WEATHERING uncertain. weathering. UNCERTAIN markets MARKETS LEARNING FROM THE PAST, POSITIONING FOR THE FUTURE

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WEATHERING

UNCERTAIN

MARKETS

LEARNING

FROM THE PAST,

POSITIONING

FOR THE FUTURE

MARKETS

LEARNING

FROM THE PAST,

POSITIONING

FOR THE FUTURE

WEATHERING

UNCERTAIN

MARKETS

LEARNING

FROM THE PAST,

POSITIONING

FOR THE FUTURE

WEATHERING

UNCERTAIN

FROM THE PAST,

weathering

uncertain

markets

LEARNING

FROM THE PAST,

POSITIONING

FOR THE FUTURE

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Managing an investment

portfolio has always been

challenging, and the most

recent market cycle has tested

investors’ commitment to their

long-term investment plans.

At BlackRock

®

, we believe

investors should maintain their

long-term view, using lessons

from the past to help position

their portfolios for the future.

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l e a r n i n g f r o m t h e pa s t, p o s i t i o n i n g f o r t h e f u t u r e [1]

You should remember that all fi nancial investments involve

an element of risk. The value of your investment and the income

from it will vary and your initial investment amount cannot

be guaranteed.

Learning

from the past

UNdERSTANd MARkET cYcLES ANd POSITION FOR GROwTH

Although markets have typically followed long-term up-and-down patterns, upturns tend to last longer than downturns.

AvOId MARkET TIMING

When trying to jump in and out of the market, investors run the risk of missing some of the best days.

THINk LONG-TERM

Although markets tend to be highly volatile over the short term, over the long term they have historically produced strong results.

Past performance is not a guide to future returns and should not be the sole factor of consideration when selecting a product.

Positioning

for the future

FOcUS ON dIvERSIFIcATION

Investing in a broad range of asset classes and styles can help overall portfolio returns while reducing risk.

POUNd-cOST AvERAGE

Employing regular investment programs like pound-cost averaging can potentially smooth out some of the market’s inherent volatility.

REBALANcE YOUR PORTFOLIO

Periodic portfolio readjustments can help make sure long-term investment goals remain on track.

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While most investors recognise that, over the long term, markets move up and down, there is also a relationship between overall market sentiment and market cycles. In rising markets, more people tend to invest as they chase returns (similar to what happened during the technology boom of the late 1990s), while in declining markets, many people tend to sell (as we saw in 2008 and early 2009).

By doing this, however, many investors are buying at market highs and selling at market lows. It is actually when market sentiment is at its worst that markets are set to rebound and, historically, extreme pessimism often coincides with market bottoms. In fact, bearishness is at its worst just before conditions begin to improve. This does not suggest investors should try to time market peaks and valleys, but rather they should understand there is often an inverse relationship between sentiment and opportunity. As such, we believe investors should avoid overreacting to market cycles or volatility.

AvOId OvERREAcTING TO vOLATILITY

growth of £10,000 in the ftse all-share index over the last 20 years (1994-2014)

£0 £10,000 £20,000 £30,000 £40,000 £50,000

Jan 94 Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14 Best opportunity to make money,

but many sell here

Source: BlackRock; Thomson Reuters Datastream. Data as at 31 December 2014. FTSE All-Share Index (total return). It is not possible to invest directly in an index. Past performance is no guarantee of future results. The information provided is for illustrative purposes only and is not meant to represent the performance of any particular BlackRock investment.

Recognising

opportunity amid

market cycles

LEARNING

FROM THE PAST

Frequently, market sentiment is lowest when the opportunity is strongest, meaning that investors should not overreact to market downturns.

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l e a r n i n g f r o m t h e pa s t, p o s i t i o n i n g f o r t h e f u t u r e [3] [2] w e at h e r i n g u n c e r ta i n m a r k e t s

Signifi cant market downturns can be rapid and diffi cult to endure, but history suggests markets will eventually recover. Over the past 48 years, we have seen a number of signifi cant market declines. As the chart below illustrates, however, the upturns that follow have on average lasted longer and been of greater scale. This trend helps explain why stocks have historically exhibited relatively strong long-term performance. Always remember that past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product.

UPTURNS HAvE BEEN LONGER ANd STRONGER

Downturns and upturns (1966-2014)

Upturns have been

stronger than

downturns

LEARNING

FROM THE PAST

When compared to

downturns, market upturns historically have lasted longer and have been stronger.

loss during downturn (cumulative % return)

gain during upturn (cumulative % return) Dates of downturn

Duration of downturn (months)

Dates of upturn of upturn Duration (months) Jan-70/May-70 4 May-70/Apr-73 35 Apr-73/Sep-74 17 Sep-74/Apr-76 19 Apr-76/Oct-76 6 Oct-76/Aug-81 58 Aug-81/Sep-81 1 Sep-81/Sep-87 72 Sep-87/Nov-87 2 Nov-87/Jun-90 31 Jun-90/Sep-90 3 Sep-90/May-92 20 May-92/Aug-92 3 Aug-92/Jan-94 17 Jan-94/Jun-94 5 Jun-94/Jul-98 49 Jul-98/Sep-98 2 Sep-98/Aug-00 23 Aug-00/Mar-03 31 Mar-03/May-07 50 May-07/Feb-09 21 Feb-09/Dec-14 70 average 8.6 40.4 -13 -38 -17 -13 -30 -22 -16 -15 -21 -53 -54 151 72 179 72 38 71 52 71 154 402 -26 126 123

Sources: BlackRock; Thomson Reuters Datastream. Data as at 31 December 2014. FTSE All-Share Index (total return). It is not possible to invest directly in an index. The information provided is for illustrative purposes only and is not meant to represent the performance of any particular investment. Downturns are defi ned by a period when the stock market value declined by 10% or more from its peak, while the recovery period indicates the number of months from the trough of the downturn to the subsequent peak.

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Studying these market cycles also shows that market recoveries tend to be uneven in terms of when the best returns can be found and that bull markets tend to be longer lasting. Bull markets (market ‘upturns’) can start quickly and then shift into periods of slower, but sustainable, growth. Over the last 48 years, in the 16 bull markets we identifi ed, markets on average recovered strongly, and managed to post gains for at least two years. Remember, past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product.

STRENGTH IN BULL MARkETS

average cumulative return of the ftse all-share index

-30 -15 0 15 30 45 60 75 RETURN (%) 26 14 8 -24 12

Average bear market return Average return in first 6-mth period Average return in second 6-mth period Average return in third 6-mth period Average return in fourth 6-mth period

Bull markets are

often stronger than

bear markets

LEARNING

FROM THE PAST

It is important to stay invested through diffi cult times and through periods of uneven growth since knowing in advance when a long-term market upturn might start is challenging, if not impossible. Investors should be mindful of the risks that markets may fall further from today’s levels.

Dates of bear

market peak to trough decline 6 months later 12 months later 18 months later 24 months later

% % % % % Jun-66 / Aug-66 -18 7 27 50 100 Jan-69 / May-70 -30 10 44 62 96 Apr-72 / Nov-74 -67 127 145 161 120 Sep-77 / Feb-78 -12 22 30 39 53 Apr-79 / Dec-79 -14 21 35 53 54 Aug-81 / Sep-81 -16 21 38 61 78 Apr-84 / May-84 -11 20 39 56 80 Sep-87 / Nov-87 -34 19 23 47 57 Aug-89 / Oct-89 -11 -1 -3 20 27 Dec-89 / Sep-90 -17 27 38 31 38 May-92 / Aug-92 -15 29 46 62 61 Jan-94 / Jun-94 -14 6 16 31 39 May-98 / Sep-98 -16 25 24 37 35 Dec-99 / Jan-03 -42 21 32 34 52 Oct-07 / Feb-09 -41 34 47 48 72 Apr-11 / Sep-11 -14 15 17 34 39 Average -23 25 37 52 63

Sources: BlackRock; Thomson Reuters Datastream. Data as at 31 December 2014. Bear markets (market ‘downturns’) are defi ned by a time period when the stock market value declined by 10% or more from its peak. Index is FTSE All-Share Index (total return). It is not possible to invest directly in an index. The information provided is for illustrative purposes only and is not meant to represent the performance of any particular investment.

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l e a r n i n g f r o m t h e pa s t, p o s i t i o n i n g f o r t h e f u t u r e [5] [4] w e at h e r i n g u n c e r ta i n m a r k e t s

Missed opportunities

can be costly

LEARNING

FROM THE PAST

Market timing runs the risk of missing out on some of the best-performing days. Every market cycle has both up days and down days. Often, a few very good

days account for a large part of the total return. Staying the course ensures investments will be ‘in’ the market on the good days. Some people try to time market movements by selling stocks when they think the market is about to decline and buying stocks when they think the market is about to rise. Consistently predicting which days will move in which direction, however, is virtually impossible and can be very costly.

As the accompanying chart shows, missing only a few of the best days over the last 20 years would have had an adverse effect on an investor’s return. A hypothetical £10,000 investment in the FTSE All-Share Index held over the entire period of 1 January 1994, through 31 December 2014, would have grown to £41,946. Missing just the fi ve best days would have reduced the ending value by £13,088. Missing out on additional days would have affected returns even more signifi cantly.

MISSING TOP-PERFORMING dAYS cAN HURT YOUR RETURN

hypothetical investment of £10,000 in the ftse all-share index over the last 20 years (1995–2014)

Sources: BlackRock; Thomson Reuters Datastream. Data as at 31 December 2014. FTSE All-Share Index (total return). Past performance is not a guide to future performance and should not be the sole factor of consideration when selecting an asset class. It is not possible to invest directly in an index. The information provided is for illustrative purposes only and is not meant to represent the performance of any particular BlackRock investment, it does not take into account the impact of fees and taxation.

0 10,000 20,000 30,000 40,000 50,000 Missing 25 Days Missing 20 Days Missing 15 Days Missing 10 Days Missing 5 Days Stay Invested Ending Value (£) £24,393 £16,100

419,464

£45,077 £13,375 £19,645 £31,012

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Despite volatility,

markets have

appreciated over

the long term

LEARNING

FROM THE PAST

As those who have watched their stock portfolios through the past couple of years can attest, markets can move quickly in either direction, which can unnerve even the most stalwart of investors. Economic crises, recessions, geopolitical incidents or company-specific events can cause sharp market disruptions. But, over time, markets have tended to recover.

HOw STOckS, BONdS ANd cASH HAvE GROwN OvER TIME

£10,000 hypothetical investment (1990-2014)

Past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product.

£71,602

£68,125

£39,908

ftse all share annualised 5 Year returns 1988–1992 14.8% 1993–1997 16.6% 1998–2002 –2.2% 2003–2007 15.4%  2008–2012 2.5%

£20,000 £10,000 £40,000 £60,000 £100,000 £80,000 Maastricht Treaty 1992 European sovereign debt crisis 2010 Asian currency crisis 1997 September 11th 2001 Invasion of Iraq 2003 Dot Com peak 2000 4,000 3,000 Subprime loan problems emerge 2007 LTCM failure 1998 Establishment of the ECB 1998 Lehman Brothers collapses 2008 European M&A surpasses US 2007 US loses its ‘AAA’ credit rating 2011

FTSE All-Share Annualised 5 Year Returns 1990–1994 9.7% 1995–1999 20.3% 2000–2004 –3.0% 2005–2009 6.5% 2010–2014 8.7% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 EQUITIES –9.72% 20.8% 20.49% 28.39% –5.85% 23.85% 16.7% 23.56% 13.77% 24.20% –5.90% –13.29% –22.68% 20.86% 12.84% 22.04% 16.75% 5.32% –29.93% 30.12% 14.51% –3.46% 12.30% 20.81% 1.18% BONdS 9.61% 16.17% 18.66% 21.01% –6.27% 16.43% 7.3% 14.14% 18.93% –0.88% 8.75% 3.04% 9.25% 2.10% 6.6% 7.93% 0.7% 5.27% 12.81% –1.16% 7.20% 15.56% 2.69% –3.95% 13.85% cASH 14.89% 11.56% 9.70% 5.99% 5.55% 6.74% 6.16% 6.92% 7.42% 5.55% 6.17% 5.07% 4.06% 3.74% 4.65% 4.75% 4.83% 6.03% 5.52% 1.21% 0.70% 0.87% 0.83% 0.51% 0.54%

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l e a r n i n g f r o m t h e pa s t, p o s i t i o n i n g f o r t h e f u t u r e [7] [6] w e at h e r i n g u n c e r ta i n m a r k e t s

Source: Thomson Reuters Datastream. All data from 31 December 1989 to 31 December 2014. The information provided is for illustrative purposes only and is not meant to represent the past or future performance of any particular investment. It is not possible to invest directly in an index. Equities are represented by the FTSE All-Share Index (total return). Bonds are represented by the FTSE Actuaries UK Gilts All Stocks Index (total return). Cash is represented by three-month LIBOR rates. All returns are in sterling terms and are based on three-monthly closing prices of the respective indices. The above

graph is provided for illustrative purposes only and does not take into account the impact of fees and taxation.

£71,602

£68,125

£39,908

ftse all share annualised 5 Year returns 1988–1992 14.8% 1993–1997 16.6% 1998–2002 –2.2% 2003–2007 15.4%  2008–2012 2.5%

£20,000 £10,000 £40,000 £60,000 £100,000 £80,000 Maastricht Treaty 1992 European sovereign debt crisis 2010 Asian currency crisis 1997 September 11th 2001 Invasion of Iraq 2003 Dot Com peak 2000 4,000 3,000 Subprime loan problems emerge 2007 LTCM failure 1998 Establishment of the ECB 1998 Lehman Brothers collapses 2008 European M&A surpasses US 2007 US loses its ‘AAA’ credit rating 2011

FTSE All-Share Annualised 5 Year Returns 1990–1994 9.7% 1995–1999 20.3% 2000–2004 –3.0% 2005–2009 6.5% 2010–2014 8.7% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 EQUITIES –9.72% 20.8% 20.49% 28.39% –5.85% 23.85% 16.7% 23.56% 13.77% 24.20% –5.90% –13.29% –22.68% 20.86% 12.84% 22.04% 16.75% 5.32% –29.93% 30.12% 14.51% –3.46% 12.30% 20.81% 1.18% BONdS 9.61% 16.17% 18.66% 21.01% –6.27% 16.43% 7.3% 14.14% 18.93% –0.88% 8.75% 3.04% 9.25% 2.10% 6.6% 7.93% 0.7% 5.27% 12.81% –1.16% 7.20% 15.56% 2.69% –3.95% 13.85% cASH 14.89% 11.56% 9.70% 5.99% 5.55% 6.74% 6.16% 6.92% 7.42% 5.55% 6.17% 5.07% 4.06% 3.74% 4.65% 4.75% 4.83% 6.03% 5.52% 1.21% 0.70% 0.87% 0.83% 0.51% 0.54%

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Diversification

may reduce risk and

enhance returns

POSITIONING

FOR THE FUTURE

As investors look to position their portfolios for the future, we would encourage them to stick with one of the most basic tenets of investing: Work with a financial professional to develop a sound asset allocation and diversification strategy designed to correspond with their long-term goals.

BUILdING A dIvERSIFIEd PORTFOLIO cAN ‘SMOOTH’ THE RIdE

Remember, past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product. Diversification and asset allocation may not protect you fully against market risk. Be aware that all financial investments involve an element of risk. The value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Best

worst

emerging

markets 50.46% mid cap30.21% emerging markets37.43% government Bonds13.59% high Yield59.48% mid cap27.40% government Bonds16.90% small cap27.82% small cap32.77% government Bonds14.92%

mid cap 30.23% small cap 20.59% international 7.72% cash 6.90% emerging markets 59.39% emerging markets 22.94% corporate Bonds 5.40% mid cap 26.11% mid cap 32.27% corporate Bonds 12.25% international 23.04% emerging markets 16.30% large cap 7.36% corporate Bonds –9.94% small cap 54.27% small cap 19.52% high Yield 2.94% high Yield 18.74% international 25.00% international 12.07% small cap 22.40% large cap 14.43% cash 6.12% international –17.39% mid cap 50.64% international 15.87% cash 1.22% corporate Bonds 15.61% large cap 18.66% average weighted portfolio 5.79% large cap 20.78% average weighted portfolio 11.66% average weighted portfolio 5.88% average weighted portfolio –19.98% average weighted portfolio 31.56% high Yield 15.00% large cap –2.18% average weighted portfolio 14.13% average weighted portfolio 12.26% emerging markets 4.29% average weighted portfolio 19.27% high Yield 11.41% government Bonds 4.70% high Yield –27.37% large cap 27.33% average weighted portfolio 14.47% average weighted portfolio –2.24% emerging markets 13.42% high Yield 7.31% mid cap 3.66% corporate Bonds 8.79% international 5.83% high Yield 2.16% large cap –28.33% international 16.45% large cap 12.62% international –4.31% international 11.42% corporate Bonds 1.93% high Yield 2.71% government Bonds 8.00% cash 4.81% corporate Bonds 0.43% emerging markets –35.18% corporate Bonds 15.10% corporate Bonds 8.67% mid cap –10.06% large cap 9.97% cash 0.55% small cap 0.89% cash 4.90% corporate Bonds 0.83% mid cap –2.46% mid cap –38.15% cash 2.21% government Bonds 7.26% small cap –12.53% government Bonds 2.73% emerging markets –4.08% large cap 0.74% high Yield 4.80% government Bonds 0.50% small cap –10.55% small cap –43.91% government Bonds –0.81% cash 0.95% emerging markets –17.57% cash 1.39% government Bonds –4.09% cash 0.62%

Large Cap (shares) is represented by the FTSE 100 Index

Mid Cap (shares) is represented by the FTSE 250 Index

Small Cap (shares) is represented by the FTSE Small Cap Index

International (shares) is represented by the MSCI World Index

Emerging Markets (shares) are represented by the MSCI Emerging Markets Index

Government Bonds are represented by the Citi Group World Government Bond UK All Maturities Index

Corporate Bonds are represented by the iBoxx £ Corp Index

Cash is represented by the JPM UK Cash (3 Months) Index

High Yield Bonds are represented by the Bank of America Merrill Lynch Global High Yield Index Average Weighted Portfolio is composed of equal

weightings of all other represented indices The average weighted portfolio is for illustration purposes only to show the effect on returns of investing in a combination of asset classes, rather than a single asset class. It is not a recommendation for diversifi ed portfolio construction.

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l e a r n i n g f r o m t h e pa s t, p o s i t i o n i n g f o r t h e f u t u r e [9] [8] w e at h e r i n g u n c e r ta i n m a r k e t s

large cap is represented by the ftse 100 index

mid cap is represented by the ftse 250 index

small cap is represented by the ftse small cap index

international is represented by the msci world index

emerging markets investments are represented by the msci emerging markets index

government Bonds are represented by the citi group world government Bond uk all maturities index

corporate Bonds are represented by the iBoxx £ corp index

cash is represented by the Jpm uk cash 3-month index

high Yield is represented by the Bank of america merrill lynch global high Yield index

average weighted portfolio is composed of equal weightings of all other represented indices

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Best

worst

emerging

markets 50.46% mid cap30.21% emerging markets37.43% government Bonds13.59% high Yield59.48% mid cap27.40% government Bonds16.90% small cap27.82% small cap32.77% government Bonds14.92%

mid cap 30.23% small cap 20.59% international 7.72% cash 6.90% emerging markets 59.39% emerging markets 22.94% corporate Bonds 5.40% mid cap 26.11% mid cap 32.27% corporate Bonds 12.25% international 23.04% emerging markets 16.30% large cap 7.36% corporate Bonds –9.94% small cap 54.27% small cap 19.52% high Yield 2.94% high Yield 18.74% international 25.00% international 12.07% small cap 22.40% large cap 14.43% cash 6.12% international –17.39% mid cap 50.64% international 15.87% cash 1.22% corporate Bonds 15.61% large cap 18.66% average weighted portfolio 5.79% large cap 20.78% average weighted portfolio 11.66% average weighted portfolio 5.88% average weighted portfolio –19.98% average weighted portfolio 31.56% high Yield 15.00% large cap –2.18% average weighted portfolio 14.13% average weighted portfolio 12.26% emerging markets 4.29% average weighted portfolio 19.27% high Yield 11.41% government Bonds 4.70% high Yield –27.37% large cap 27.33% average weighted portfolio 14.47% average weighted portfolio –2.24% emerging markets 13.42% high Yield 7.31% mid cap 3.66% corporate Bonds 8.79% international 5.83% high Yield 2.16% large cap –28.33% international 16.45% large cap 12.62% international –4.31% international 11.42% corporate Bonds 1.93% high Yield 2.71% government Bonds 8.00% cash 4.81% corporate Bonds 0.43% emerging markets –35.18% corporate Bonds 15.10% corporate Bonds 8.67% mid cap –10.06% large cap 9.97% cash 0.55% small cap 0.89% cash 4.90% corporate Bonds 0.83% mid cap –2.46% mid cap –38.15% cash 2.21% government Bonds 7.26% small cap –12.53% government Bonds 2.73% emerging markets –4.08% large cap 0.74% high Yield 4.80% government Bonds 0.50% small cap –10.55% small cap –43.91% government Bonds –0.81% cash 0.95% emerging markets –17.57% cash 1.39% government Bonds –4.09% cash 0.62%

Large Cap (shares) is represented by the FTSE 100 Index

Mid Cap (shares) is represented by the FTSE 250 Index

Small Cap (shares) is represented by the FTSE Small Cap Index

International (shares) is represented by the MSCI World Index

Emerging Markets (shares) are represented by the MSCI Emerging Markets Index

Government Bonds are represented by the Citi Group World Government Bond UK All Maturities Index

Corporate Bonds are represented by the iBoxx £ Corp Index

Cash is represented by the JPM UK Cash (3 Months) Index

High Yield Bonds are represented by the Bank of America Merrill Lynch Global High Yield Index Average Weighted Portfolio is composed of equal

weightings of all other represented indices The average weighted portfolio is for illustration purposes only to show the effect on returns of investing in a combination of asset classes, rather than a single asset class. It is not a recommendation for diversifi ed portfolio construction.

Source: BlackRock, Datastream. Data as at 31 December 2014. Total Return Indices shown. The average weighted portfolio is used to illustrate the effects of rudimentary diversification on returns and should not be construed as investment advice or recommendation as to any particular asset allocation or course of action.

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As we have seen, choosing the exact best time to invest is very diffi cult or even impossible. Pound-cost averaging, in which a fi xed amount of money is invested at regular intervals, ensures purchasing more shares of an investment when prices are low and fewer when they are high. Ultimately, a lower average cost translates to a higher return when the market swings back up.

In Strategy 1 of the hypothetical example below, an investor used a pound-cost averaging strategy, making regular investments of £1,000 per month. When the share prices were higher, the investor bought fewer shares and when the share prices were lower, the investor bought more shares. As a result, the investor’s average cost per share (£19.44) was lower than the average market price over the same time period. Additionally, this same investor purchased more shares with the same amount of money than he or she would have made with a lump-sum investment at the beginning of the year (Strategy 2).

You should be aware that regular investing does not guarantee a profi t and does not protect against loss in declining markets. Regular investing involves continuous investing so investors should consider their ability to make periodic payments in all market environments. You should remember that all fi nancial investments involve an element of risk. The value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed.

REdUcE THE IMPAcT OF PRIcE vOLATILITY

BY POUNd-cOST AvERAGING

Strategy 1: systematically invest £1,000 per month every month for a year regardless of share price ST OC K S HAR E PRICE 0 10 20 £30

Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec.

£25 £25 £25 £20 50 shares £20 50 shares shares50 £20 £18 40 shares shares40 56 shares 62 shares £16 67 shares £15 67 shares £15 59 shares £17 40 shares 37 shares £27

total shares purchased: 618 – average cost/share: £19.44

Strategy 2: invest £12,000 as a lump sum at the beginning of the year

ST OC K S HAR E PRICE 0 10 20 £30 £25 £25 £25 £27 £20 £20 £16 £15 £15 £17 £20 £18

Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec.

480 shares

total shares purchased: 480 – cost/share: £25

Pound-cost averaging

can improve

long-term returns

POSITIONING

FOR THE FUTURE

Pound-cost averaging can help smooth out long-term returns and can potentially lower the average share price of investments.

Source: BlackRock. These illustrations do not include any dealing charges that might be due. You should be aware that regular investing does not guarantee a profi t and does not protect against loss in declining markets. Regular investing involves continuous investing so investors should consider their ability to make periodic payments in all market environments. You should remember that all fi nancial investments involve an element of risk. The value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. The information provided is for illustrative purposes only and is not meant to represent the performance of any particular investment.

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[10] w e at h e r i n g u n c e r ta i n m a r k e t s l e a r n i n g f r o m t h e pa s t, p o s i t i o n i n g f o r t h e f u t u r e [11]

Portfolio rebalancing

can keep your goals

on track

POSITIONING

FOR THE FUTURE

Regular portfolio

rebalancing can potentially help improve long-term returns and reduce volatility. All of the work that goes into getting an asset allocation strategy right would

be wasted if it were not maintained. Over time, some asset classes may outperform or underperform and alter a portfolio’s overall allocation. Rebalancing is a way to reset a portfolio to its original allocation to keep it consistent with the initial investment strategy. Using several hypothetical portfolios as examples, the graph below shows how annual rebalancing over the last 20 years would have changed each portfolio’s risk and return characteristics.

For example, annual rebalancing of Portfolio I (50% stocks, 50% bonds) improved average annual return while also reducing risk. Similar results can be seen for other portfolio allocations.

REBALANcING cAN IMPROvE PORTFOLIO EFFIcIENcY

the effect of annual rebalancing on diversifi ed portfolios over the last 20 years (1994-2014) 6 8 10 12 7 9 11 13 15 16 R E TU R N ( AV E R A G E A N N U A L TO TA L R E TU R N )

RISK (STANDARD DEVIATION OF MONTHLY RETURNS)

Not rebalanced Rebalanced % Portfolio I 50% Stocks 50% Bonds Portfolio I 50% Stocks 50% Bonds Portfolio II 60% Stocks 40% Bonds Portfolio II 60% Stocks 40% Bonds Portfolio III 70% Stocks 30% Bonds Portfolio III 70% Stocks 30% Bonds Portfolio V 90% Stocks 10% Bonds Portfolio V 90% Stocks 10% Bonds Portfolio IV 80% Stocks 20% Bonds Portfolio IV 80% Stocks 20% Bonds Portfolio VI 100% Stocks Portfolio VI 100% Stocks

Source: BlackRock; Thomson Reuters Datastream. Data as at 31 December 2014. Past performance is no guarantee of future results. The information shown does not refl ect the past performance of actual accounts, but rather the past performance of portfolios of indices. The ‘rebalanced’ portfolios assume rebalancing of their component indices to their established percentages on January 1 of each year. Stocks are represented by an equal allocation to the FTSE 100, FTSE 250 and FTSE Small Cap indices. Bonds are represented by the CitiGroup World Government Bond Index Europe. All fi gures are in total return terms. Assumes reinvestment of all distributions. It is not possible to invest directly in an index.

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Weathering

market cycles

Investing over the long term has always been challenging, and recent market cycles have again tested investors’ fortitude. Getting – and staying – prepared for diffi cult times, however, is often a determining factor in long-term success.

History has shown that market cycles can be extreme, but you do not have to navigate these challenging times alone. BlackRock has the expertise, global market insight and risk management to help you stay the course and meet your fi nancial goals. Through our strengths – as well as our partnership with fi nancial professionals – you can feel confi dent that your assets are being managed by some of the most experienced and trusted investment professionals in the industry.

INvESTORS NEEd TO TURN THE LESSONS

FROM THE PAST INTO OPPORTUNITIES FOR THE

FUTURE BY:

 Establishing, and sticking with, a long-term investment plan.

 Staying in contact with their fi nancial professional.

 Remaining prepared: be informed, invested, resolute, opportunistic and diversifi ed.

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l e a r n i n g f r o m t h e pa s t, p o s i t i o n i n g f o r t h e f u t u r e [13]

TALk TO YOUR FINANcIAL

PROFESSIONAL TOdAY

uncertain markets reinforce the need to be prepared and the value a fi nancial professional can offer, including:

 review your long-term investment goals, time horizon and appetite for risk;

 development of an individual asset allocation strategy;

 and periodic portfolio reviews to ensure that your expectations, as well as investments, align with long term plans and goals.

most importantly, a fi nancial professional can provide individual guidance in all market conditions, which is essential during uncertain times. contact your fi nancial professional today about Blackrock’s investment solutions.

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The opinions expressed are those of BlackRock as at December 2014 and are subject to change at any time due to changes in market or economic conditions. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any strategy. BlackRock has not considered the suitability of investment against your individual needs and risk tolerance. We strongly recommend that you seek professional advice prior to investing. All fi nancial investments involve an element of risk. The value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. Past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product. Diversifi cation and asset allocation may not protect you fully against market risk.

Issued by BlackRock Investment Management (UK) Limited (authorised and regulated by the Financial Conduct Authority). Registered offi ce: 12 Throgmorton Avenue, London, EC2N 2DL. Registered in England No. 2020394. Tel: 020 7743 3000. For your protection, telephone calls are usually recorded. BlackRock is a trading name of BlackRock Investment Management (UK) Limited. © 2015 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, ALADDIN, iSHARES, LIFEPATH, SO WHAT DO I DO WITH MY MONEY, INVESTING FOR A NEW WORLD and BUILT FOR THESE TIMES are registered and unregistered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners. RSM-0729 (Splash/275859/Jul15)

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As the world’s largest investment manager, we believe it’s our responsibility to help investors of all sizes succeed in the New World of Investing. We were built to provide the global market insight, breadth of capabilities and deep risk management expertise these times require.

 the resources you need for a new world of investing

Investing with BlackRock gives you access to every asset class, geography and investment style, as well as extensive market intelligence and risk analysis, to help build the dynamic, diverse portfolios these times require.

 the best thinking you need to uncover opportunity

With deep roots in all corners of the globe, our 120+ investment teams in over 30 countries share their best thinking to translate local insight into actionable ideas that strive to deliver better, more consistent returns over time.

 the risk management you need to invest with clarity

With more than 1,000 risk professionals and premier risk management technology, BlackRock digs deep into the data to understand the risk that has to be managed for the returns our clients need and bring clarity to the most daunting fi nancial situations.

BlackRock. Investing for a new world.

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