2012 FactSet Research Systems Inc., all rights reserved. The information contained herein: (1) is proprietary to FactSet Research
Systems Inc. and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither FactSet Research
Systems Inc. nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future
results. Indexes are unmanaged, and one cannot invest directly in an index.
36
U.S. Equity Valuations Are Below Long-Term Averages S&P 500 Index 1-Year Forward P/E Ratio
15-Year Period Ended September 30, 2012
Source: © 2012 FactSet Research Systems Inc.
37
World Equity Valuations Are Below Historical Averages World Markets 1-Year Forward P/E Ratio
5-Year Period Ended September 30, 2012
Source: Bloomberg as of September 30, 2012
38
Investors Still Not Convinced S&P 500 Index Performance vs. Bloomberg U.S. Weekly Consumer Comfort Index (January 2000–September 2012)
Sources: S&P 500: © 2012 Morningstar; Bloomberg U.S. Weekly Consumer Comfort Index: Bloomberg. Indexes are unmanaged and one cannot invest directly in an index.
39
“Bull markets are
born on pessimism,
grow on skepticism,
mature on optimism
and die on euphoria.
— SIR JOHN TEMPLETON
Templeton Funds Founder
and Former Chairman
”
Taking the Next Step
41
How to Step Back into the Stock Market
Earn
Income
Build a
Position
Capitalize on
Opportunity
42
Earn Income Re-Entering the Stock Market with
Bissett Strategic Income Fund–Series A
Source: Morningstar Research Inc., as of December 31, 2012. Canadian Money Market Fund Yield of 0.41% is based on the Morningstar Money Market CAD Peer Group
Average which contained 176 funds.
2.2x
$698
$320
$20,000
Bissett Strategic Income
Fund–Series A
43
Earn Income Take Action with
Bissett Strategic Income Fund–Series A
44
Source: Morningstar Research Inc. as of September 30, 2012. The portfolio assumes 33.33% in Bissett Canadian Dividend Fund, 33.33% in Franklin US Rising
Dividends Fund and 33.33% in Mutual Global Discovery Fund.
Build a Position Scaling In with a Globally Diversified Combination
43
Build a Position Scaling In with a
Globally Diversified Combination
45
Growth of Monthly $1,000 Investments in 3-pack Portfolio (Rebalanced Annually)
vs. $60,000 Lump Sum Investment in Canadian Equities
5-Year Period Ended September 30, 2012
Build a Position Scaling In with a
Globally Diversified Combination
Source: Morningstar Research Inc. as of September 30, 2012. The hypothetical combined portfolio assumes 33.33% in Bissett Canadian Dividend Fund, 33.33% in Franklin U.S. Rising Dividends
Fund and 33.33% in Mutual Global Discovery Fund. For illustrative purposes only. Indexes are unmanaged and one cannot invest directly in an index. The growth of the $1,000 monthly investment
begins September 30, 2007 and ends September 30, 2012. Figures include reinvestment of income, capital gains, return of capital and dividends, but the performance does not include the effect of
any direct fees described in the fund's prospectus (e.g. advisory fee or income taxes payable) which, if applicable, would lower your total return. No investment strategy, including dollar cost averaging,
can guarantee a profit or protect against a loss in a declining market. Continuous or periodic investment plans neither assure a profit nor protect against loss in declining markets. Because dollar cost
averaging involves continuous investing regardless of fluctuating price levels, you should carefully consider your financial ability to continue investing through periods of fluctuating prices.
46
Source: Morningstar Research Inc. as of September 30, 2012. The portfolio assumes 33.33% in Bissett Canadian Equity Fund, 33.33% in
Franklin U.S. Rising Dividends Fund and 33.33% in Mutual Global Discovery Fund.
Build a Position Scaling In with a Globally Diversified Combination
Build a Position Scaling In with a
Globally Diversified Combination
47
Growth of Monthly $1,000 Investments in 3-pack Portfolio (Rebalanced Annually)
vs. $60,000 Lump Sum Investment in Canadian Equities
5-Year Period Ended September 30, 2012
Build a Position Scaling In with a
Globally Diversified Combination
Source: Morningstar Research Inc. as of September 30, 2012. The hypothetical combined portfolio assumes 33.33% in Bissett Canadian Equity Fund, 33.33% in Franklin U.S. Rising Dividends Fund
and 33.33% in Mutual Global Discovery Fund. For illustrative purposes only. Indexes are unmanaged and one cannot invest directly in an index. The growth of the $1,000 monthly investment begins
September 30, 2007 and ends September 30, 2012. Figures include reinvestment of income, capital gains, return of capital and dividends, but the performance does not include the effect of any direct
fees described in the fund's prospectus (e.g. advisory fee or income taxes payable) which, if applicable, would lower your total return. No investment strategy, including dollar cost averaging, can
guarantee a profit or protect against a loss in a declining market. Continuous or periodic investment plans neither assure a profit nor protect against loss in declining markets. Because dollar cost
averaging involves continuous investing regardless of fluctuating price levels, you should carefully consider your financial ability to continue investing through periods of fluctuating prices.
48
Source: Morningstar Research Inc. as of September 30, 2012.
Build a Position Scaling In with
Bissett Canadian Dividend Fund–Series A
49
Growth of Monthly $1,000 Investments vs. $60,000 Lump Sum Investment
in Canadian Equities
5-Year Period Ended September 30, 2012
Build a Position Scaling In with
Bissett Canadian Dividend Fund–Series A
Source: Morningstar Research Inc. as of September 30, 2012. Indexes are unmanaged and one cannot invest directly in an index. The growth of the $1,000 monthly
investment begins September 30, 2007 and ends September 30, 2012. Figures include reinvestment of income, capital gains, return of capital and dividends, but the
performance does not include the effect of any direct fees described in the fund's prospectus (e.g. advisory fee or income taxes payable) which, if applicable, would
lower your total return. No investment strategy, including dollar cost averaging, can guarantee a profit or protect against a loss in a declining market. Continuous or
periodic investment plans neither assure a profit nor protect against loss in declining markets. Because dollar cost averaging involves continuous investing
regardless of fluctuating price levels, you should carefully consider your financial ability to continue investing through periods of fluctuating prices.
50
Source: Morningstar Research Inc. as of September 30, 2012.
Build a Position Scaling In with
Bissett Dividend Income Fund–Series A
51
Growth of Monthly $1,000 Investments vs. $60,000 Lump Sum Investment
in Canadian Equities
5-Year Period Ended September 30, 2012
Build a Position Scaling In with
Bissett Dividend Income Fund–Series A
Source: Morningstar Research Inc. as of September 30, 2012. Indexes are unmanaged and one cannot invest directly in an index. The growth of the $1,000 monthly
investment begins September 30, 2007 and ends September 30, 2012. Figures include reinvestment of income, capital gains, return of capital and dividends, but the
performance does not include the effect of any direct fees described in the fund's prospectus (e.g. advisory fee or income taxes payable) which, if applicable, would
lower your total return. No investment strategy, including dollar cost averaging, can guarantee a profit or protect against a loss in a declining market. Continuous or
periodic investment plans neither assure a profit nor protect against loss in declining markets. Because dollar cost averaging involves continuous investing
regardless of fluctuating price levels, you should carefully consider your financial ability to continue investing through periods of fluctuating prices.
52
Source: Morningstar Research Inc. as of September 30, 2012.
Build a Position Scaling In with
Bissett Canadian Equity Fund–Series A
53
Growth of Monthly $1,000 Investments vs. $60,000 Lump Sum Investment
in Canadian Equities
5-Year Period Ended September 30, 2012
Build a Position Scaling In with
Bissett Canadian Equity Fund–Series A
Source: Morningstar Research Inc. as of September 30, 2012. Indexes are unmanaged and one cannot invest directly in an index. The growth of the $1,000 monthly
investment begins September 30, 2007 and ends September 30, 2012. Figures include reinvestment of income, capital gains, return of capital and dividends, but the
performance does not include the effect of any direct fees described in the fund's prospectus (e.g. advisory fee or income taxes payable) which, if applicable, would
lower your total return. No investment strategy, including dollar cost averaging, can guarantee a profit or protect against a loss in a declining market. Continuous or
periodic investment plans neither assure a profit nor protect against loss in declining markets. Because dollar cost averaging involves continuous investing
regardless of fluctuating price levels, you should carefully consider your financial ability to continue investing through periods of fluctuating prices.
54
Source: Morningstar Research Inc. as of September 30, 2012.
Build a Position Scaling In with
Franklin U.S. Rising Dividends Fund–Series A
55
Growth of Monthly $1,000 Investments vs. $60,000 Lump Sum Investment
in U.S. Equities
5-Year Period Ended September 30, 2012
Build a Position Scaling In with
Franklin U.S. Rising Dividends Fund–Series A
Source: Morningstar Research Inc. as of September 30, 2012. Indexes are unmanaged and one cannot invest directly in an index. The growth of the $1,000 monthly
investment begins September 30, 2007 and ends September 30, 2012. Figures include reinvestment of income, capital gains, return of capital and dividends, but the
performance does not include the effect of any direct fees described in the fund's prospectus (e.g. advisory fee or income taxes payable) which, if applicable, would
lower your total return. No investment strategy, including dollar cost averaging, can guarantee a profit or protect against a loss in a declining market. Continuous or
periodic investment plans neither assure a profit nor protect against loss in declining markets. Because dollar cost averaging involves continuous investing
regardless of fluctuating price levels, you should carefully consider your financial ability to continue investing through periods of fluctuating prices.
56
Source: Morningstar Research Inc. as of September 30, 2012.
Build a Position Scaling In with
Mutual Global Discovery Fund–Series A
57
Growth of Monthly $1,000 Investments vs. $60,000 Lump Sum Investment
in Global Equities
5-Year Period Ended September 30, 2012
Build a Position Scaling In with
Mutual Global Discovery Fund–Series A
Source: Morningstar Research Inc. as of September 30, 2012. Indexes are unmanaged and one cannot invest directly in an index. The growth of the $1,000 monthly
investment begins September 30, 2007 and ends September 30, 2012. Figures include reinvestment of income, capital gains, return of capital and dividends, but the
performance does not include the effect of any direct fees described in the fund's prospectus (e.g. advisory fee or income taxes payable) which, if applicable, would
lower your total return. No investment strategy, including dollar cost averaging, can guarantee a profit or protect against a loss in a declining market. Continuous or
periodic investment plans neither assure a profit nor protect against loss in declining markets. Because dollar cost averaging involves continuous investing
regardless of fluctuating price levels, you should carefully consider your financial ability to continue investing through periods of fluctuating prices.
58
Capitalize on Opportunity Buying an Attractive Value with
Templeton International Stock Fund–Series A
As of 9/30/12. Holdings are subject to change. For updated information, please call Franklin Templeton Investments at 1.800.387.0830 or visit www.franklintempleton.ca.
The portfolio manager for the fund reserves the right to withhold release of information with respect to holdings.
Geographic Weightings (As of September 30, 2012)
47
Capitalize on Opportunity Buying an Attractive Value with
Templeton International Stock Fund–Series A
59
Capitalize on Opportunity Increase your Growth Potential with
Templeton International Stock Fund–Series A
$35,200
$24,231 $22,685
Te
mple
ton Inte
rnatio
nal
Sto
ck F
und–
Series A
MS
CI E
AF
E G
R
Index (
CA
D$)
Inte
rnational E
quity
Cate
gory
Avera
ge
Source: Morningstar Research Inc. as of September 30, 2012. * Since inception (January 3, 1989). Source: Morningstar Research Inc. as of September 30,
2012. The growth of $10,000 begins at the date of the fund's inception (January 3, 1989). Figures include reinvestment of income,
capital gains, return of capital and dividends, but the performance does not include the effect of any direct fees described in the fund's
prospectus (e.g. advisory fee or income taxes payable) which, if applicable, would lower your total returns.
over 45% more growth
Growth of $10,000*
January 3, 1989 to September 30, 2012
60
Capitalize on Opportunity Buying an Attractive Value with
Templeton Emerging Markets Fund–Series A
Source: IMF October 2012 *Includes Indonesia, Malaysia, Philippines, Thailand and Vietnam
Higher Projected Growth Rates for Emerging Economies are Driving Changes in
Global Markets and Consumption
61
Capitalize on Opportunity Buying an Attractive Value with
Templeton Emerging Markets Fund–Series A
Source: Factset; EIU *Developed Markets : G7. Emerging Markets : 87 non-OECD Countries. Total domestic, external and IMF
government debt, as a % of nominal GDP. Usually but not exclusively central government
Emerging vs. Developed Markets:
Public Debt % of GDP
December 21, 2002 – December 30, 2011
Emerging vs. Developed Markets:
Government Debt Per Capita
2011 U.S. Dollars
62
Today’s Discussion
• How We Got Here
• What Most Investors Are Missing
• Taking the Next Step
63
The Importance of Working with Your Financial Advisor
• Keeps emotions out of investing
• Builds a long-term investment
strategy that is appropriate for
your risk tolerance and goals
• Ensures you stay on course with
regular reviews and adjustments
to your investment strategy
64
Important Legal Information
The historical annual compounded rates of return as of December 31, 2012 are: Bissett Strategic
Income Fund–Series A units 8.4% 1-year and since inception (December 29, 2011); Bissett Canadian
Dividend Fund–Series A units 1 year 8.8%, 3 years 8.5%, 5 years 4.9% and 7.7% since inception
(December 22, 2003); Bissett Dividend Income Fund–Series A units 1 year 7.7%, 3 years 8.1%, 5
years 3.7%, 10 years 5.8% and 5.6% since inception (November 24, 2000); Bissett Canadian Equity
Fund–Series A units 1 year 13.9%, 3 years 7.7%, 5 years 2.9%, 10 years 7.2%, and 5.5% since
inception (November 24, 2000); Franklin U.S. Rising Dividends Fund–Series A units 1 year 5.5%, 3
years 7.3%, 5 years 1.7%, 10 years -0.8%, and -3.7% since inception (November 24, 2000); Mutual
Global Discovery Fund–Series A units 1 year 12.6%, 3 years 5.4%, 5 years -0.3% and 5.6% since
inception (February 17, 2003); Templeton Emerging Markets Fund–Series A units 1 year 12.3%, 3
years 0.6%, 5 years -2.7%, 10 years 8.4% and 6.2% since inception (September 20, 1991); Templeton
International Stock Fund–Series A units 1 year 13.9%, 3 years 0.3%, 5 years -4.9%, 10 years 2.9%,
and 5.7% since inception (January 3, 1989). These include changes in unit value and reinvestment of
all distributions but do not take into account sales, redemption, distribution or optional charges or
income taxes payable by any unitholder which may have reduced returns. Commissions, trailing
commissions, management fees and expenses may all be associated with mutual fund investments.
Please read the prospectus before investing. The indicated rates of return are the historical annual
compounded returns, including changes in unit value and reinvestment of all distributions and do not
take into account sales, redemption, distribution or optional charges or income taxes payable by any
securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change
frequently and past performance may not be repeated.
Franklin Templeton Investments Corp.
5000 Yonge Street, Suite 900
Toronto, Ontario M2N 0A7
Toll-free: 1-800-387-0830
franklintempleton.ca
© 2013 Franklin Templeton Investments Corp. All rights reserved. TSCA PPT 12/12