Investing Essentials E-Book

Building a better portfolio


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A simplified approach to investing Investing can be a great way to achieve your long-term financial goals. However, it comes with both risks and rewards. Finding the investment solutions most aligned with your goals is the first step. One option to gaining exposure to the markets is through mutual funds. These professionally managed vehicles buy and sell diverse types of securities, and are designed to help make investing affordable and easy to access— regardless of your experience level. Since most investors may not have the time or resources to research, purchase, and maintain a broad mix of individual securities, mutual funds are designed to provide this valuable benefit.

Advantages of mutual fund ownership

Accessibility The purchasing process can typically be completed within minutes through either a broker, directly from a mutual fund company, or from a bank or insurance company. Diversity Achieve instant diversification when investing in just one fund, or across multiple funds, since mutual funds invest in many different securities at the same time. Affordability Actively managed mutual fund costs, as a percentage of assets, are typically much less, when compared to the costs associated with managing your own portfolio of individual securities. 1 And, in many cases, an account can be opened for $1,000, and subsequent investments can be made for as little as $50. Professional Management Experienced investment managers monitor the financial markets and economy, while researching companies or organizations offering stock or bond securities for purchase, so you don’t have to.

1. Active management is an investment strategy involving ongoing buying and selling actions by the manager. Active managers purchase investments and continuously monitor their activity to exploit profitable conditions. Active management typically charges higher fees.


A look behind the lens Mutual funds are investment pools, where multiple investors purchase ownership in a vehicle that contains anywhere from a dozen to hundreds of different securities, such as stocks or bonds. Each mutual fund is managed by a professional investment manager (or investment team), who buys and sells these securities for the most effective management of the fund. When you purchase a mutual fund, that ownership provides you with a piece of each security within that investment pool—and your ownership is represented as a share. When there are profits generated from the securities in which a mutual fund invests, your share value increases. And, when there are losses generated from these same securities, your share value will decrease. If the securities in which a mutual fund invests generate dividend income or capital gains/losses, those, too, get passed on to each investor. The inner workings of a mutual fund The “Investor”

pools their money

which get

with other investors in a mutual fund.

passed back to

The “Fund Manager”

“Returns” on the investments

The securities

invests the pooled assets in


“Securities” such as stocks and/or bonds.


Decisions, decisions—A broad spectrum of choices

There are many types of mutual funds from which to choose—each with its own financial objective. Some invest exclusively in a specific industry or country, some focus on generating income, and others look to capitalize on growth opportunities. The mutual fund (or funds) you select should closely match your financial goals, time horizon, and risk level. Types of mutual funds based on investment goal

Building Long-Term Wealth

• International Stock Funds • Global Stock Funds

• Aggressive Growth Funds • Growth Stock Funds

Growth and Income

• Growth and Income Funds • Balanced Funds

• Convertible Bond Funds • Asset Allocation Funds

• Value Stock Funds • International Bond Funds • Global Bond Funds

• High-Yield Bond Funds • Investment-Grade Bond Funds

• Money Market Funds

Generating Income

Tax-Conscious Investing

• Municipal Bond Funds

There is no assurance that the investment objectives can be met.


Three keys to developing an investment strategy Your investment strategy is unique to you. It should be tailored to best suit your goals, risk tolerance, and time horizon. As you develop your strategy, consider the following:

1 Establish investment goals

2 Assess how much risk you’re willing to accept

3 Determine an appropriate time horizon

When investing, an important rule of thumb is to focus on long-term goals and not get distracted by short-term volatility (see chart below). Historically, better results have been achieved the longer the investment time horizon. However, past performance is no guarantee of future results.

Volatility is nearly impossible to eliminate, but it can present opportunity. Balancing more

What’s important to you? Are you looking for your first investment, saving for a home, or investing in your child’s education? Regardless of your financial situation, it’s never too early, or late, to start thinking about what you want to achieve and developing a plan to help you get there.

aggressive investments with lower- risk options can help create a more stable investment portfolio, designed to take advantage of the potential opportunities created by market fluctuations.

A longer time horizon has lessened the impact of volatility 2

Annual returns S&P 500 ®

WORST Performance


BEST Performance

1 year 5 years 10 years 20 years

< 74.58 % >

-37.00 %

37.58 %

< 30.85 % >

28.56 %

-2.30 %

< 20.59 % >

19.21 %

-1.38 %

< 12.26 % >

5.62 %

17.88 %

2. Source: Morningstar for the period from 1/1/79-12/31/21. This chart is for illustrative purposes and is not representative of any investment or portfolio. Stocks are represented by the S&P 500 ® Index, an unmanaged index considered to be representative of the U.S. stock market in general. The chart is based on a reinvestment of income and compounded annual return, and assumes no transaction costs or taxes. Past performance is no guarantee of future results. An investment cannot be made directly into an index.


The market cyclicality of asset classes Asset class performance is cyclical in nature—which means that no one asset class is consistently more favorable than any other. Since each asset class can potentially outperform or underperform the market in any given period, diversification continues to play a key role in investing.

Taking turns at the top: Asset class performance is cyclical in nature 3

Annual Returns (2012–2021)











U.S. Bonds

18.22% 38.82% 13.69% 3.30% 21.31% 37.28% 1.28% 31.49% 19.96% 28.71%

Municipal Bonds

17.44% 34.76% 13.22% 1.38% 17.13% 25.03% 0.01% 30.54% 18.40% 22.58%

Foreign Bonds

17.32% 32.39% 10.60% 1.18% 13.80% 21.83% -2.08% 25.52% 18.31% 16.61%


17.28% 22.78% 9.05% 1.05% 11.96% 18.52% -2.62% 22.38% 17.10% 14.82%

Blended Return

16.35% 18.63% 7.43% 0.55% 11.19% 14.65% -3.49% 22.01% 14.04% 11.26%

High-Yield Bonds

16.00% 8.64% 5.97% -0.81% 10.15% 14.51% -4.26% 18.44% 7.82% 9.82%

Small Stocks

15.81% 7.44% 4.89% -2.44% 8.24% 10.26% -4.38% 15.04% 7.51% 5.28%

Large Stocks

11.28% -2.02% 3.04% -3.66% 2.65% 7.50% -9.06% 14.32% 7.11% 1.52%

Midcap Stocks

6.82% -2.55% 2.45% -4.41% 2.31% 5.45% -11.01% 8.72% 5.26% -1.54%

Foreign Stocks Emerging Market Stocks

6.78% -2.60% -2.19% -4.47% 1.00% 3.54% -13.79% 7.54% 5.21% -1.80%

4.21% -5.25% -4.90% -14.92% 0.25% 2.70% -14.58% 7.42% -2.58% -2.54%

Investing in multiple mutual funds enables you to create a customized portfolio of well-diversified investments suitable for helping you meet your personal investment objectives and attaining your financial goals. This approach could reduce overall investment costs and provide better risk management than if you purchased the securities individually. To illustrate this point, below is a sampling of hypothetical portfolios displaying varying levels of risk.

Investment portfolios: Hypothetical examples based on risk level 3

Conservative 50% Stocks, 40% Bonds, 10% Alternatives

Moderate 65% Stocks, 25% Bonds, 10% Alternatives

Growth 80% Stocks, 10% Bonds, 10% Alternatives


















U.S. Stocks

Foreign Stocks

U.S. Bonds

Foreign Bonds

Money Market


3. Source: Morningstar, 12/31/21. Large stocks are represented by the S&P 500 ® Index. Midcap stocks are represented by the Russell Midcap Index. Small stocks are represented by the Russell 2000 Index. Foreign stocks are represented by the MSCI EAFE ® Index. Emerging market stocks are represented by the MSCI Emerging Markets Index. Blended return is represented by a 60%/40% split of the S&P 500 Index and Bloomberg U.S. Aggregate Bond Index. U.S. Bonds are represented by the Bloomberg U.S. Aggregate Bond Index. High-yield bonds are represented by the Bloomberg U.S. Corporate High Yield Bond Index. Municipal bonds are represented by the Bloomberg Municipal Bond Index. Foreign bonds are represented by the JPM EMBI Global Diversified Bond Index. Alternatives are represented by the Morningstar Diversified Alternative Total Return Index. Past performance is no guarantee of future results, which will vary. An investment cannot be made directly into an index. Index definitions can be found at the end of this brochure.


The importance of diversification Diversifying your assets among a variety of investment styles helps ensure that your portfolio’s overall return is not limited to the performance of just one type of security. Of course, markets are unpredictable, and diversification does not assure a profit or guarantee against market loss. When it comes to market declines, having a diversified portfolio is especially critical. For instance, if an investment falls 25% in one year, it takes a 33% gain in the following year just to break even. By investing in a variety of market sectors and styles, a loss in one area may be recouped by a gain in another. To demonstrate this point, the chart below helps illustrate how three types of hypothetical investors fared using different investment approaches.

Hypothetical results over a 30-year period (1/1/92-12/31/21) The importance of a disciplined approach 4

The Contrarian

The Follower

Invested $10,000 in a diversified portfolio, consisting of equal parts of six asset classes, and rebalancing every quarter back to the original asset allocation mix. The Diversifier

Invested $10,000 in the worst-performing market segment from the previous year.

Invested $10,000 in the best-performing market segment from the previous year.


On 1/1/92, each person invested $10,000, and during the next 30 years, continued to make annual investments of $10,000.


The Diversi fi er $1,571,174 The Follower $1,236,425 The Contrarian $1,227,495








12/31/17 12/31/19 12/31/21 12/31/15 12/31/13 12/31/11 12/31/09 12/31/07 12/31/05 12/31/03 12/31/01 12/31/99 12/31/93 12/31/95 12/31/97 1/1/92

Maintaining a diversified portfolio and utilizing a systematic investment plan, such as the one used in this illustration, do not ensure a profit or guarantee against a loss in a declining market. Investors should consider their financial ability to continue to invest through periods of low prices. Hypothetical results are for illustrative purposes only and are not intended to represent the future performance of any specific investment.

4. Source: Morningstar, 12/31/21. For “The Diversifier” illustration, six unmanaged indices were used with equal weighting: Russell 1000 ® Growth Index, Russell 1000 ® Value Index, Russell 2500 ® Growth Index, Russell 2500 ® Value Index, Bloomberg U.S. Aggregate Bond Index, and the MSCI EAFE Index. Results assume the reinvest- ment of all capital gain and dividend distributions. Past performance is no guarantee of future results, which will vary. An investment cannot be made directly into an index. The index performance is not representative of any investment or portfolio. Index definitions can be found at the end of this brochure.


Determine the share class right for you When investing in a mutual fund, you have the option to choose the share class that best meets your needs. The most common have been listed below. The difference between them typically depends on how much you will be charged for buying the fund. This structure allows you to choose a share class that’s right for you.

Sales charges differ by share class Class A and Investor Class shares

An initial sales charge is payable when shares are purchased. There is no sales charge to redeem (or sell) shares.

Class C shares

There is no charge to purchase shares. Shares sold within a specified period of time after purchase are subject to a 1% sales charge that is deducted from the redemption proceeds. There is no charge to redeem (or sell) shares that are held for more than one year.

NOTE: For Class A shares, you may qualify for a reduction or waiver of sales charges depending on how much you invest (see below). Breakpoint

The dollar amount for the purchase of a fund’s shares that qualifies an investor for a reduced sales charge. Mutual funds that charge front-end sales loads may reduce the sales load if a larger investment is made. Investment thresholds are established for these larger investment amounts, which are then used to determine the reduction in the sales load. These threshold levels are referred to as “breakpoints.” Mutual funds are not required to offer breakpoints in the sales load. If they do, the breakpoints must be disclosed. Allows an investor to qualify for a breakpoint discount based on the total amount of purchases agreed to be made in the near future.

Letter of intent

Rights of accumulation

Allows an investor to qualify for a breakpoint based on the total value of previous purchases.

Your financial professional can help you determine a share class most appropriate for you.


Consider fees and expenses As with any business, running a mutual fund involves costs. Funds pass along these costs to investors through fees and expenses. It is important to understand these charges because they can lower returns. All fees and operating expenses must be disclosed within a fund’s prospectus, so be sure to carefully review the fee tables of any funds you’re considering.

Shareholder fees Sales charge on purchases (load)

The amount paid when purchasing shares of a mutual fund. This is also known as a “front-end load.” This fee is typically used to pay the intermediary that sells the fund’s shares and will reduce the amount of your investment. If you invested $1,000 in a mutual fund with a 5% front-end load, the $50 sales load is paid immediately, and the remaining $950 gets invested in the fund. A type of fee that some funds charge their shareholders when they purchase shares. Unlike a front-end sales load, a purchase fee is paid to the fund (not to a broker) and is typically imposed to defray some of the fund’s costs associated with the purchase. A fee paid when an investor sells shares. This is also referred to as a “back-end load” and typically goes to the brokers that sell the fund’s shares. The most common type of back-end sales load is the contingent deferred sales charge (CDSC). The amount of this type of load depends on how long the investor holds his or her shares and decreases to zero if the investor holds his or her shares long enough. Another type of fee some funds charge their shareholders when they sell or redeem shares. Unlike a deferred sales load, this fee is paid to the fund (not to a broker) and is typically used to defray fund costs associated with a shareholder’s redemption. A fee that some funds impose on shareholders if they exchange (transfer) to another fund within the same fund group or “family of funds.” A fee that some funds impose on investors in connection with the maintenance of their accounts. For example, a maintenance fee on accounts whose values are less than a certain dollar amount. These fees are paid out of fund assets to the fund’s investment advisor for investment portfolio management, other management fees payable to the fund’s investment advisor or its affiliates, and administrative fees payable to the investment advisor that are not included in the “Other Expenses” category (discussed below). These fees are paid by the fund out of fund assets to cover the costs of marketing and selling fund shares and sometimes to cover the costs of providing shareholder services. Distribution fees include fees to compensate brokers and others who sell fund shares and to pay for advertising, the printing and mailing of prospectuses to new investors, and the printing and mailing of sales literature. These are expenses not included under “Management Fees” or “Distribution (12b-1) Fees,” such as any shareholder service expenses not already included in the 12b-1 fees, custodial expenses, legal and auditing expenses, transfer agent expenses, and other administrative expenses. This represents the line of the fee table that displays the total annual fund operating expenses, expressed as a percentage of the fund’s average net assets. Looking at the expense ratio can help you make comparisons among funds.

Purchase fee

Deferred sales charge (load)

Redemption fee

Exchange fee

Account fee

Annual fund operating expenses Management fees

Distribution (12b-1) fees

Other expenses

Total annual fund operating expenses (expense ratio)


Know the tax consequences When you typically buy and hold an individual stock or bond in a non-retirement account [i.e., accounts that are not IRAs, SEPs, 401(k)s, etc.], you must generally pay income tax each year on the dividends or interest you receive. However, you won’t have to pay any capital gains tax until you sell and make a profit. Mutual funds are different. When you buy and hold mutual fund shares, you will generally owe income tax on any ordinary dividends in the year you receive or reinvest them. In addition to owing taxes on any personal capital gains when you sell your shares, you may also have to pay taxes each year on the fund’s capital gains. Bear in mind that if you receive a capital gains distribution, you will likely owe taxes—even if the fund has had a negative return during the year when you purchased your shares. For this reason, you should call the fund family or visit their web site to find out when it makes distributions, so you don’t pay more than your fair share of taxes. Don’t go it alone For many, the stakes are too high to develop an investment strategy on their own. That’s why millions of Americans rely on the services provided by a financial professional. While the use of a financial professional does not guarantee investment success, they have the experience and training to give you investment insight and guidance. A financial professional will work with you to outline appropriate investment options and to develop an investment strategy in line with your specific goals.


Index definitions The S&P 500 ® Index is an unmanaged index and is widely regarded as the standard for measuring large-cap U.S. stock market performance. The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which consists of the largest 1,000 U.S. companies based on total market capitalization. The Russell 2000 Index is a popular measure of the stock price performance of small companies, consisting of the 2,000 smallest companies in the Russell 3000 Index. The MSCI EAFE ® Index is an unmanaged, capitalization-weighted index containing approximately 985 equity securities located outside the U.S. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI Emerging Markets Index consists of the following 21 emerging market country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. The Bloomberg U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasurys, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage pass-throughs), asset-backed securities, commercial mortgage-backed securities (agency and non-agency). The Bloomberg U.S. Corporate High Yield Bond Index measures the market of USD-denominated, non-investment-grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes emerging markets debt. The Bloomberg Municipal Bond Index covers the USD-denominated, long-term, tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and pre-refunded bonds. The Morningstar Diversified Alternative Total Return Index provides diversified exposure to alternative asset classes in the ProShares ETF lineup. This Index does not incorporate Environmental, Social, or Governance (ESG) criteria. The JPM EMBI Global Diversified Bond Index covers government bonds in hard currencies. The Russell 1000 ® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 ® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.

The Russell 2500 ® Growth Index measures the small- to mid-cap growth segment of the U.S. equity universe. The Russell 2500 ® Value Index measures the small- to mid-cap value segment of the U.S. equity universe. An investment cannot be made directly into an index.


About Risk All mutual funds are subject to market risk, including possible loss of principal.

Foreign securities may be subject to greater risks than U.S. investments, including currency fluctuations, less liquid trading markets, greater price volatility, political and economic instability, less publicly available information, and changes in tax or currency laws or monetary policy. These risks are likely to be greater for emerging markets than for developing markets. Stocks represent ownership shares in a company and may provide the potential for growth over time. Due to market fluctuation, investing in stocks involves higher risks than bonds or cash investments. Growth stocks may be more volatile than other stocks because they are generally more sensitive to investor perceptions and market moves. During periods of growth stock underperformance, investment performance may suffer. Value stocks may experience adverse business developments or may be subject to special risks that have caused their securities to be out of favor. The principal risk of investing in value stocks is that they may never reach what investors believe is their full value or that they may go down in value. Bonds are IOUs issued by governments, government agencies, or companies. Bonds are subject to credit risk and interest-rate risk and can lose principal value when interest rates rise. High-yield securities (junk bonds) have speculative characteristics and present a greater risk of loss than higher-quality debt securities. These securities can also be subject to greater price volatility. Municipal bond interest income may be subject to state and local taxes or the alternative minimum tax. Issuers of convertible securities may not be as financially strong as those issuing securities with higher credit ratings and are more vulnerable to changes in the economy. Target Date and Asset Allocation Fund performance is dependent upon the subadvisor’s skill in determining the asset class allocations and the mix of underlying investments, as well as the performance of those underlying investments. The underlying investments’ performance may be lower than the performance of the asset class which they were selected to represent. The Funds are indirectly subjected to the investment risks of each underlying investment held. Cash investments include commercial paper, bank obligations, and some debt instruments of the Federal government. Their stability and short-term nature make them “liquid” or able to be quickly and easily turned into cash. Money Market Funds are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or another government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, you can lose money.

Securities products and services are offered through NYLIFE Securities LLC, 51 Madison Avenue, New York NY 10010. ClearPath Wealth Strategies, LLC is not owned or operated by NYLIFE Securities LLC or Its affiliates. This material is provided as a resource for information only. Neither New York Life Insurance Company, New York Life Investment Management LLC, their affiliates, nor their representatives provide legal, tax, or accounting advice. You are urged to consult your own legal and tax advisors for advice before implementing any plan. ”New York Life Investments” is both a service mark, and the common trade name, of certain investment advisors affiliated with New York Life Insurance Company. New York Life Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. Securities distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302. NYLIFE Distributors LLC is a Member FINRA/SIPC.



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