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How $25,000 Could Have Financed 4 Years of College

Financial advisors, how many of your clients welcomed a new baby or grandbaby in the last year? After you’ve admired the photos, it’s not too soon to encourage them to think about financing that baby’s college graduation. Relatively modest steps taken now could well position the new relative for the future.

In the hypothetical illustration below, see how annual contributions of $5,000 each into Calamos Growth and Income Fund (A Shares at NAV) in the first five years of a baby’s life (1995 to 1999) would have been enough to cover college expenses of $30,000 for four years (2012 to 2016).

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Even after four years of tuition, book and meal payments, $23,710 would have remained at the end of the period—just slightly less than the amount of the original investment.

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Past performance does not guarantee future results. This illustration should be read along with the average annual total returns for the 1-, 5- and 10-year periods below. Growth in the five annual $5,000 investments assumes a 4.75% sales charge with each investment and reinvestment of all distributions. Initial investments are made in January of each year and the withdrawals are made in December.

We like the Calamos Growth and Income Fund (I shares: CGIIX) as a potential college savings solution because it’s managed to seek equity-like returns with historically lower risk. In the case of this illustration from 1993 to 2016, the downside was limited, which produced excess returns when the S&P 500 had negative returns. This helped the investment progress.

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The Shortcomings of an Indexed College Plan

An additional point to make when discussing Calamos Growth and Income Fund with parents or grandparents: The next 20 years may present its share of financial tests for the would-be student’s parents, and there may be times when they will be tempted to liquidate a long-term investment to meet near-term cash needs.

Here’s why we caution against relying on an market-indexed investment. As shown in the hypothetical illustration below, a client would not have been able to accomplish the same objective at the end of a 20-year investment period. Five annual investments of $5,000 early on would not have been enough to generate $30,000 a year for four years. The fourth year would have fallen $24,472 short.

 

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This illustration should be read along with the average annual total returns for the 1-, 5- and 10-year periods below. Initial investments are made in January of each year and the withdrawals are made in December.

The S&P 500 Index is generally considered representative of the U.S. stock market. Unmanaged index returns assume reinvestment of any and all distributions and, unlike fund returns, do not reflect fees, expenses or sales charges. Investors cannot invest directly in an index. The consistent risk posture of CGIIX argues in favor of the fund’s potential role as a set-and-forget college savings plan.

A Word About Lower-volatility Equity

When we discuss volatility, our focus is on the variation of returns in our lower-volatility equity funds versus a full equity benchmark such as the S&P 500. We consider a fund to have lower volatility when its beta versus the equity benchmark is less than one. For example, a beta of 0.5 reflects half of the market’s volatility versus the index, while a beta of 2.0 would indicate twice the volatility of the index. From this perspective, the Fund has a lower risk profile than the S&P 500 Index.

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Financial advisors, please see the Calamos Growth and Income Fund profile for more information or talk to your Calamos Investment Consultant at 888-571-2567 or caminfo@calamos.com.
 

 

 

 

Performance data quoted represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance quoted. The principal value and return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance reflected at NAV does not include the Fund’s maximum front-end sales load of 4.75%. Had it been included, the Fund’s return would have been lower. For the most recent fund performance information visit www.Calamos.com.

Standard Deviation is a statistical measure of the historical volatility of a mutual fund or portfolio. Sharpe ratio is a calculation that reflects the reward per each unit of risk in a portfolio. There is no assurance that the funds will meet their investment objectives. Beta is a historic measure of a fund’s relative volatility, which is one of the measures of risk; a beta of 0.5 reflects 1/2 the market’s volatility as represented by the Fund’s primary benchmark, while a beta of 2.0 reflects twice the volatility.

The principal value and investment return of an investment will fluctuate so that your shares, when redeemed may be worth more or less than their original cost. You can obtain performance data current to the most recent month end by visiting calamos.com. Calendar year returns measure net investment income and capital gain or loss from portfolio investments for each period specified. Average annual total return measures net investment income and capital gain or loss from portfolio investments as an annualized average. All performance shown assumes reinvestment of dividends and capital gains distributions. Class A shares load-adjusted returns are adjusted for the maximum front-end sales load of 4.75%. The Funds also offer Class B and C shares, the performance of which may vary. Performance shown reflects an expense reimbursement that improved results. As of the prospectus dated 2/29/16, the gross expense ratio for Class A shares is 1.11% and for Class I shares is 0.86%.

Important Risk Information. An investment in the Fund is subject to risks, and you could lose money on your investment in the Fund. There can be no assurance that the Fund will achieve its investment objective. Your investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The risks associated with an investment in the Fund can increase during times of significant market volatility. The Fund also has specific principal risks, which are described below. More detailed information regarding these risks can be found in the Fund’s prospectus.

The principal risks of investing in the Calamos Growth and Income Fund include: convertible securities risk consisting of the potential for a decline in value during periods of rising interest rates and the risk of the borrower to miss payments, synthetic convertible instruments risk consisting of fluctuations inconsistent with a convertible security and the risk of components expiring worthless, equity securities risk, growth stock risk, small and mid-sized company risk, interest rate risk, credit risk, liquidity risk, high yield risk, forward foreign currency contract risk and portfolio selection risk.

NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE

Before investing, carefully consider the fund’s investment objectives, risks, charges and expenses. Contact 800.582.6959 for a prospectus containing this and other information. Read it carefully.

 

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Speak with a Calamos Investment Consultant at 888-571-2567