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Q4 | 2014 - Questis Quarterly Market Review Call

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The document summarizes global market performance in the 4th quarter of 2014. US stocks outperformed most other markets, with small caps outperforming large caps. International developed markets declined, with small caps slightly outperforming large caps. Emerging markets also declined and underperformed developed markets. REITs in the US and globally outperformed broader equity markets. Bond markets were positive due to falling yields.

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Q4 Quarterly Market Review Fourth Quarter 2014
Investment Committee 2 ! ! Chief Operating Officer John M. Tabb III, CFP®, AIF® John@MyQuestis.com (843) 376-1321 ! Portfolio Specialist Dan Callahan Dan@MyQuestis.com (843) 628-5329 ! ! ! Chief Product Officer James Carlson James@MyQuestis.com (843) 376-1320
Quarterly Market Review Fourth Quarter 2014 Overview: Market Summary for Q4 World Stock Market Performance (US and Intl.) World Asset Classes US Stocks International Developed Stocks Emerging Markets Stocks Real Estate Investment Trusts (REITs) Commodities Fixed Income Global Diversification Questis Performance This report features world capital market performance and a timeline of events for the past quarter and year of 2014. It begins with a global overview, then features the returns of stock and bond asset classes in the US and 
 international markets. The report also illustrates the performance of globally diversified portfolios.
US Stock Market Global Real Estate International Developed 
 Stocks US Bond Market Global Bond Market 
 ex US +5.24% -3.69% +9.68% +1.79% Emerging 
 Markets 
 Stocks BONDSSTOCKS -4.50% Market Summary 4 Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net div.]), Emerging Markets (MSCI Emerging Markets Index [net div.]), Global Real Estate (S&P Global REIT Index), US Bond Market (Barclays US Aggregate Bond Index), and Global Bond ex US Market (Citigroup WGBI ex USA 1−30 Years [Hedged to USD]). The S&P data are provided by Standard & Poor's Index Services Group. Russell data © Russell Investment Group 1995–2015, all rights reserved. MSCI data © MSCI 2015, all rights reserved. Barclays data provided by Barclays Bank PLC. Citigroup bond indices © 2014 by Citigroup. Fourth Quarter 2014 Index Returns +3.02%
5 Graph Source: MSCI ACWI Index. MSCI data © MSCI 2015, all rights reserved.
 It is not possible to invest directly in an index. Performance does not reflect the expenses associated with management of an actual portfolio. Past performance is not a guarantee of future results.
6 Graph Source: MSCI ACWI Index. MSCI data © MSCI 2015, all rights reserved.
 It is not possible to invest directly in an index. Performance does not reflect the expenses associated with management of an actual portfolio. Past performance is not a guarantee of future results.
7 US Equity Markets The US equity markets—and particularly the large cap segment of the market—logged a strong year. The S&P 500 Index returned 13.69%; the NASDAQ Composite Index gained 13.40%; and the Russell 2000, a popular benchmark for small company US stocks, returned 4.89%. International and Emerging Markets Non-US developed stock markets experienced negative performance across almost all major indices (references in USD). The MSCI World ex USA Index, a benchmark for large cap stocks in developed markets outside the US, returned -4.32%. The small cap and value versions of the MSCI EAFE index returned -4.95% and -5.39%, respectively. Emerging markets proved no exception, with the MSCI Emerging Markets Index returning -2.19% Fixed Income Returns of major fixed income indices were positive due to falling yields and rising prices. One-year US Treasury notes returned 0.18%, US government bonds 4.92%, world government bonds (1–5 years USD hedged) 1.90%, and US TIPS 3.64%. Real Estate and Commodities Real estate securities had a banner year: The Dow Jones US Select REIT Index returned 32.00%, and the S&P Global ex US REIT Index returned 10.94%. Commodities were negative for the fourth year in a row, with the Bloomberg Commodity Total Return Index returning -17.01%. World Asset Classes - 2014 Index Returns
Ranked Returns for the Quarter (%) Large Cap Growth Large Cap Large Cap Value Marketwide Small Cap Value Small Cap Small Cap Growth 10.05 9.73 9.40 5.24 4.98 4.93 4.78 US Stocks 8 Fourth Quarter 2014 Index Returns Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Marketwide (Russell 3000 Index), Large Cap (S&P 500 Index), Large Cap Value (Russell 1000 Value Index), Large Cap Growth (Russell 1000 Growth Index), Small Cap (Russell 2000 Index), Small Cap Value (Russell 2000 Value Index), and Small Cap Growth (Russell 2000 Growth Index). World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. Russell 3000 Index is used as the proxy for the US market. Russell data © Russell Investment Group 1995–2015, all rights reserved. The S&P data are provided by Standard & Poor's Index Services Group. The US equity market performed better than most other markets for the quarter. Small cap indices outperformed large cap indices. Marketwide value indices outperformed growth indices, and large and mid-cap value indices outperformed their growth counterparts. However, value underperformed growth among both small and micro cap stocks. REITs, which are included to varying degrees in many benchmarks, boosted index returns. Period Returns (%) * Annualized Asset Class YTD 1 Year 3 Years** 5 Years** 10 Years** Marketwide 12.56 12.56 20.51 15.63 7.94 Large Cap 13.69 13.69 20.41 15.45 7.67 Large Cap Value 13.45 13.45 20.89 15.42 7.30 Large Cap Growth 13.05 13.05 20.26 15.81 8.49 Small Cap 4.89 4.89 19.21 15.55 7.77 Small Cap Value 4.22 4.22 18.29 14.26 6.89 Small Cap Growth 5.60 5.60 20.14 16.80 8.54 Aggressive: 45% Moderate: 30% Conservative: 15% ALLOCATION
International Developed Stocks 9 Fourth Quarter 2014 Index Returns Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Large Cap (MSCI World ex USA Index), Small Cap (MSCI World ex USA Small Cap Index), Value (MSCI World ex USA Value Index), and Growth (MSCI World ex USA Growth). All index returns are net of withholding tax on dividends. World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. MSCI World ex USA IMI Index used as the proxy for the International Developed market. MSCI data © MSCI 2015, all rights reserved. International developed broad market indices measured in US dollars underperformed the US indices but outperformed emerging markets as a group. Small caps slightly outperformed large caps. Value underperformed growth across all size segments. The US dollar strengthened against most currencies during the quarter. Q4 Ranked Returns (%) Growth Small Cap Large Cap Value -5.1719 -3.6922 -3.3796 -2.2162 US currency * Annualized Asset Class YTD 1 Year 3 Years** 5 Years** 10 Years** Large Cap -4.32 -4.32 10.47 5.21 4.64 Small Cap -5.35 -5.35 11.77 7.91 5.87 Value -5.41 -5.41 10.46 4.52 4.18 Growth -3.26 -3.26 10.43 5.85 5.04 Period Returns (%) Aggressive: 27% Moderate: 18% Conservative: 9% ALLOCATION
Emerging Markets Stocks 10 Fourth Quarter 2014 Index Returns Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Large Cap (MSCI Emerging Markets Index), Small Cap (MSCI Emerging Markets Small Cap Index), Value (MSCI Emerging Markets Value Index), and Growth (MSCI Emerging Markets Growth Index). All index returns are net of withholding tax on dividends. World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. MSCI Emerging Markets IMI Index used as the proxy for the emerging market portion of the market. MSCI data © MSCI 2015, all rights reserved. Broad market emerging markets indices underperformed developed markets, including the US. Small cap indices underperformed large cap indices for the quarter. Value indices underperformed growth indices in large caps and mid-caps but outperformed in small caps. The US dollar strengthened against most currencies during the quarter. Q4 Ranked Returns (%) Growth Large Cap Small Value -6.4395 -6.023 -4.5047 -2.6067 US currency * Annualized Asset Class YTD 1 Year 3 Years** 5 Years** 10 Years** Large Cap -2.19 -2.19 4.04 1.78 8.43 Small Cap 1.01 1.01 7.65 2.93 9.63 Value -4.08 -4.08 1.79 0.51 8.59 Growth -0.35 -0.35 6.24 3.00 8.22 Period Returns (%) Aggressive: 10% Moderate: 7% Conservative: 4% ALLOCATION
Real Estate Investment Trusts (REITs) 11 Fourth Quarter 2014 Index Returns Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Number of REIT stocks and total value based on the two indices. All index returns are net of withholding tax on dividends. Total value of REIT stocks represented by Dow Jones US Select REIT Index and the S&P Global ex US REIT Index. Dow Jones US Select REIT Index used as proxy for the US market and S&P Global ex US REIT Index used as proxy for the World ex US market. Dow Jones US Select REIT Index data provided by Dow Jones ©. S&P Global ex US REIT Index data provided by Standard and Poor’s Index Services Group © 2014. US REITs outperformed the broad equity market for the quarter. REIT indices in developed markets outside the US outperformed broad market equity indices. Q4 Ranked Returns (%) US REITs Global REITs (ex US) 2.9817 15.092 Period Returns (%) * Annualized Asset Class YTD 1 Year 3 Years** 5 Years** 10 Years** US REITs 32.00 32.00 16.10 16.99 8.13 Global REITs (ex US) 10.94 10.94 14.42 9.86 4.29Aggressive: 9% Moderate: 7.50% Conservative: 6% ALLOCATION
Asset Class YTD Q4 1 Year 3 Years** 5 Years** 10 Years** Commodities -17.01 -12.10 -17.01 -9.43 -5.53 -1.86 Period Returns (%) * Annualized Commodities 12 Fourth Quarter 2014 Index Returns Past performance is not a guarantee of future results. Index is not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. 
 All index returns are net of withholding tax on dividends. Securities and commodities data provided by Bloomberg. Commodities were broadly negative during the fourth quarter. The Bloomberg Commodity Index fell 12.10%. Energy led the decline with WTI crude oil and natural gas returning -40.65% and -32.49%, respectively. Wheat was the best performer with a gain of 21.82%. After experiencing negative returns in the third quarter, corn and soybeans gained a respective 19.70% and 10.44% in the fourth quarter. Q4 Ranked Returns for Individual Commodities (%) Wheat Corn Soybeans Cotton Live Cattle Soybean Oil Gold Zinc Copper Aluminum Nickel Silver Sugar Lean Hogs Coffee Heating Oil Natural Gas Unleaded Gas Brent Oil WTI Crude Oil -40.6519 -40.2033 -38.5649 -32.4892 -30.1823 -15.8088 -13.9409 -11.7325 -8.8458 -7.5781 -6.4082 -5.8896 -5.3641 -2.342 -2.2035 -0.8205 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.399 10.437 19.697 21.823 Aggressive: 5.40% Moderate: 4.50% Conservative: 3.60% ALLOCATION
Bond Yields across Issuers 10-Year US Treasury Muni HQ Corporates MQ Corporates 3.313 2.519 3.56 2.17 Fixed Income 13 Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Yield curve data from Federal Reserve. State and local bonds are from the Bond Buyer Index, general obligation, 20 years to maturity, mixed quality. AAA-AA Corporates represent the Bank of America Merrill Lynch US Corporates, AA-AAA rated. A-BBB Corporates represent the Bank of America Merrill Lynch US Corporates, BBB-A rated. Barclays data provided by Barclays Bank PLC. US long-term bonds, bills, inflation, and fixed income factor data 
 © Stocks, Bonds, Bills, and Inflation (SBBI) Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). Citigroup bond indices © 2014 by Citigroup. The BofA Merrill Lynch Indices are used with permission; © 2014 Merrill Lynch, Pierce, Fenner & Smith Incorporated; all rights reserved. Merrill Lynch, Pierce, Fenner & Smith Incorporated is a wholly owned subsidiary of Bank of America Corporation. Fourth Quarter 2014 Index Returns Interest rates across US fixed income markets generally declined during the quarter. The yield on the 10-year Treasury note ended at 2.17%, a dip of 34 basis points over the period. (One basis point equals one- hundredth of a percentage point.) Long-term US Treasury bonds gained 27% in 2014. Period Returns (%) Asset Class YTD 1 Year 3 Years** 5 Years** 10 Years** BofA Merrill Lynch Three-Month US Treasury Bill Index 0.04 0.04 0.07 0.09 1.54 BofA Merrill Lynch 1-Year US Treasury Note Index 0.18 0.18 0.23 0.41 2.00 Citigroup WGBI 1−5 Years (hedged to USD) 1.90 1.90 1.54 1.78 3.11 Long-Term Government Bonds 23.87 23.87 4.29 9.88 7.48 Barclays US Aggregate Bond Index 5.97 5.97 2.66 4.45 4.71 Barclays US Corporate High Yield Index 2.45 2.45 8.43 9.03 7.74 Barclays Municipal Bond Index 9.05 9.05 4.30 5.16 4.74 Barclays US TIPS Index 3.64 3.64 0.44 4.11 4.38 * Annualized US Treasury Yield Curve 0 1 2 3 4 1
 Yr 5
 Yr 10
 Yr 30
 Yr 12/31/14 12/31/13 9/30/14 Aggressive: 0% Moderate: 40% • 20% Short-Term • 12% Global • 8% TIPS Conservative: 60% • 30% Short Term • 18% Global • 12% TIPS ALLOCATION
Growth of Wealth: The Relationship between Risk and Return $10,000 $27,500 $45,000 $62,500 $80,000 01/1988 10/1989 07/1991 04/1993 01/1995 10/1996 07/1998 04/2000 01/2002 10/2003 07/2005 04/2007 01/2009 10/2010 07/2012 04/2014 Stock/Bond Mix 100% Stocks ! 75/25 50/50 25/75 100% Treasury Bills Global Diversification 14 Fourth Quarter 2014 Index Returns Diversification does not eliminate the risk of market loss. Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect expenses associated with the management an actual portfolio. Asset allocations and the hypothetical index portfolio returns are for illustrative purposes only and do not represent actual performance. Global Stocks represented by MSCI All Country World Index (gross div.) and Treasury Bills represented by US One-Month Treasury Bills. Globally diversified allocations rebalanced monthly, no withdrawals. Data © MSCI 2015, all rights reserved. Treasury bills © Stocks, Bonds, Bills, and Inflation Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). These portfolios illustrate the performance of different global stock/bond mixes and highlight the benefits of diversification. Mixes with larger allocations to stocks are considered riskier but have higher expected returns over time. 12/2014
Randomness of Returns 15 ! • We often hear the term “The Lost Decade” for US stocks. This was coined after the S&P500 essentially returned 0% for the period 2000 to 2010. • If an investor held a globally diversified portfolio during this same time period, the results are much different. For instance, a sample 70/30 portfolio during this period, consisting of US and International Stocks, REIT’s, and Bonds, archived an annualized return of 8.4%. * • Global Diversification is important for risk reduction, but it also allows you to capture returns wherever they may occur, and helps take the guesswork out of investing. You never know which markets will outperform year to year, as the graphic above illustrates. ! !*Source: http://www.forbes.com/sites/feeonlyplanner/2012/08/21/a-lost-decade-not-the-case-for-all-investors/
Asset Class Performance (Net of Fees) 16 • The spread of YTD returns between the 100% stock portfolio and the 20/80 portfolio is remarkably tight. ! • Bonds performed surprisingly well in 2014, contrary to many industry experts who predicted, yet again, that interest rates would rise. The yield on 10-year T-Notes actually decreased in 2014. The Barclay’s Aggregate Bond Index, a widely used index to measure the “Bond Market’, was up ~6% for the year. ! • Real Estate Investment Trusts (REIT’s) had another strong year. US REIT’s were up 30% in 2014. ! • Commodities struggled throughout the year, and got hit hard in Q4 due to the decline of oil prices.
17 Coming Soon… Questions? Contact us anytime. We are always here to help. !! Portfolio Specialist Dan Callahan Dan@MyQuestis.com (843) 628-5329 ! ! ! !!! • Next week, we’ll distribute our Review, which covers major headlines, events and performance of global markets and economies for 2014. • Ongoing quarterly review calls. !

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Q4 | 2014 - Questis Quarterly Market Review Call

  • 2. Investment Committee 2 ! ! Chief Operating Officer John M. Tabb III, CFP®, AIF® John@MyQuestis.com (843) 376-1321 ! Portfolio Specialist Dan Callahan Dan@MyQuestis.com (843) 628-5329 ! ! ! Chief Product Officer James Carlson James@MyQuestis.com (843) 376-1320
  • 3. Quarterly Market Review Fourth Quarter 2014 Overview: Market Summary for Q4 World Stock Market Performance (US and Intl.) World Asset Classes US Stocks International Developed Stocks Emerging Markets Stocks Real Estate Investment Trusts (REITs) Commodities Fixed Income Global Diversification Questis Performance This report features world capital market performance and a timeline of events for the past quarter and year of 2014. It begins with a global overview, then features the returns of stock and bond asset classes in the US and 
 international markets. The report also illustrates the performance of globally diversified portfolios.
  • 4. US Stock Market Global Real Estate International Developed 
 Stocks US Bond Market Global Bond Market 
 ex US +5.24% -3.69% +9.68% +1.79% Emerging 
 Markets 
 Stocks BONDSSTOCKS -4.50% Market Summary 4 Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net div.]), Emerging Markets (MSCI Emerging Markets Index [net div.]), Global Real Estate (S&P Global REIT Index), US Bond Market (Barclays US Aggregate Bond Index), and Global Bond ex US Market (Citigroup WGBI ex USA 1−30 Years [Hedged to USD]). The S&P data are provided by Standard & Poor's Index Services Group. Russell data © Russell Investment Group 1995–2015, all rights reserved. MSCI data © MSCI 2015, all rights reserved. Barclays data provided by Barclays Bank PLC. Citigroup bond indices © 2014 by Citigroup. Fourth Quarter 2014 Index Returns +3.02%
  • 5. 5 Graph Source: MSCI ACWI Index. MSCI data © MSCI 2015, all rights reserved.
 It is not possible to invest directly in an index. Performance does not reflect the expenses associated with management of an actual portfolio. Past performance is not a guarantee of future results.
  • 6. 6 Graph Source: MSCI ACWI Index. MSCI data © MSCI 2015, all rights reserved.
 It is not possible to invest directly in an index. Performance does not reflect the expenses associated with management of an actual portfolio. Past performance is not a guarantee of future results.
  • 7. 7 US Equity Markets The US equity markets—and particularly the large cap segment of the market—logged a strong year. The S&P 500 Index returned 13.69%; the NASDAQ Composite Index gained 13.40%; and the Russell 2000, a popular benchmark for small company US stocks, returned 4.89%. International and Emerging Markets Non-US developed stock markets experienced negative performance across almost all major indices (references in USD). The MSCI World ex USA Index, a benchmark for large cap stocks in developed markets outside the US, returned -4.32%. The small cap and value versions of the MSCI EAFE index returned -4.95% and -5.39%, respectively. Emerging markets proved no exception, with the MSCI Emerging Markets Index returning -2.19% Fixed Income Returns of major fixed income indices were positive due to falling yields and rising prices. One-year US Treasury notes returned 0.18%, US government bonds 4.92%, world government bonds (1–5 years USD hedged) 1.90%, and US TIPS 3.64%. Real Estate and Commodities Real estate securities had a banner year: The Dow Jones US Select REIT Index returned 32.00%, and the S&P Global ex US REIT Index returned 10.94%. Commodities were negative for the fourth year in a row, with the Bloomberg Commodity Total Return Index returning -17.01%. World Asset Classes - 2014 Index Returns
  • 8. Ranked Returns for the Quarter (%) Large Cap Growth Large Cap Large Cap Value Marketwide Small Cap Value Small Cap Small Cap Growth 10.05 9.73 9.40 5.24 4.98 4.93 4.78 US Stocks 8 Fourth Quarter 2014 Index Returns Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Marketwide (Russell 3000 Index), Large Cap (S&P 500 Index), Large Cap Value (Russell 1000 Value Index), Large Cap Growth (Russell 1000 Growth Index), Small Cap (Russell 2000 Index), Small Cap Value (Russell 2000 Value Index), and Small Cap Growth (Russell 2000 Growth Index). World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. Russell 3000 Index is used as the proxy for the US market. Russell data © Russell Investment Group 1995–2015, all rights reserved. The S&P data are provided by Standard & Poor's Index Services Group. The US equity market performed better than most other markets for the quarter. Small cap indices outperformed large cap indices. Marketwide value indices outperformed growth indices, and large and mid-cap value indices outperformed their growth counterparts. However, value underperformed growth among both small and micro cap stocks. REITs, which are included to varying degrees in many benchmarks, boosted index returns. Period Returns (%) * Annualized Asset Class YTD 1 Year 3 Years** 5 Years** 10 Years** Marketwide 12.56 12.56 20.51 15.63 7.94 Large Cap 13.69 13.69 20.41 15.45 7.67 Large Cap Value 13.45 13.45 20.89 15.42 7.30 Large Cap Growth 13.05 13.05 20.26 15.81 8.49 Small Cap 4.89 4.89 19.21 15.55 7.77 Small Cap Value 4.22 4.22 18.29 14.26 6.89 Small Cap Growth 5.60 5.60 20.14 16.80 8.54 Aggressive: 45% Moderate: 30% Conservative: 15% ALLOCATION
  • 9. International Developed Stocks 9 Fourth Quarter 2014 Index Returns Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Large Cap (MSCI World ex USA Index), Small Cap (MSCI World ex USA Small Cap Index), Value (MSCI World ex USA Value Index), and Growth (MSCI World ex USA Growth). All index returns are net of withholding tax on dividends. World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. MSCI World ex USA IMI Index used as the proxy for the International Developed market. MSCI data © MSCI 2015, all rights reserved. International developed broad market indices measured in US dollars underperformed the US indices but outperformed emerging markets as a group. Small caps slightly outperformed large caps. Value underperformed growth across all size segments. The US dollar strengthened against most currencies during the quarter. Q4 Ranked Returns (%) Growth Small Cap Large Cap Value -5.1719 -3.6922 -3.3796 -2.2162 US currency * Annualized Asset Class YTD 1 Year 3 Years** 5 Years** 10 Years** Large Cap -4.32 -4.32 10.47 5.21 4.64 Small Cap -5.35 -5.35 11.77 7.91 5.87 Value -5.41 -5.41 10.46 4.52 4.18 Growth -3.26 -3.26 10.43 5.85 5.04 Period Returns (%) Aggressive: 27% Moderate: 18% Conservative: 9% ALLOCATION
  • 10. Emerging Markets Stocks 10 Fourth Quarter 2014 Index Returns Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Large Cap (MSCI Emerging Markets Index), Small Cap (MSCI Emerging Markets Small Cap Index), Value (MSCI Emerging Markets Value Index), and Growth (MSCI Emerging Markets Growth Index). All index returns are net of withholding tax on dividends. World Market Cap represented by Russell 3000 Index, MSCI World ex USA IMI Index, and MSCI Emerging Markets IMI Index. MSCI Emerging Markets IMI Index used as the proxy for the emerging market portion of the market. MSCI data © MSCI 2015, all rights reserved. Broad market emerging markets indices underperformed developed markets, including the US. Small cap indices underperformed large cap indices for the quarter. Value indices underperformed growth indices in large caps and mid-caps but outperformed in small caps. The US dollar strengthened against most currencies during the quarter. Q4 Ranked Returns (%) Growth Large Cap Small Value -6.4395 -6.023 -4.5047 -2.6067 US currency * Annualized Asset Class YTD 1 Year 3 Years** 5 Years** 10 Years** Large Cap -2.19 -2.19 4.04 1.78 8.43 Small Cap 1.01 1.01 7.65 2.93 9.63 Value -4.08 -4.08 1.79 0.51 8.59 Growth -0.35 -0.35 6.24 3.00 8.22 Period Returns (%) Aggressive: 10% Moderate: 7% Conservative: 4% ALLOCATION
  • 11. Real Estate Investment Trusts (REITs) 11 Fourth Quarter 2014 Index Returns Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Number of REIT stocks and total value based on the two indices. All index returns are net of withholding tax on dividends. Total value of REIT stocks represented by Dow Jones US Select REIT Index and the S&P Global ex US REIT Index. Dow Jones US Select REIT Index used as proxy for the US market and S&P Global ex US REIT Index used as proxy for the World ex US market. Dow Jones US Select REIT Index data provided by Dow Jones ©. S&P Global ex US REIT Index data provided by Standard and Poor’s Index Services Group © 2014. US REITs outperformed the broad equity market for the quarter. REIT indices in developed markets outside the US outperformed broad market equity indices. Q4 Ranked Returns (%) US REITs Global REITs (ex US) 2.9817 15.092 Period Returns (%) * Annualized Asset Class YTD 1 Year 3 Years** 5 Years** 10 Years** US REITs 32.00 32.00 16.10 16.99 8.13 Global REITs (ex US) 10.94 10.94 14.42 9.86 4.29Aggressive: 9% Moderate: 7.50% Conservative: 6% ALLOCATION
  • 12. Asset Class YTD Q4 1 Year 3 Years** 5 Years** 10 Years** Commodities -17.01 -12.10 -17.01 -9.43 -5.53 -1.86 Period Returns (%) * Annualized Commodities 12 Fourth Quarter 2014 Index Returns Past performance is not a guarantee of future results. Index is not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. 
 All index returns are net of withholding tax on dividends. Securities and commodities data provided by Bloomberg. Commodities were broadly negative during the fourth quarter. The Bloomberg Commodity Index fell 12.10%. Energy led the decline with WTI crude oil and natural gas returning -40.65% and -32.49%, respectively. Wheat was the best performer with a gain of 21.82%. After experiencing negative returns in the third quarter, corn and soybeans gained a respective 19.70% and 10.44% in the fourth quarter. Q4 Ranked Returns for Individual Commodities (%) Wheat Corn Soybeans Cotton Live Cattle Soybean Oil Gold Zinc Copper Aluminum Nickel Silver Sugar Lean Hogs Coffee Heating Oil Natural Gas Unleaded Gas Brent Oil WTI Crude Oil -40.6519 -40.2033 -38.5649 -32.4892 -30.1823 -15.8088 -13.9409 -11.7325 -8.8458 -7.5781 -6.4082 -5.8896 -5.3641 -2.342 -2.2035 -0.8205 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.399 10.437 19.697 21.823 Aggressive: 5.40% Moderate: 4.50% Conservative: 3.60% ALLOCATION
  • 13. Bond Yields across Issuers 10-Year US Treasury Muni HQ Corporates MQ Corporates 3.313 2.519 3.56 2.17 Fixed Income 13 Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Yield curve data from Federal Reserve. State and local bonds are from the Bond Buyer Index, general obligation, 20 years to maturity, mixed quality. AAA-AA Corporates represent the Bank of America Merrill Lynch US Corporates, AA-AAA rated. A-BBB Corporates represent the Bank of America Merrill Lynch US Corporates, BBB-A rated. Barclays data provided by Barclays Bank PLC. US long-term bonds, bills, inflation, and fixed income factor data 
 © Stocks, Bonds, Bills, and Inflation (SBBI) Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). Citigroup bond indices © 2014 by Citigroup. The BofA Merrill Lynch Indices are used with permission; © 2014 Merrill Lynch, Pierce, Fenner & Smith Incorporated; all rights reserved. Merrill Lynch, Pierce, Fenner & Smith Incorporated is a wholly owned subsidiary of Bank of America Corporation. Fourth Quarter 2014 Index Returns Interest rates across US fixed income markets generally declined during the quarter. The yield on the 10-year Treasury note ended at 2.17%, a dip of 34 basis points over the period. (One basis point equals one- hundredth of a percentage point.) Long-term US Treasury bonds gained 27% in 2014. Period Returns (%) Asset Class YTD 1 Year 3 Years** 5 Years** 10 Years** BofA Merrill Lynch Three-Month US Treasury Bill Index 0.04 0.04 0.07 0.09 1.54 BofA Merrill Lynch 1-Year US Treasury Note Index 0.18 0.18 0.23 0.41 2.00 Citigroup WGBI 1−5 Years (hedged to USD) 1.90 1.90 1.54 1.78 3.11 Long-Term Government Bonds 23.87 23.87 4.29 9.88 7.48 Barclays US Aggregate Bond Index 5.97 5.97 2.66 4.45 4.71 Barclays US Corporate High Yield Index 2.45 2.45 8.43 9.03 7.74 Barclays Municipal Bond Index 9.05 9.05 4.30 5.16 4.74 Barclays US TIPS Index 3.64 3.64 0.44 4.11 4.38 * Annualized US Treasury Yield Curve 0 1 2 3 4 1
 Yr 5
 Yr 10
 Yr 30
 Yr 12/31/14 12/31/13 9/30/14 Aggressive: 0% Moderate: 40% • 20% Short-Term • 12% Global • 8% TIPS Conservative: 60% • 30% Short Term • 18% Global • 12% TIPS ALLOCATION
  • 14. Growth of Wealth: The Relationship between Risk and Return $10,000 $27,500 $45,000 $62,500 $80,000 01/1988 10/1989 07/1991 04/1993 01/1995 10/1996 07/1998 04/2000 01/2002 10/2003 07/2005 04/2007 01/2009 10/2010 07/2012 04/2014 Stock/Bond Mix 100% Stocks ! 75/25 50/50 25/75 100% Treasury Bills Global Diversification 14 Fourth Quarter 2014 Index Returns Diversification does not eliminate the risk of market loss. Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect expenses associated with the management an actual portfolio. Asset allocations and the hypothetical index portfolio returns are for illustrative purposes only and do not represent actual performance. Global Stocks represented by MSCI All Country World Index (gross div.) and Treasury Bills represented by US One-Month Treasury Bills. Globally diversified allocations rebalanced monthly, no withdrawals. Data © MSCI 2015, all rights reserved. Treasury bills © Stocks, Bonds, Bills, and Inflation Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). These portfolios illustrate the performance of different global stock/bond mixes and highlight the benefits of diversification. Mixes with larger allocations to stocks are considered riskier but have higher expected returns over time. 12/2014
  • 15. Randomness of Returns 15 ! • We often hear the term “The Lost Decade” for US stocks. This was coined after the S&P500 essentially returned 0% for the period 2000 to 2010. • If an investor held a globally diversified portfolio during this same time period, the results are much different. For instance, a sample 70/30 portfolio during this period, consisting of US and International Stocks, REIT’s, and Bonds, archived an annualized return of 8.4%. * • Global Diversification is important for risk reduction, but it also allows you to capture returns wherever they may occur, and helps take the guesswork out of investing. You never know which markets will outperform year to year, as the graphic above illustrates. ! !*Source: http://www.forbes.com/sites/feeonlyplanner/2012/08/21/a-lost-decade-not-the-case-for-all-investors/
  • 16. Asset Class Performance (Net of Fees) 16 • The spread of YTD returns between the 100% stock portfolio and the 20/80 portfolio is remarkably tight. ! • Bonds performed surprisingly well in 2014, contrary to many industry experts who predicted, yet again, that interest rates would rise. The yield on 10-year T-Notes actually decreased in 2014. The Barclay’s Aggregate Bond Index, a widely used index to measure the “Bond Market’, was up ~6% for the year. ! • Real Estate Investment Trusts (REIT’s) had another strong year. US REIT’s were up 30% in 2014. ! • Commodities struggled throughout the year, and got hit hard in Q4 due to the decline of oil prices.
  • 17. 17 Coming Soon… Questions? Contact us anytime. We are always here to help. !! Portfolio Specialist Dan Callahan Dan@MyQuestis.com (843) 628-5329 ! ! ! !!! • Next week, we’ll distribute our Review, which covers major headlines, events and performance of global markets and economies for 2014. • Ongoing quarterly review calls. !