FUND YOUR FUTURE - Fidelity Investments

[Pages:32]Sean Murphy, CFA iShares Product Consultant

October 24, 2019

FUND YOUR FUTURE

with income ETFs

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TODAY'S INCOME CHALLENGE

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Investors are still in a lot of cash

On average, Americans hold 58% of their liquid investible assets in cash

Cash yields have not kept pace with inflation

1.60%

Cash 58%

Source: BlackRock Global Investor Pulse Survey 2017. Based on a survey of 4,000 individual US investors. On average, Americans hold 58% of their liquid investible assets in cash.

0.88%

0.21% 0.10%

Savings Accounts

Money Market Account

1-year CD

Inflation

Source: using national averages for savings accounts, money market accounts, and 1-year CD rates as of 3/1/19. Inflation represented by 1-year change in the consumer price index as of January 31, 2019. Past performance does not guarantee future results.

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Yields remain below historical averages

Yields are low across the income landscape, with less than 25% of bond assets yielding over 4%.

Fixed Income Assets Yielding Over 4%, 1999-Q2 2019

100%

75% 50% 25%

US Treasury Euro Core US Agencies US Municipal Euro Periphery US MBS Global Credit US CMBS Emerging Market Global High Yield

0%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. Source: BlackRock Investment Institute, Barclays and Thomson Reuters, 6/30/2019. The bars show market capitalization weights of assets with an average annual yield over 4% in a select universe that represent s about 70% of the Barclays Multiverse Bond Index. US Treasury represented by the Barclays US Treasury index. Euro core is based on the Barclays French and German government debt indexes. US Agencies represented by Barclays US Aggregate Agencies index. US Municipal represented by Barclay Municipal Bond index. Euro periphery is an average of the Barclays government debt indexes for Italy, Spain and Ireland. US MBS represented by the Barclays US Mortgage Backed Securities index. Global Credit represented by the Barclays Global Aggregate Corporate index. US CMBS represented by the Barclays Investment Grade CMBS index. Emerging Market combines the Barclays EM hard and local currency debt indexes. Global High Yield represented by the Barclays Global High Yield index.

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Consider multiple asset classes for income

But know that high income assets can be volatile. Concentrated positions come with downside risk. Relative value can change quickly across asset classes.

Yield and Intra-Period Decline: Major Income Asset Classes Over Trailing 3 Years

Traditional sources of income

Alternative sources of income

Current Yield

3 Year Maximum

Loss

10%

5.87%

5.55% 6.26% 6.70% 7.86%

5% 1.95% 2.49% 3.16% 1.91% 2.47% 4.04%

3.82%

0%

-5%

-4.38% -4.49%

-10% -8.62%

-5.40%

-3.78%

-7.22% -9.24%

-15%

-15.16%

-14.65%

-20%

-19.36% -18.71%

-25%

-30% Treasuries

Core Bonds

Inv. Grade Debt

US Equity

Global Equity

Dividend Equities

High Yield

US REITs

EM Debt

Preferred Stock

Bank Loans

-28.16%

MLPs

Index performance is for illustrative purposes only and do not predict or depict the yield of any fund. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Data represents past performance and is no guarantee future results. Source: Bloomberg and Standard & Poor's. As of 6/30/19. Max drawdown is peak-to-trough decline over the trailing 3 year period. Index yields are shown for illustrative purposes only and do not predict or depict the yield of any Blackrock fund. Past performance does not guarantee future results. Fixed income yields are represented by yield to worst. All other yields represented by trailing 12 month yield. For represented indexes and their definitions, see Important Notes.

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WHY USE ETFs

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ETFs offer a low cost, tax efficient way to invest

What are ETFs?

Stock

Tradable during the day

ETFs

Diversified funds that trade like stocks

Mutual fund

Diversified

Like a stock, an ETF can be bought and sold whenever

the market isopen

Like a mutual fund, an ETF is a professionally

managed, diversified portfolio

Transactions in shares of ETFs will result in brokerage commissions and will generate tax consequences. All regulated investment companies are obliged to distribute portfolio gains to shareholders. For more information on the differences between traditional mutual funds and ETFs, see the end of this document.

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Why use ETFs?

COMPETITIVE PERFORMANCE

LOW COST

TAX EFFICIENT

Over the last 5 years iShares market cap S&P style box ETFs

outperformed 73% of peers across all nine style boxes*

iShares ETFs cost 1/3 as much as the typical mutual fund

6% of iShares ETFs on average paid capital gains distributions over the last 5 years vs. 58% of

mutual funds

*Morningstar, as of 06/30/2019. Comparison universe is ETFs and mutual funds in the Morningstar category and uses total return. Overall figure is a weighted average of the percentage of funds that the iShares ETF outperformed in each style box, weighted based on the number of funds in the Morningstar category. The funds outperformed 53.7% and 76.6% of peers on a 1 and 10 year basis, respectively. Performance may be different for other time periods. iShares market cap S&P style box ETFs are IVV, IJH, IJR, IVW, IVE, IJK, IJJ, IJT, and IJS. Past performance is no guarantee of future results. Source Morningstar, as of 6/30/19. Comparison is between the average Prospectus Net Expense Ratio for the iShares ETFs (0.34%) and active open-end mutual funds (0.96%). Source: Morningstar, as of 06/30/19. Average number of mutual funds that paid a capital gain distribution each year over 5 years. Universe includes all U.S. open ended mutual funds, oldest share class used. Universe includes all funds incepted before 10/31 in each year and excludes funds that closed before 10/31 in each year. Past distributions are not indicative of future distributions.

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