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U.S. Stock Funds
Chances are you have at least one long-term financial goal. Whether it's saving for retirement or college, starting your own business or traveling the world, stock funds may help you reach your financial aspirations.
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Inflation Robs Purchasing Power
Over time, inflation can erode the purchasing power of your money. Increases in the cost of living, while fluctuating year to year, averaged 2.82% annually in the decade ending December 31, 2008.1 If this pace were to continue, an item you pay $10 for today would cost about $13.21 in 10 years, and about $17.45 in 20 years. Your investments would need to earn an average of 2.82% each year just to maintain your present purchasing power.
1. Source: ©Morningstar 2009
Stocks' Strong Return Potential
There's no disputing the long-term results of the stock market. During the past 20 years, stocks have outperformed all other major asset classes, including long-term U.S. government bonds. While past performance does not guarantee future results, you stand the best chance of reaping the rewards of stocks if you keep your money invested over a long period of time.
Solid Long-Term Returns*
Average Annual Total Return
30 Years Ended December 31, 2008
The illustration does not represent the past or future performance of any Franklin, Templeton or Mutual Series fund. For current performance of any Franklin Templeton fund, please see the Price and Performance section.
*©2009 Morningstar - 45% Large Cap Stocks / 20% Bonds / 35% Small Cap Stocks are represented by the S&P 500 Index, Barclays Capital U.S. Aggregate Bond Index, and the Russell 2000 Index, respectively. U.S. Stocks are represented by the S&P 500 Index. Long-Term U.S. Government Bonds are represented by the Barclays Capital U.S. Aggregate Bond Index. U.S. Treasury Bills are represented by the P&R 90-Day U.S. Treasury Index. Inflation is measured by changes in the Consumer Price Index, U.S. Bureau of Labor Statistics.
Rewards of Long-Term Investing
Looking at an index like the S&P 500, we find that time has helped tame, although not eliminate, price fluctuations. During one-year periods from 1929 through 2008, the stock market jumped by up to 53.99% and fell by as much as -43.34%. When we evaluate 20-year periods, however, we find that the worst average annual total return was a positive 3.11%.
Historical Returns from Stocks*
As measured by the S&P 500 Index 1929-2008
The illustration does not represent the past or future performance of any Franklin, Templeton or Mutual Series fund. For current performance of any Franklin Templeton fund, please see the Price and Performance section.
*Source: Standard & Poor's Micropal. Past performance does not guarantee future results. Stock performance is represented by the unmanaged S&P 500 Index, which includes reinvested dividends. An individual cannot invest directly in an index.
In fact, based on historical results, the longer you were invested in the stock market, the more likely you would have earned positive returns. While what has happened in the past does not guarantee future results, stocks can play an important role in your investment strategy.
Stock Mutual Funds
With thousands of publicly traded common stocks in the U.S. alone, making investment decisions on your own can be overwhelming. One way to simplify investing in the stock market is through a stock equity mutual fund.
The mutual fund concept is simple: A number of people who share the same financial objective pool their money and have it invested and managed by professional portfolio managers. Stock mutual funds, for example, invest this pooled money in common stocks of public companies, generally with long-term capital appreciation as a primary goal.
Benefits of Stock Mutual Funds
Diversification. Equity mutual funds allow you to spread your money across a larger number of securities than you probably could on your own. This diversification dramatically reduces the risk of any one company's losses adversely affecting your investment as a whole.
Professional management. Professional money managers closely monitor the securities markets and individual companies, buying and selling securities as they see opportunities arise. Few individual investors can devote time or resources to daily management of a sizable portfolio or stay up to date on the thousands of securities available in the financial markets.
Liquidity. You may sell some or all of your mutual fund shares at any time and receive their current value (net asset value). The value may be more or less than your original cost, which may include a sales charge.
Convenience. Mutual funds offer shareholders many services that make investing easier. You may buy or sell shares each business day, automatically add to or withdraw from your account each month, and have income dividends and capital gains paid out to you or automatically reinvested.
Front-end, and in some cases back-end, sales loads, redemption fees, management fees, Rule 12b-1 fees and other expenses are associated with Franklin Templeton mutual fund investments. Investors' returns are reduced by these fees and expenses. Funds are offered through prospectuses.
A few words about risk
Stocks historically have outperformed other asset classes over the long term, but tend to fluctuate in value more dramatically over the short term. These and other risks are discussed in each fund's prospectus.
Types of Stock Mutual Funds
Some funds that invest for capital appreciation are broad-based, investing in a wide range of companies and industries. Others have a narrower focus, and may invest in companies of a certain size, such as small- or mid-cap funds, or in specific sectors like technology or utilities.
In general, these funds seek capital growth through price appreciation of the securities in their portfolios and are usually subject to more volatility than funds that invest for growth and income.
Funds that invest for capital appreciation
Funds that invest for capital appreciation may invest in both growth and value stocks.
Growth stocks are from companies that have been growing faster than the general economy and their competitors, and are expected to continue to outpace them.
Value stocks are from companies which, although they have real underlying net worth, have fallen out of favor with investors, resulting in a lower stock price.
| Type of Stock Fund | What the Fund Buys* |
|---|---|
| *This overview is not meant to describe Franklin Templeton funds, but to provide examples of investments equity funds can make, as well as possible investment strategies. | |
| Growth | Stocks in companies whose earnings are expected to rise |
| International Equity | Stocks in non-U.S. companies |
| Global Equity | Stocks in U.S. and non-U.S. companies |
| Sector | Stocks in a particular industry, such as energy, biotechnology, transportation |
| Value | Stocks of undervalued companies expected to increase in value |
| Blend | Stocks of both growth and value companies |
Funds that invest for growth and income
Growth and income funds are designed to pursue both long-term growth (capital appreciation) and current income. The funds vary in the degree to which they emphasize growth over income or income over growth. They typically invest in a mix of stocks for growth and bonds or dividend-paying stocks for income, and share these characteristics:
- Are generally considered less aggressive than growth funds
- Receive dividends from stocks and/or interest from bonds in their portfolios, which may help offset stock price declines
- Generally experience lower volatility than pure growth funds
- Provide added diversification when combining stocks with bonds
- Often pay quarterly dividends
Time is Your Ally
History shows that for long-term investors, timing the market is far less important than time spent in the market. Missing just a few key days in the stock market can have a dramatic effect on overall portfolio results.
| Period of Investment | S&P 500 Average Annual Total Return |
|---|---|
| * Source: Standard & Poor's Corporation. The market is represented by the unmanaged Standard & Poor's 500 Index and includes reinvested dividends. One cannot invest directly in an index. Past performance does not guarantee future results. | |
| Remained Fully Invested | 5.91% |
| Missed the 10 Best Days | 1.13% |
| Missed the 20 Best Days | -2.55% |
| Missed the 30 Best Days | -5.72% |
| Missed the 40 Best Days | -8.40% |
Important Legal Information
Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. Download a summary prospectus and/or prospectus, which contains this and other information. Please carefully read a prospectus before you invest or send money.
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For U.S. residents only.