November 2002
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Stock market volatility has been on most investors' minds during the past year. In this issue of Getting There, we'll discuss volatility and how the most experienced investors cope with this unavoidable feature of investing. |
| State Comptroller Nancy Wyman |
Riding Out Stock Market Volatility
The incredible bull market of the mid-nineties, when it seemed like every investment produced big rewards, led to unrealistic expectations among some investors. Many people forgot that stock volatility - the rise and fall of stock prices over time - is inevitable. Inflation, interest rates, corporate earnings reports, economic risks and political instability all cause stock prices to change. While the market's current volatility has some investors scrambling for the nearest exit, successful, experienced investors know that all financial markets are cyclical by nature - what goes down will usually go back up, given time.
When You're Investing for the Long Term
Generally, if you are saving through an employer-sponsored retirement plan like the State's Deferred Compensation Plan, you are saving and investing for the long term. Here are two basic tips of long-term investing to remember:
TIP 1
When you are investing to meet your long-term goals, time is on your side. Knee-jerk reactions to the normal ups and downs of the financial markets may have significant results. If you are considering moving your entire portfolio out of the stock market, consider that you may miss a market rally and dramatically cut performance potential.
| We've all heard the terms "bear market" and "bull market," but
exactly what do those terms mean? A "bear market" means stock market prices
have been falling for a while and have dropped at least 20% from the high point.
A "bull market" is a prolonged period of rising stock prices, usually 20% or
more. Historically, bull markets have won out over bear markets. Since 1948, the stock market, as measured by the performance of the S&P 500, a group of 500 stocks whose performance is often considered representative of the performance of the overall stock market, has experienced 10 bull markets and nine bear markets. The average bull market lasted 40 months, while the average bear market lasted close to 16 months. |
TIP 2
Concentrate on what you have control over. You can control the amount you invest and the length of time your money is invested. Regular plan contributions help you use dollar cost averaging to your advantage: since you are investing the same dollar amount each pay period, you purchase more shares when prices are low and fewer shares when prices are high. This way you are using the market fluctuations to your advantage!
The Cyclical Market: An Example
As shown in the following chart, the average annual total return of the stock market has outperformed other types of investments. Also note that while there have been times when the market's value dropped, over time the overall rate of return has been positive. And, keep in mind that a decline in market value may be a good time to buy stocks that are selling at undervalued prices.
If you invested $100 in 1981, here's how the investment would have performed, depending on whether you invested in stocks, bonds or cash equivalents, such as money market funds.
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Past performance is no guarantee of future results. Future returns may not be
enough to overcome possible annual declines. |
| 1 Stock returns are represented by Standard
& Poor's 500 Index (Tracks the stock performance of 500 companies) 2 Bond returns are represented by 50% Lehman Brother's Long Term Government Bond Index and 50% Lehman Brother's Long Term Corporate Bond Index 3 Cash equivalents returns are represented by 90-day Treasury Bills Source: S&P Micropal |
| Consult Your Professional Financial Advisor |
| The Deferred Compensation Plan offers over 45 funds to choose from. These funds offer a wide range of investment styles, so that you can diversify your account. The expertise and guidance of a professional representative may be a valuable resource for you. Financial advisors can assist you with evaluating and choosing the best investment alternatives, help you analyze your risk tolerance and offer professional advice which may help you feel confident with your investment portfolio. |
IMPORTANT NOTE: The information presented in this newsletter is not intended as investment advice. Its purpose is to help you understand the investment choices available through the State of Connecticut's Deferred Compensation Plan. Your financial strategy and investment choices are entirely your own and should reflect your personal needs and circumstances.
State of Connecticut personnel, including the Human Resources Department staff, cannot provide investment advice. For more information, you may want to consult with a professional financial advisor.
The investment information is current as of September 30, 2002.
Investment Fund Performance & Operating Fees
For the Period Ending September 30, 2002
You may invest your contributions with any one of the plan's three financial services organizations: ING Financial Advisers, LLC (member SIPC), The Hartford and Phoenix Investment Partners.
The following charts will help you evaluate your investment choices - both mutual funds and annuity options. They show the historical rates of return for each financial services organization's available investment options and the various operating fees that may be assessed against these options for the period ending September 30, 2002.
The rates of return columns are "net of expenses" and reflect the actual returns that would be applied to your account. This means that they already exclude the operating fees a financial services organization may charge you for managing, investing or marketing a particular investment option. Operating expenses appear in separate columns.
About Your Fund Choices
To help you identify between these two types of options, variable annuities appear in italic print. When comparing two similarly styled mutual funds or annuity options, be sure to:
Since each financial services organization offers similar investment opportunities, it's a good idea to review the materials from each of these organizations before you make your decision as to where to invest your money. Then, select the one financial services organization that offers the investment options and products that best match your personal financial goals.
| ING FINANCIAL ADVISERS | |||||||
|---|---|---|---|---|---|---|---|
| Return on Investments (net of expenses) |
Operating Expenses | ||||||
| Last Quarter | Annual Rates of Return | ||||||
| Level of Risk | Investment Options | 7/1/02-9/30/02 | 1 Year |
Annualized 5 Years |
Management Fees |
Other Expenses |
Total Expenses |
| High | Janus Aspen Series Aggressive Growth Portfolio | -13.03% | -20.65% | -2.96% | 0.65% | 0.82% | 1.47% |
| Janus Aspen Series Worldwide Growth Portfolio | -17.53 | -19.60 | -1.58 | 0.65 | 0.84 | 1.49 | |
| ING MFS Emerging Equities Portfolio | -17.33 | -21.15 | -10.30 | 0.68 | 0.93 | 1.61 | |
| ING Scudder International Growth Portfolio | -19.67 | -18.99 | -4.58 | 0.80 | 1.00 | 1.80 | |
| Medium | ING Index Plus Large Cap VP | -17.43 | -21.86 | -1.74 | 0.35 | 0.90 | 1.25 |
| ING Growth and Income VP | -16.49 | -22.61 | -7.48 | 0.50 | 0.89 | 1.39 | |
| ING Small Company VP | -19.47 | -13.00 | 0.60 | 0.75 | 0.91 | 1.66 | |
| AIM V.I. Growth Fund | -18.87 | -30.46 | -10.25 | 0.62 | 1.06 | 1.68 | |
| Fidelity VIP Equity-Income Portfolio | -19.27 | -17.63 | -1.87 | 0.48 | 0.90 | 1.38 | |
| Fidelity VIP II Contrafund Portfolio | -10.03 | -5.14 | 2.34 | 0.58 | 0.90 | 1.48 | |
| Janus Aspen Series Growth Portfolio | -14.84 | -19.13 | -2.97 | 0.65 | 0.81 | 1.46 | |
| Low | ING Balanced VP, Inc. | -9.82 | -9.50 | 1.16 | 0.50 | 0.89 | 1.39 |
| ING Bond VP | 3.31 | 5.90 | 5.87 | 0.40 | 0.90 | 1.30 | |
| ING Money Market VP | 0.18 | 1.04 | 3.86 | 0.25 | 0.89 | 1.14 | |
| ING Fixed Account-457/401* . | NA | NA | NA | 0.00 | 0.00 | 0.00 | |
| Calvert Social Balanced Portfolio | -9.20 | -12.10 | -0.94 | 0.70 | 0.98 | 1.68 | |
| Janus Aspen Series Balanced Portfolio | -5.61 | -4.75 | 7.37 | 0.65 | 0.81 | 1.46 | |
* The returns as of September 30, 2002, for the last quarter, one year and five-year periods are 1.31%, 5.36% and 5.78%, respectively, and do not include the impact of contract changes. The current rate is 5.30%, expressed as an annual effective yield, and is guaranteed not to drop below 4.70% through December 31, 2002.
| THE HARTFORD | |||||||
|---|---|---|---|---|---|---|---|
|
Return on Investments (net of expenses) |
Operating Expenses | ||||||
| Last Quarter | Annual Rates of Return | ||||||
|
Level of Risk |
Investment Options | 7/1/02-9/30/02 | 1 Year | Annualized 5 Years |
Management Fees |
Other Expenses |
Total Expenses |
| High | American Century Ultra | -15.56 | -16.59 | -1.98 | 0.99 | 0.70 | 1.69 |
| Hartford International Opportunities Y | -22.52 | -18.18 | -6.37 | 0.85 | 0.91 | 1.76 | |
| Hartford Small Company Y | -21.32 | -13.91 | -3.16 | 0.85 | 0.81 | 1.66 | |
| Janus Worldwide | -17.70 | -19.90 | -2.61 | 0.65 | 0.93 | 1.58 | |
| Medium | American Century Income & Growth | -17.20 | -18.49 | -1.87 | 0.67 | 0.70 | 1.37 |
| American Century Value | -16.43 | -9.19 | 1.48 | 1.00 | 0.70 | 1.70 | |
| Fidelity Adv. Growth Opportunities | -17.00 | -20.02 | -8.44 | 0.35 | 1.45 | 1.80 | |
| Hartford Capital Appreciation HLS | -13.16 | -16.89 | 2.20 | 0.63 | 0.80 | 1.43 | |
| Hartford Dividend and Growth Y | -18.31 | -16.71 | 0.20 | 0.75 | 0.80 | 1.55 | |
| Hartford MidCap Y | -18.47 | -5.45 | NA | 0.83 | 0.83 | 1.66 | |
| Hartford Index HLS | -17.53 | -21.42 | -2.81 | 0.40 | 0.78 | 1.18 | |
| Hartford Stock HLS | -17.46 | -23.81 | -2.47 | 0.46 | 0.78 | 1.24 | |
| Janus Twenty | -11.82 | -19.93 | -0.73 | 0.65 | 0.91 | 1.56 | |
| Low | Hartford Advisers HLS | -9.84 | -13.63 | 0.84 | 0.63 | 0.78 | 1.41 |
| General Account* | NA | NA | NA | 0.00 | 0.00 | 0.00 | |
| Hartford Bond Income Strategy Y | 3.03 | 5.64 | 6.05 | 0.65 | 0.82 | 1.47 | |
* The Declared Rate is credited through the close of the calendar year on contributions received during the designated calendar quarter. The rate for the fourth quarter 2002 is 4.5%. For contributions received prior to January 1, 2002, the Declared Rate is 4.3%. Rates quoted are effective annual yields.
| Phoenix Investment Partners | |||||||
|---|---|---|---|---|---|---|---|
| Return on Investments (net of expenses) |
Operating Expenses | ||||||
| Last Quarter | Annual Rates of Return | ||||||
|
Level of Risk |
Investment Options | 7/1/02-9/30/02 | 1 Year |
Annualized 5 Years |
Management Fees |
Other Expenses |
Total Expenses |
| High | Phoenix-Aberdeen Worldwide Opportunities A | -20.91 | -15.96 | -1.91 | 0.75 | 0.70 | 1.45 |
| Phoenix-Seneca Mid-Cap Edge A | -20.35 | -20.51 | 1.27 | 0.80 | 1.71 | 2.51 | |
| Phoenix-Engemann Small-Mid Cap Growth A | -21.31 | -22.14 | -7.57 | 0.97 | 0.86 | 1.83 | |
| Phoenix-Aberdeen International A | -21.88 | -13.54 | -5.38 | 0.75 | 0.62 | 1.37 | |
| Medium | Phoenix Duff & Phelps Core Equity A | -18.27 | -22.91 | -8.01 | 0.75 | 2.20 | 2.95 |
| Phoenix-Engemann Nifty Fifty A | -15.82 | -21.24 | -10.87 | 0.82 | 0.78 | 1.60 | |
| Phoenix-Engemann Capital Growth | -12.18 | -15.73 | -8.79 | 0.66 | 0.42 | 1.08 | |
| Phoenix-Oakhurst Growth & Income A | -17.73 | -21.22 | -0.21 | 0.75 | 1.13 | 1.88 | |
| Phoenix-Seneca Growth A | -16.13 | -22.84 | -1.62 | 0.70 | 0.74 | 1.44 | |
| Phoenix-Oakhurst Managed Assets A | -8.27 | -4.57 | 0.06 | 1.00 | 0.51 | 1.51 | |
| Low | Phoenix-Engemann Balanced Return A | -6.36 | -9.66 | 0.52 | 0.76 | 0.87 | 1.63 |
| Phoenix-Goodwin Multi-Sector Short Term Bond A | 2.77 | 6.85 | 5.18 | 0.55 | 1.00 | 1.55 | |
| Phoenix-Duff & Phelps Core Bond | 2.97 | 4.28 | 5.48 | 0.45 | 0.55 | 1.00 | |
| Phoenix-Goodwin Money Market A | 0.31 | 1.46 | 4.19 | 0.40 | 0.33 | 0.73 | |