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Morningstar Advisor Magazine October/November 2009 Issue

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Advance client relations with educational, informative and detailed FINRA reviewed sales ideas. These one-page investment concept hand-outs serve as an effective resource that help facilitate ongoing communication and strong relationships with clients. Partner with a third party resource that investors respect and discover the benefits of Morningstar Advisor Sales Ideas. Educate your clients, save time, focus on client relationships, and enhance marketing efforts.

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Diversification is perhaps the simplest and most popular investment concept, but in times of severe economic trouble, it may appear to lose its effectiveness. During the recent financial and credit crises, investors saw their portfolios tumble and started to fear that diversification was dead. It is true that a widespread decline in the economy affected most asset classes, but diversification, far from being dead, may still offer protection against extreme losses. The image illustrates the percentage of mutual funds and stocks that lost more than 75% and the percentage of funds and stocks that lost more than the market in 2008.

November 2009 | Fight or Flight

The recent market downturn caused some people to shift their investments from stocks and mutual funds to risk-free instruments. Despite providing some safety from market volatility, this strategy comes with some downsides. The image illustrates the current rates for fixed-income investments with varying maturities, along with the average inflation rate over the last 10 years.

December 2009 | A Penny Saved

Most people are aware of how important it is to save for retirement, and of how difficult it is to be able to retire comfortably. In recent years, both workers and retirees have expressed record low confidence over having sufficient savings to rely on in retirement. Perhaps the task of saving for retirement would be less daunting if investors could calculate exactly how much they needed to save as a percentage of their income. The table presents suggested savings rates for prospective retirees by age, gross income, and the amount already saved, assuming an 80% replacement of pre-retirement income.

September 2009 | Helpful TIPS

Inflation is normally a significant cause of concern for consumers and investors alike. Not only do rising prices put pressure on people's spending habits, but high inflation can also eat into investment returns. Treasury inflation-protected securities (TIPS) may offer a cushion during inflationary periods. They are fixed-income investments whose coupon payments change with the inflation rate: If inflation rises, the interest payment increases, and if inflation drops, the interest payment decreases. The image shows the performance of TIPS for the years since 1989 in which inflation was higher than its long-term average.

August 2009 | Traffic Jam

A well-diversified portfolio is based, in part, on the low correlation between its constituent asset classes. If this correlation changes, the portfolio may not be as well diversified as the investor previously thought. This is what happened during the current downturn: Because correlations between many asset classes went up, the diversification benefit was diminished. The image highlights the correlation of nine asset classes with the market for three time periods: before the current downturn, during the current downturn, and for the entire period since January 1980.

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