Don't let market rebounds skip your portfolio. During a recovery, quality companies should take the lead. Managers that embrace uncertainty and focus on fundamentals can help bring the right stocks to any portfolio.
Three Reasons Why Equities Should Always be in Your Portfolio
Stocks should be an integral part of your portfolio.
Equities are a key component of a long-term investment strategy. Despite the challenges of 2008, history shows stocks outperform bonds in the long run. In fact, bear markets have taught us an important lesson—more stocks, rather than less, can benefit your long-term investment strategy. When selecting an equity manager, you may want to consider a team with deep research resources, a forward-looking investment process and truly active portfolios.
Add experience and depth of resources to your portfolio.
Consider GSAM's Fundamental Equity Teams. Our Fundamental Equity teams bring an average of 20 years of investment experience and a global perspective to your portfolio. With more than 100 investment professionals in more than 10 offices worldwide*, the Fundamental Equity teams are grounded in a process that unveils opportunities in times of turmoil. The team’s strong discipline and forward-looking approach can be building blocks for any portfolio. The Fundamental Equity teams cover three major investment areas: growth, value and global equities.
* As of 6/30/09
Select managers who can identify opportunities for your portfolio—even in turbulent markets.
Take a look at GSAM Fundamental Equity. Even with today’s slowing economy and credit crunch, there are still many investment opportunities. The Fundamental Equity teams look for quality companies that can actively take market share and sustain earnings growth. Consider the Fundamental Equity teams for your portfolio.
Stocks should be an integral part of your portfolio - equities are a key component of a long-term investment strategy
Although you can never predict the swings of the market, investors looking to build their portfolios or develop a distribution strategy may want to revisit the equity portions of their portfolio. Stocks are a fundamental part of any well-diversified, long-term portfolio. Equities may not take the lead all the time - but they can be the engine for growth over time.
When developing a portfolio strategy, consider these hypothetical scenarios:
1. Planning for your long-term goalsWhether you’re investing for your retirement, a new home or saving for college, a long-term investment strategy should:
|
2. Taking your retirement? A systematic withdrawal plan can helpAfter years of investing and saving, you’re ready to begin enjoying the next stage of your life. A financial advisor can help plan a withdrawal or distribution strategy to supplement your monthly income. Your distribution or withdrawal strategy should:
|
Conclusion: a more diversified portfolio of 60% stocks / 40% bonds has the greatest return.
If recent market turmoil turned you away from equities, you may want to revisit your allocations.
Source: GSAM. This hypothetical is based on an initial investment of $100,000, on December 31, 1972, based on the allocations above. It does not assume reinvestment of dividends and capital gains, and sales charges. The monthly systematic distribution plan assumes a distribution of $5,000 in 1973 that is subsequently adjusted monthly for inflation. Amounts reflect the cumulative distribution taken over the stated time period. Keep in mind that past performance is no guarantee of future results and you cannot invest directly in an index.
Hypothetical historical returns were created with the benefit of hindsight using the percentage allocations shown in the charts above. Hypothetical performance results have many inherent limitations and no representation is being made that any investor will, or is likely to achieve performance similar to that shown. In fact, there are frequent sharp differences between hypothetical
performance results and the actual results subsequently achieved.
Stocks: The S&P 500 Index is the Standard & Poor’s 500 Composite Index of 500 stocks, an unmanaged index of common stock prices. The Index is unmanaged and the figures for the Index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
Bonds: The Barclays Capital U.S. Aggregate Index represents an unmanaged diversified portfolio of fixed-income securities, including U.S. Treasuries, investment-grade corporate bonds, and mortgage-backed and asset-backed securities. The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index. Bonds are subject to interest rate, price and credit risks. Prices tend to be inversely affected by changes in interest rates.
Ready to revisit the equity allocation in your portfolio? Pick a manager that's ready to exploit it.
We believe active portfolio management plays an important role in client portfolios. Even over relatively short time periods - such as the last eight years1 - different investment approaches, like active or passive management, swing in and out of favor. Because the market regularly moves in cycles, tailwinds for one style of investing will represent headwinds for another. However, over the entire time period, regardless of which style was in favor over the shorter-term, active management has benefited investors - if they were invested with the right active managers.
Active management is simply an attempt to "beat" the market as measured by a particular benchmark or index through stock selection and timing decisions based on thorough analysis and research.
Passive Management or "indexing" involves no active decision-making, rather, it is based on investing in exactly the same securities, in the same proportions, as an index.
Diversification does not protect an investor from market risk and does not ensure a profit.
Add experience and depth of resources to your portfolio - consider the Fundamental Equity Teams
While we believe there are several reasons to choose active management today, more than ever it is important to choose the right manager. First, a manager must have deep research resources to navigate and process all the new information that is coming at an increasingly fast rate. Second, a manager must have a forward-looking investment process, a fundamental discipline that allows for the anticipation of change as opposed to reliance on the historical growth rates and valuation ranges that are now largely irrelevant. Finally, a manager should be truly active, building portfolios based on research conviction and not diluting those ideas by hugging the benchmark. With these characteristics and good execution, we believe today's environment has never been better for the right active manager.
The Fundamental Equity team - even in uncertain market climates - can boast:
- a process that embraces uncertainty and unveils opportunities in times of turmoil
- strong discipline - adjusting risk to participate in up markets and mitigating it in down markets
- a forward looking view - never backward
- funds with historically consistent returns over the long run - click a fund name below to view performance
- a broad team of experienced investment professionals - averaging more than 20 years of experience
- global reach and perspective - 100 investment professionals in more than 10 offices worldwide*
Goldman Sachs Asset Management's Fundamental Equity teams cover three major investment areas: growth, value and global equities. Each experienced team has its own distinct investment philosophy and process, while united by their forward-looking, truly active approach. Our teams leverage the insights and resources of the broader fundamental equity platform, offering comprehensive research capabilities and high-conviction stock selection.
* As of 6/30/09.
Past performance does not guarantee future results.
A prospectus for the Fund containing more complete information may be obtained from your investment representative or from Goldman, Sachs & Co. by calling 800-526-7384 or by clicking on the Prospectuses link from the Literature area in the menu above. Select an asset class and then a fund for a full listing of materials including the fund's most recent prospectus. Please consider a fund's objectives, risks, and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other important information about the Fund.
GS Tollkeeper FundSM is a registered service mark of Goldman, Sachs & Co.
The equity markets are volatile, but not all stocks are equally volatile. Small and mid-size company stocks typically involve greater risk, particularly in the short term, than those of larger, more established companies. Some funds will be subject to style risk which is the risk that the growth investing or value investing style of the fund may be out of favor in the marketplace for various periods of time. Fixed income investing entails credit risk and interest rate risk. When interest rates rise, bond prices generally fall.
Select managers who can identify opportunities for your portfolio - even in turbulent markets. Take a look at GSAM Fundamental Equity
Even with today's slowing economy and credit crunch, there are still areas of opportunity for strong stock selection. The Fundamental Equity team looks for quality companies that can actively take market share, sustain earnings growth, capitalize on secular growth drivers, exert pricing power, and self-finance their growth.
The Fundamental Equity team has an unyielding belief: The market eventually recognizes the value of dominant quality franchises.|
In the current environment where:
|
|
We believe quality companies that can:
|
|
Should be able to:
Regardless of the market environment |
When evaluating companies, the Fundamental Equity teams look at the following key characteristics:
- High return on invested capital
- Free cash flow
- Recurring revenue stream
- Pricing power
- Strong management team - Rational capital allocation, balance sheet strength, alignment of interest
- Attractive valuation