1. 1 14-0906-26 (0415) © 2015 Morningstar. All Rights Reserved. By accessing this presentation, you agree to the following terms. If you do not agree to these terms, you should not open this presentation: In all cases you are responsible for ensuring that the Material appears exactly as it was sent to you or as downloaded by you. You shall not alter or modify the Materials in any manner whatsoever, and you shall ensure that the Materials are not altered or modified in any manner by any party to whom you make them available.

2. The Northwestern Mutual Life Insurance Company – Milwaukee, WI 14-0906-26 (0415) © 2015 Morningstar. All Rights Reserved. © 2014 Morningstar. All Rights Reserved. PRINCIPLES OF INVESTING Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) (life and disability insurance, annuities) and its subsidiaries. Securities offered through Northwestern Mutual Investment Services, LLC (NMIS), a subsidiary of NM, broker-dealer, registered investment adviser and member FINRA and SIPC. For illustrative purposes only and not indicative of any investment. Past performance is no guarantee of future results. No investment strategy can guarantee a profit or protect against a loss.

3. 3 14-0906-26 - (0415) © 2015 Morningstar. All Rights Reserved. Power of Reinvesting 1995–2014 Stocks are represented by the Ibbotson ® Large Company Stock Index. Bonds are represented by the 20-year U.S. government bond. An investment cannot be made directly in an index. With fixed income securities, such as bonds, interest rates and bond prices tend to move in opposite directions. When interest rates fall, bond prices typically rise; and conversely, when interest rates rise, bond prices typically fall. Bond and bond fund investors should carefully consider risks such as: interest rate risk, credit risk, liquidity risk and inflation risk before investing in a particular bond or bond fund. Past performance is no guarantee of future results. Hypothetical value of $1,000 invested at the beginning of 1994. Data does not account for taxes or transaction costs. This is for illustrative purposes only and not indicative of any investment.

4. 4 14-0906-26 - (0415) © 2015 Morningstar. All Rights Reserved. Power of Compounding Hypothetical investment in stocks Stocks are represented by the Ibbotson ® Large Company Stock Index. Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.

5. 5 14-0906-26 - (0415) © 2015 Morningstar. All Rights Reserved. Importance of Rebalancing 1994–2014 Small stocks are represented by the Ibbotson ® Small Company Stock Index. Large stocks are represented by the Ibbotson ® Large Company Stock Index. Intermediate-term government bonds are represented by the five-year U.S. government bond. With fixed income securities, such as bonds, interest rates and bond prices tend to move in opposite directions. When interest rates fall, bond prices typically rise; and conversely, when interest rates rise, bond prices typically fall. Bond and bond fund investors should carefully consider risks such as: interest rate risk, credit risk, liquidity risk and inflation risk before investing in a particular bond or bond fund. Past performance is no guarantee of future results. Stocks: 50% large and 50% small stocks. Bonds: intermediate-term government bonds. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.

6. 6 14-0906-26 - (0415) © 2015 Morningstar. All Rights Reserved. Managing Risk with Portfolio Rebalancing The risk and return of rebalanced versus non-rebalanced portfolios Past performance is no guarantee of future results. Risk and return are measured by monthly annualized standard deviation and compound annual return, respectively. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.

7. 7 14-0906-26 - (0415) © 2015 Morningstar. All Rights Reserved. About the Data Each portfolio consists of 60% stocks, 30% bonds, and 10% cash at the portfolio begin date. The 60% stock allocation consists of 30% large, 15% small, and 15% international stocks at each portfolio begin date. The bond allocation consists entirely of five-year U.S. government bonds, while the cash allocation consists of 30-day U.S. Treasury bills. The rebalanced portfolio has been rebalanced monthly. Large stocks are represented by the Ibbotson ® Large Company Stock Index. Small stocks are represented by the Ibbotson ® Small Company Stock Index; international stocks by the Morgan Stanley Capital International Europe, Australasia, and Far East (EAFE ® ) Index; government bonds by the five-year U.S. government bond; and cash by the 30-day U.S. Treasury bill. An investment cannot be made directly in an index. The data assumes reinvestment of income and does not account for taxes or transaction costs.

8. 8 14-0906-26 - (0415) © 2015 Morningstar. All Rights Reserved. Dangers of Market Timing Hypothetical value of $1 invested from 1926–2014 Stocks are represented by the Ibbotson ® Large Company Stock Index. Treasury bills are represented by the 30-day U.S. Treasury bill. The data assumes reinvestment of income and does not account for taxes or transaction costs. Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.

9. 9 14-0906-26 - (0415) © 2015 Morningstar. All Rights Reserved. Dangers of Market Timing Hypothetical value of $1 invested from 1995–2014 Stocks are represented by the Ibbotson ® Large Company Stock Index. Treasury bills are represented by the 30-day U.S. Treasury bill. An investment cannot be made directly in an index. The data assumes reinvestment of income and does not account for taxes or transaction costs. Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment.

10. 10 14-0906-26 - (0415) © 2015 Morningstar. All Rights Reserved. Market-Timing Risk The effects of missing the best month of annual returns 1970–2014 Stocks are represented by the Ibbotson ® Large Company Stock Index. The data assumes reinvestment of income and does not account for taxes or transaction costs. Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.

11. 11 14-0906-26 - (0415) © 2015 Morningstar. All Rights Reserved. The Cost of Market Timing Risk of missing the best days in the market 1995–2014 Stocks in this example are represented by the Ibbotson ® Large Company Stock Index. The data assumes reinvestment of income and does not account for taxes or transaction costs. Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.

12. 12 14-0906-26 - (0415) © 2015 Morningstar. All Rights Reserved. Reduction of Risk Over Time 1926–2014 Small stocks are represented by the Ibbotson ® Small Company Stock Index. Large stocks are represented by the Ibbotson ® Large Company Stock Index. Government bonds are represented by the 20-year U.S. government bond, and Treasury bills by the 30-day U.S. Treasury bill. The data assumes reinvestment of all income and does not account for taxes or transaction costs. Past performance is no guarantee of future results. Each bar shows the range of compound annual returns for each asset class over the period 1926–2014. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.

13. 13 14-0906-26 - (0415) © 2015 Morningstar. All Rights Reserved. Returns Before and After Inflation 1926–2014 Stocks are represented by the Ibbotson ® Large Company Stock Index. Bonds are represented by the 20-year U.S. government bond, cash by the U.S. 30-day Treasury bill, and inflation by the Consumer Price Index. Past performance is no guarantee of future results. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.

14. 14 14-0906-26 - (0415) © 2015 Morningstar. All Rights Reserved. Can You Stay on Track? Stocks are represented by the Standard & Poor’s 500 ® index, which is an unmanaged group of securities and considered to be representative of the U.S. stock market in general. Bonds are represented by the 20-year U.S. government bond. The data assumes reinvestment of income and does not account for taxes or transaction costs. With fixed income securities, such as bonds, interest rates and bond prices tend to move in opposite directions. When interest rates fall, bond prices typically rise; and conversely, when interest rates rise, bond prices typically fall. Bond and bond fund investors should carefully consider risks such as interest rate risk, credit risk, liquidity risk and inflation risk before investing in a particular bond or bond fund. Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.