Morningstar Advisor - Spring 2008 - 21

Junk-Bond, Treasury Spreads Widen U.S. LT Gvt Yld (%Yield) LB Hi-Yld (%Yield) U.S. IT Gvt Yld (%Yield) 12 8 about the same as in 2006, says Russel Kinnel, Morningstar’s director of fund research. It’s bad news for shareholders if this is the beginning of the end of declining expenses, Kinnel says. Morningstar research has found that costs are the best predictors of future returns. From 2003 through 2006, Kinnel says, the average asset-weighted expense ratio fell to 0.9% from 1%. In 2007, however, the average expense ratio stayed at 0.9%, and the costs in the balanced and municipal-bond asset classes rose. Domestic-equity and taxable-bond funds dipped 1 basis point; international enjoyed a meaningful drop of 4 basis points. The biggest reason asset-weighted expense ratios dropped from 2003 to 2006, Kinnel says, wasn’t that fund companies cut fees (although some did). It was that advisors and investors sought out low-cost funds because they had better performance records than higher-costs funds in the wake of the 2000-02 bear market. 4 Another factor was the mutual fund scandal, Kinnel says. It spurred some companies voluntarily to lower or stop boosting their fees, while others were forced to lower fees by Eliot Spitzer as terms for settlement. (The Spitzermandated cuts are set to expire over the next two years, after which companies will be free to raise fees that had been forced down.) In 2007, it’s clear that costs didn’t matter that much to advisors and investors, Kinnel says. The biggest spike in fees came in the balanced group, and it was driven by the explosive growth of Franklin Templeton Founding Funds Allocation FFALX. “The fund has netted nearly $15 billion in five years,” Kinnel says, “because it charges a higher 12b-1 fee than the underlying funds it invests in. That makes it more attractive to advisors who keep the 12b-1 fee.” In other words, it would be cheaper for investors to buy the three underlying funds separately than to have them rolled up into one fund. K Jan 07 Mar 07 May 07 July 07 Sep 07 Nov 07 Jan 08 Mar 08 average fund’s return down a percentage point or two, and if yield spreads widen a bit more, high-yield investors might be left with a return in the 4% to 5% range over the next 12 months. After Years of Decline, Fund Fees Level Off U.S. LT Gvt Yld (%Yield) LB Hi-Yld (%Yield) U.S. IT Gvt Yld (%Yield) Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 After declining for years, the expense ratio that the average fund investor paid in 2007 was LIFE COMES AT YOU FAST ® When it does, know that we’re on the other end with Simpler Solutions. Like using variable annuities and living benefits to provide more income potential with less income risk during retirement. We think it’s a solid solution. See how a recent study by Ibbotson Associates supports this conclusion. For more information, call 877-966-3669 and enter promo code 56204 or visit nationwide.com/moreincome Not a deposit, not FDIC or NCUSIF insured, not guaranteed by the institution, not insured by any federal government agency, may lose value. The general distributor for variable annuities is Nationwide Investment Services Corporation, member FINRA. Nationwide, Nationwide Financial, the Nationwide framemark, On Your Side and Life Comes at You Fast are federally registered service marks of Nationwide Mutual Insurance Company. © 2008 Nationwide Financial Services, Inc. All rights reserved. In MI only: Nationwide Investment Svcs. Corporation. Ibbotson Associates, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. The Ibbotson name and logo are property of Ibbotson. Ibbotson and its affi liates are not related to Nationwide ® and its affi liates. For broker/dealer use only – not for use with the public. NFV-0468AO MorningstarAdvisor.com 21 T DOTTED LINE OR BELOW 3/27/08 5:58:43 PM
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Morningstar Advisor - Spring 2008

Table of Contents for the Digital Edition of Morningstar Advisor - Spring 2008

Morningstar Advisor - Spring 2008
Contents
Letter from the Editor
Inbox
Do You Use Annuities with Living Benefit Guarantees?
Managers Who Actively Enrich Shareholders
Staying Out of the Silos
Investment Briefs
Let’s Not All Become Fundamental Indexers Just Yet
Volatility Potential
Adding the Income Dimension
Do’s and Don’ts of RMDs
An Attractive Yield is Only Skin Deep
Mutual Funds Get in the Game
Beyond Target Date
The Last Holdout
A Bird of a Different Feather
First-Class Thinker
Sleep Like a Baby
Is Health Care Immune to a Recession?
Anatomy of a Mutual Fund Disaster
Embrace Your Inner Contrarian
Risks Worth Taking
Mutual Fund Analyst Picks
Undervalued Stocks
Most Popular Variable Annuities
New at Morningstar and on MorningstarAdvisor.com
Back to the Garden
Morningstar Advisor - Spring 2008 - Intro
Morningstar Advisor - Spring 2008 - Morningstar Advisor - Spring 2008
Morningstar Advisor - Spring 2008 - Cover2
Morningstar Advisor - Spring 2008 - 1
Morningstar Advisor - Spring 2008 - 2
Morningstar Advisor - Spring 2008 - Contents
Morningstar Advisor - Spring 2008 - 4
Morningstar Advisor - Spring 2008 - 5
Morningstar Advisor - Spring 2008 - 6
Morningstar Advisor - Spring 2008 - Letter from the Editor
Morningstar Advisor - Spring 2008 - 8
Morningstar Advisor - Spring 2008 - Inbox
Morningstar Advisor - Spring 2008 - Do You Use Annuities with Living Benefit Guarantees?
Morningstar Advisor - Spring 2008 - 11
Morningstar Advisor - Spring 2008 - Managers Who Actively Enrich Shareholders
Morningstar Advisor - Spring 2008 - 13
Morningstar Advisor - Spring 2008 - 14
Morningstar Advisor - Spring 2008 - Staying Out of the Silos
Morningstar Advisor - Spring 2008 - 16
Morningstar Advisor - Spring 2008 - 17
Morningstar Advisor - Spring 2008 - Investment Briefs
Morningstar Advisor - Spring 2008 - 19
Morningstar Advisor - Spring 2008 - 20
Morningstar Advisor - Spring 2008 - 21
Morningstar Advisor - Spring 2008 - Let’s Not All Become Fundamental Indexers Just Yet
Morningstar Advisor - Spring 2008 - 23
Morningstar Advisor - Spring 2008 - 24
Morningstar Advisor - Spring 2008 - 25
Morningstar Advisor - Spring 2008 - Volatility Potential
Morningstar Advisor - Spring 2008 - 27
Morningstar Advisor - Spring 2008 - 28
Morningstar Advisor - Spring 2008 - 29
Morningstar Advisor - Spring 2008 - 30
Morningstar Advisor - Spring 2008 - 31
Morningstar Advisor - Spring 2008 - Adding the Income Dimension
Morningstar Advisor - Spring 2008 - 33
Morningstar Advisor - Spring 2008 - 34
Morningstar Advisor - Spring 2008 - 35
Morningstar Advisor - Spring 2008 - Do’s and Don’ts of RMDs
Morningstar Advisor - Spring 2008 - 37
Morningstar Advisor - Spring 2008 - 38
Morningstar Advisor - Spring 2008 - 39
Morningstar Advisor - Spring 2008 - An Attractive Yield is Only Skin Deep
Morningstar Advisor - Spring 2008 - 41
Morningstar Advisor - Spring 2008 - Mutual Funds Get in the Game
Morningstar Advisor - Spring 2008 - 43
Morningstar Advisor - Spring 2008 - 44
Morningstar Advisor - Spring 2008 - 45
Morningstar Advisor - Spring 2008 - 46
Morningstar Advisor - Spring 2008 - Beyond Target Date
Morningstar Advisor - Spring 2008 - 48
Morningstar Advisor - Spring 2008 - 49
Morningstar Advisor - Spring 2008 - 50
Morningstar Advisor - Spring 2008 - 51
Morningstar Advisor - Spring 2008 - 52
Morningstar Advisor - Spring 2008 - The Last Holdout
Morningstar Advisor - Spring 2008 - 54
Morningstar Advisor - Spring 2008 - 55
Morningstar Advisor - Spring 2008 - 56
Morningstar Advisor - Spring 2008 - 57
Morningstar Advisor - Spring 2008 - 58
Morningstar Advisor - Spring 2008 - 59
Morningstar Advisor - Spring 2008 - A Bird of a Different Feather
Morningstar Advisor - Spring 2008 - 61
Morningstar Advisor - Spring 2008 - 62
Morningstar Advisor - Spring 2008 - 63
Morningstar Advisor - Spring 2008 - First-Class Thinker
Morningstar Advisor - Spring 2008 - 65
Morningstar Advisor - Spring 2008 - 66
Morningstar Advisor - Spring 2008 - 67
Morningstar Advisor - Spring 2008 - Sleep Like a Baby
Morningstar Advisor - Spring 2008 - 69
Morningstar Advisor - Spring 2008 - 70
Morningstar Advisor - Spring 2008 - 71
Morningstar Advisor - Spring 2008 - 72
Morningstar Advisor - Spring 2008 - 73
Morningstar Advisor - Spring 2008 - Is Health Care Immune to a Recession?
Morningstar Advisor - Spring 2008 - 75
Morningstar Advisor - Spring 2008 - Anatomy of a Mutual Fund Disaster
Morningstar Advisor - Spring 2008 - 77
Morningstar Advisor - Spring 2008 - Embrace Your Inner Contrarian
Morningstar Advisor - Spring 2008 - 79
Morningstar Advisor - Spring 2008 - Risks Worth Taking
Morningstar Advisor - Spring 2008 - 81
Morningstar Advisor - Spring 2008 - 82
Morningstar Advisor - Spring 2008 - Mutual Fund Analyst Picks
Morningstar Advisor - Spring 2008 - 84
Morningstar Advisor - Spring 2008 - 85
Morningstar Advisor - Spring 2008 - 86
Morningstar Advisor - Spring 2008 - 87
Morningstar Advisor - Spring 2008 - 88
Morningstar Advisor - Spring 2008 - Undervalued Stocks
Morningstar Advisor - Spring 2008 - 90
Morningstar Advisor - Spring 2008 - 91
Morningstar Advisor - Spring 2008 - Most Popular Variable Annuities
Morningstar Advisor - Spring 2008 - 93
Morningstar Advisor - Spring 2008 - 94
Morningstar Advisor - Spring 2008 - New at Morningstar and on MorningstarAdvisor.com
Morningstar Advisor - Spring 2008 - Back to the Garden
Morningstar Advisor - Spring 2008 - Cover3
Morningstar Advisor - Spring 2008 - Cover4
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