Saving for Retirement

2 Things To Do Today To Retire Rich (Or At Least Worry Free) April 23, 2017

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2 Things To Do Today To Retire Rich (Or At Least Worry Free) April 23, 2017

Every success in life begins with understanding what it takes to realize that success and then working towards that goal over time.  Retirement is no different.  The younger you are when you develop this understanding, the more likely retirement will meet your hopes. 

What does retiring successfully look like?

It’s different for everyone, but there are some common themes:

  1. The financial ability to experience life on your terms.
  2. Freedom from financial worry regardless of macro-economic circumstances.
  3. Little or no debt.
  4. The ability to help those you want to help, be it children or charities.

How?

Step 1:  Break your retirement down into the core financial elements,  or “buckets.” Each bucket has a specific role in your retirement success.

 

Basic Living Expenses. Food, housing, transportation, medical care, emergency cash, etc.  Very unlikely Social Security will be enough.

a. Understand how much income you will need. 

b. Understand how much you must invest in this bucket to generate the income you will need.

c. Understand the types of investments that fit this bucket and what they pay – this bucket should take minimal risks and be as close to principal guaranteed as you can manage.

d. Treasury bonds, high grade municipal or corporate bonds, other fixed income solutions may be suitable including SOME annuity types (most annuities are bad, get in touch if you have questions).

 

Discretionary Spending.  This is your play money:  travel, new cars, dining out, shopping, second homes, whatever you like to do that you could live without if push came to shove.

a. Determine what this expense is likely to be annually.

b. Understand what you need to invest in this bucket to support your discretionary spending in most years – this bucket should take moderate risk to meet withdrawals with minimal principal reduction in most years.

c. Diversified stock allocation with recession plan, growth & income strategies with non-correlating or reduced correlation elements (i.e. everything in your portfolio shouldn’t be going up, or down, at the same time). Partial hedges can play a useful role in this bucket.

d. Limited exposure to single stocks or growth stocks/sectors, dividend investment strategies.

 

Long Term or Legacy Assets  These are dollars you don’t expect to draw on for 5 to 10 years or more.  They can be earmarked for charitable giving, helping children or grandchildren, or whatever aspirational dream you might have. 

a. Focused on long term growth to take advantage of the incredible compounding power of the markets.

b. Diversified stock allocation with focus on sectors with higher historical growth.

c. Exposure to blend of blue chip/growth stocks, dividend strategies.

 

At this point, you should have an idea how much you are going to need in each bucket by the time you retire. 

Taking step 2 is the difference between those that enjoy retirement awesomeness and those that get by, or worse, are forced to continue working even if they don’t want to.

Step 2:  Set a budget to make sure your savings are on track to fund each bucket.  Start with funding Basic Living Expenses.  Set up automatic deposits into your investments accounts with your bank.  Don’t forget to max out your 401k and retirement accounts. 

A point of clarification – just because the money you are saving is going to be used to fund Basic Living Expenses doesn’t mean it should be in bonds/fixed income today – what you invest those dollars in today depends on how far you are from retirement.  The same with the other buckets.

Even if you can’t put away what you need to from each paycheck today, save as close to that target as you can manage without too much discomfort.  Every dollar counts.  It will make a difference. 

This doesn’t mean you should endure hardship today, but if you are like most Americans you are spending money in places that don’t add real value to your life and instead steal from your future. 

Want an awesome retirement?  Get started today by taking some time to think about your buckets, then create a plan to fill them. 

Need some help?  Retirement income/investment planning is something my firm does with everyone that invests with ACI’s guidance.  If you just need a little direction, go ahead and get in touch – I’ll point you down the right road and even have a couple free tools to help you on your way.

If you need or prefer a more comprehensive approach, ACI is happy to help.  As far as I know, ACI is the only firm to offer a 100% satisfaction guarantee on investment and income planning.  If you aren’t 100% satisfied, you don’t pay.  Pretty simple.    

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To Smarter Investing,

Dak Hartsock
Market Strategist
ACI Wealth Advisors, LLC.
Process Portfolios, LLC.

Recession Odds Dip – Consumers Spending More

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Recession Odds Dip – Consumer Spending Still Rising 9/7/2016

Before we get going, I was recently asked what the point is of understanding whether or not we are entering a recession. This person had been told by their broker that to “ride the rallies you have to ride out the valleys.” Catchy, right?

The reason to understand when the economy is falling into recession is because around 80% of the time the stock market sells off hard when it does. The market usually takes a few months after the recession actually starts to figure it out, but once it starts selling most of the time it keeps going far longer than anyone other than a billionaire likes to see. The other reason- when the market itself starts into recessionary selling, 70% or more stocks follow the market down.

Think of it this way. If you were getting into your car this morning and you received a credible message that there was nearly an 80% chance you would get in a car accident today, and that about 70% of the cars on the road were also going to be involved in a crash today, would you crank it up and head for the freeway or would you decide to preserve your car (and maybe more than that) and stay at home?

Now that doesn’t mean that you should stay at home at all costs, but if those were my odds for the day, I’d sure like to know about them before I decided to take a drive.

So, my firm and I use what’s called the Recession Probability Indicator (“RPI”) to identify whether or not we are in (or entering) a recession. Think of it as a lookout in the crow’s nest of an old school sailing ship – he’s keeping an eye out for storms or rocks so the ship gets where it’s heading safely.

My firm and I use the RPI for the same reasons – to help steer client accounts away from storms and rocks so they can live their lives focused on what’s important to them rather than worrying about the next market crash. We aren’t going to see every single rock or approaching storm, but if we weren’t looking we wouldn’t see any of them. I think of it as Wealth Preservation 101. It’s basic.

Absent a recession, it’s best to stay invested. If you’d like more information on this idea, follow this link —> CLICK HERE.

So, if recession is what we need to pay attention to, are we in one yet?

Nope.

Consumer activity drives about 70% of the American economy and spending is still rising at +4.2% vs. last quarter. As a result, we are seeing a slightly reduced probability of recession vs. earlier in the year. This is subject to change, but for now the investment climate is stable and likely to stay that way for a while longer.

If you don’t know how the Recession Probability Indicator works, CLICK HERE. Make sure to scroll down to take a look at the tables below the description.

Below is an updated graph of the RPI. It runs on a 2 – 3 month lag.

If you’d like to take a look at the American Institute of Economic Research business conditions update CLICK HERE.

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To Smarter Investing,

Dak Hartsock
Chief Market Strategist
ACI Wealth Advisors, LLC.
Process Portfolios, LLC.

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Q1 2016 Quarterly Update and Market Outlook

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Q1 2016 Year-to-Date and Market Outlook Update

The video below reviews performance for all 6 Process Portfolios year-to-date through April 15, 2016 and also includes an updated Market Outlook near the end.

2016 saw the worst January in at least a generation and a return to higher levels of volatility thanks to central bank actions that seem to be increasingly opaque to many market watchers. I’ve been fortunate in that the Fed hasn’t done anything far distant from my expectations, at least so far. We’ve also seen the financial media predictably stoking fear and the usual parade of media guests short on data but long on opinion.

Regardless, careful students of the markets have seen a number of signs that suggest we may see smoother waters later in the year, as long as the economy does not move onto a recessionary footing.

Overall, reasonable performance with 4 of 6 portfolios beating the benchmarks, and 3 of 6 outpacing the broad market. Most portfolios have managed to do so with less risk than investing in an index fund. It’s fair to say it’s been a very good quarter for the 3 portfolios that clocked a 4%+ return, 2 with substantially less risk than buying an S&P 500 index fund. That’s a nice result for such a tumultuous period.

The video below features the executive brief and results updates in the first 4 slides. Feel free to use the video player’s tools to skip ahead to what you are interested in. Thereafter there is a little more “color” on each portfolio followed by an updated Market Outlook. Rounding out the periphery of the presentation are descriptions of each ACI Process Portfolio, including risk management.

This video concludes with the always exciting regulatory disclosures, which seem to get longer by the day. We can thank the admirable solidarity law school graduates in government demonstrate with their private sector compatriots, constantly striving to make sure their fellows on the other side of the fence have plenty of work.

As I know everyone loves to read the disclosures, I’ve had our theme music looped at the end to give you an even better reading experience.

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Warm Regards,

Dak Hartsock
Chief Market Strategist
ACI Wealth Advisors, LLC.
Process Portfolios, LLC.

What’s Up With The Economy? Recession Probability and Business Conditions Update

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April 4, 2016

There has been a lot of economic doom and gloom talk over the last couple months, with media “expert” after media “expert” saying the US economy is about to fall into a recession. It comes with the predictable warnings about a bad bear market. The vast majority of these talking heads are just voicing opinions based on their own views and often get emotional when voicing their perspective. The problem with these “experts” is there very little in the way of factual economic data to support any of their positions.

Understand that investing is not an activity that benefits from either uninformed opinion or emotions. In fact, the opposite is true – uniformed opinions and emotional decision making often cause grief to investors.

Success in the investment game is primarily about WHAT IS, not WHAT IF. What IF is the progenitor of fear and greed, arguably the cause of more financial grief than Alan Greenspan (that was a market nerd joke). What IS, by definition, restricts consideration and decision to the facts at hand.

I’m sure you’ve gone to a doctor at some point in your life because you had a cold – runny nose, sore throat, a bit of fever, maybe some aches and pains. Has the doctor ever said, “What if this isn’t a cold? What if this is pneumonia? What if one of your lungs is collapsing? Could it be that you have cancer? Maybe you are sniffling because you are about to fall victim to a hemorrhagic fever and the bleeding has started in your sinuses? Maybe you are achy because you are going to come down with Dengue Fever? Is it possible this is Malaria?

Do you believe the doctor could effectively manage your condition if the diagnostic conversation was about What IF rather than What IS?

Investing is no different. Any effective conversation or action has to be about What IS. What IF is basically irrelevant.

So, let’s look at What IS.

At the most recent reading, the Recession Probability Indicator is cruising along at a steady 12, meaning the overall investment environment continues to be stable. That is subject to change, but for right now there is no recession on the horizon and in fact several key areas of the economy strengthened in the most recent month. If you aren’t familiar with the RPI, CLICK HERE to see how well it works.

RPI Graphic March 2016 update

Manufacturing, responsible for about 30% of our economy, moved back into expansion mode last month for the first time since last fall and the non-manufacturing sector of the US economy also strengthened a bit, which is good news for the other 70% of our economy.

A reminder – just because there is no recession doesn’t mean the market can’t go up and down, but that history vastly favors those who stay invested despite volatility, as long as there is no recession imminent.

If you’d like some evidence, take a look at the facts– Why Recessions Kill Investment Portfolios.

Fear helps the media sell advertising and brokers increase commissions, but it doesn’t help your investment portfolio get you to retirement with the assets you need to live the way you want to.

The point? Don’t let short term noise get in the way of a solid investment plan. Only impending recessions should do that, and if you have a real investment plan, you already know what you are going to do when the next recession comes.

Don’t have a retirement income and investment plan? Newsflash – one of the key differences between the wealthiest investors and the average person is that they know what they have to invest and save and when they need to do it.

We can help. Use the contact page or email and we’ll have a no pressure, get to know chat to see my firm and I can add value to your life.

For those interested, here is a link to the most recent Business Conditions Report by the American Institute of Economic Research–CLICK HERE

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To Smarter Investing,

Dak Hartsock
Chief Market Strategist
ACI Wealth Advisors, LLC.
Process Portfolios, LLC.

Is Your 401k Stealing From You?

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Is Your 401k Stealing From You?

One of the most widely used investment accounts is the 401k retirement savings plan. Investors from CEO’s to grocery clerks pay into these accounts as a central part of their retirement strategy. A solid 401k account can be the difference between a satisfying retirement and one filled with financial struggle.

But there are widespread problems in 401k plans, so much so that even the White House is pushing against the hidden fees that are buried in the vast majority of plans.
So, what are these fees and how much damage can they actually do to your account?

There are plan administrator fees, fund management fees, load fees, contingent deferred sales load, redemption fees, and 12b-1 fees. They can add up and do some serious damage.

For the most part, you can’t do anything about administrator and 12b-1 fees but they are typically reasonable even in the worst offending plans, and sometimes the employer covers those expenses anyway.

What you do need to think about are the rest of the fees, which can outrageous.

Redemption fees are usually incurred when you buy an investment in your 401k and then sell it again within a short period of time. The best way to avoid these is to remember that you are investing for retirement and only buy into funds you feel comfortable holding in the account for at least a year.

The biggest problems in 401ks are load fees. These can be as high as 8.5%, but are usually in the 5% range. Regardless, a load fee is something you should never, ever pay if it can be avoided. The majority of that 5% is commission paid to the plan administrator for including the offending fund in your company’s 401k investment options.

The next biggest problem is the management fee, or expense ratio. In some funds, this can run as high as 3%. As a general rule of thumb, if the fund management fee is above 0.75% (or even 0.50%), try to find a less expensive option.

The best way to do that is usually to replace a mutual fund with an Exchange Traded Fund (or “ETF”) that gives you approximately the same exposure to the desired investment.
Let’s look at a specific example – the John Hancock Large Cap Equity Fund A Class shares (“TAGRX”) which are available in many John Hancock administered 401k plans. The front end load fee on this fund is 5%. So, this means that if you put $100,000 into this fund you immediately lose $5,000 to commissions paid to the administrator. The expense ratio of 1.06% is below average for a fund of this type, but still really high compared to alternatives that are probably also in your 401k options. If your investment stays level during the year, this is another $1,000 or so of your money lost to fees for a total approximate fee loss of $6,006 for the year. So the fund has to do at least over 6% for the year just to get you back to break even.

If your plan has John Hancock Funds, it probably also has John Hancock ETFs. The John Hancock Multifactor Large Cap ETF (“JHML”) is comparable to the TAGRX fund above, but has no sales load and an expense ratio of 0.35%. So, total approximate annual fees of $350 for a $100,000 investments vs. up to $6.006. Think about that.

Chances are you rebalance annually. If you are replacing one load fund with another each year, or even every other year, you are costing yourself huge amounts of money in retirement.

What does huge mean?

CASE STUDY: 401k Account – 53 Year Old Senior Executive at a National Food Company
Approximate 401k balance at time of analysis: ~$700,000.

case study

Click graphic to enlarge

9/10 holdings had fees he didn’t know about. He had rebalanced each year for the previous 5 years and as a result was losing about $10,800 a year to unseen fees. Think about that – nearly $55,000 over 5 years lost to avoidable fees.

That’s expensive, but it doesn’t stop there.

Let’s say he stopped buying load funds with high expense ratios and replaces them with lower cost ETFs from here on out.

How much did he really lose from just 5 years of not understanding fees and investment choices in his plan?

Assume:
1) He retires at 65.
2) His account averages 7% a year from this point forward.
A) Year 1 of retirement: $128k in missed gains lost to avoidable fees.
B) Year 10 of retirement: $254k in missed gains lost to avoidable fees.

What if he’d kept rebalancing into the same type funds each year until age 65?
A) Year 1 of retirement: $374k in missed gains lost to avoidable fees.
B) Year 10 of retirement: $736k in missed gains lost to avoidable fees.

This is widespread. Most companies, however well meaning, have these fees in their 401k plans. The bottom line is that the benefits coordinators aren’t investment advisors – they listen to what the plan salespeople tell them, pick the one with a recognizable brand or that they think they understand the least poorly, and move on to their next problem. Looking under the hood on investments isn’t in the job description or in their training.

If the senior executive above hadn’t decided to get his 401k independently evaluated, he probably would have missed out on around $500,000 or maybe more in retirement. That’s a BIG number and it’s why you need to look under the hood on your 401k and understand what’s happening.

If you can’t make sense of your choices or don’t have the time to dig into your plan, talk to someone that can.

These hidden and mostly avoidable fees could be the difference between having a vacation home in retirement or not, or a grandchild going to the college of their choice, or spending a year or two abroad.

It’s your money.

If your portfolio is $300,000 or more, click here to find out what you are paying in avoidable fees and get suggestions that can keep more of your money working for you. Just mention 401k fees in the message box.

As always, if you have questions about this update or just need a little guidance in the right direction, feel free to get in touch.

To Smarter Investing,

Dak Hartsock
Chief Market Strategist
ACI Wealth Advisors, LLC.
Process Portfolios, LLC.

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Broke at 80. What You Don’t Know About Long Term Care Can Hurt You, and Probably Will.

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Broke at 80. What You Don’t Know About Long Term Care Can Hurt You, and Probably Will.

Remember the movie Saturday Night Live? There is a moment where the main character Tony, played by John Travolta, is being told by his boss he needs to think about the future. Tony immediately tells him “Screw the future.” The boss, who has some understanding of life, replies “No Tony, you can’t screw the future, the future screws you.”

When it comes to dealing with long term health expenses, it would be hard to find a more accurate statement. Health inflation in this country has averaged 3.7% per year over the last 10 years. This doesn’t seem too bad until you realize that over the same period inflation has been below 2%, and wage inflation (meaning how fast your paycheck has grown) has only clocked about 0.7% a year over the same period.

A little added perspective: this means that after 10 years of “wage growth” the $1 you earned in 2005 has only grown to $1.07, while the $1 you spent for healthcare in 2005 now costs you $1.44 for the same type benefits. In simplified terms, your total income has increased 7%, but your healthcare costs have increased by 44%.

This makes for long term financial disaster if you don’t have a plan to protect yourself from these costs.

So, what are the choices?

Many people count on Medicare or Medicare supplements to address these issues, but the simple fact is that neither pays for situations where you may need permanent in-home care, an assisted living facility, or a nursing home, which are substantial costs even today. Medicare benefits are limited, and very likely will be even more limited in the future due to our government’s excessive spending habits.

The reality is that most people are going to need adult day care, in-home care, an assisted living facility, or a nursing home. The only question is whether it’s going to hit you in your 60’s, 70’s or 80’s, but it’s coming. That’s reality. If neither you nor your children are able to cover the expense when the time comes, there are government run facilities you that will probably accept you.

Imagine the helpful government employees at the DMV or IRS preparing your food, helping you dress, managing your prescriptions and making sure you have everything you need when you aren’t able to handle it yourself. Good times, right?

If that isn’t part of the future you imagine for yourself or your spouse, then you need to deal with the problem before the problem deals with you.

There are options.

The least expensive way may be with a 30 year term life policy. Here is a link for an earlier article I wrote on this subject. CLICK HERE

The next most cost effective solution is a long term care policy (“LTC”).

Long term care policies are a viable solution if extended term life plans don’t appeal, or if you need added coverage above what you can get from a well designed term life policy. Many long term care policies feature an annualized cost of care adjustment designed to keep up with expenses. The benefit of this cannot be underestimated, especially in a future that is probably going to continue to experience flat wage inflation. Find a policy with some kind of cost of care rider to keep up with the rising expenses.

Many long term care sales agents will try to sell you a whole life or variable life policy with a long term care benefit. Don’t bite. These earn big commissions for the agent, are expensive, and draw money away from both better investments and the primary problem which is fixing your long term care situation.

Another mistake made when purchasing long term care coverage is not getting enough. Many people fixate on the face value of the policy and assume it will be enough. After all, a $200,000 or $300,000 long term care policy will cover just about everything, right?

Not likely. When you buy a long term care policy with a benefit of $300,000 you are basically making a bet that you will either (1) die after about 4 and half years of assisted living (unlikely) or (2) that you will be miraculously cured of the infirmities that made you decide on an assisted living facility shortly after your $300,000 runs out (3) that your portfolio can sustain the additional draw down to pay for the facility on top of your other living expenses from 4 years and 7 months on. Number 3 might make sense for some people, but what if you live longer than you expect to? Many do, and more in the future will.

Shouldn’t you know if option 3 is going to work for you? If you don’t, time to get financial plan that includes managing this expense.

Let’s look at actual costs for in-home care, assisted living, and a nursing home;

Home Health Care: $45,760 a year. That’s the national average. It could be substantially higher where you live. Think about this as $3,813 a month that Medicare won’t pay if you need it. Where are you going to get that money?

Home Health Care is generally defined as assistance with a range of tasks that you aren’t able to handle any longer like housekeeping, errands, bathing, handling medications, etc. If you think you will only need two hours a day and can manage costs that way, you are probably wrong.

Assisted Living Facility: $43,200 a year, usually per person. Again, this is the national average and your costs could be substantially higher (probably are) but are not as likely to be substantially lower. If you are married, you could be on the hook for $7,200 a month (or more). Most people don’t have retirement accounts that can sustain that kind of draw down added on top of their other expenses, at least not for very long.

Nursing Home Care: Private room: $91,250 a year is the national average. This category also experiences the highest annual inflation of the above options at around 4% per year over the last 5 years. $7,604 a month. What happens if you have a spouse and you both need this type care?

When you need one of the above, and you most likely will, what happens if you live 5 or even 10 years longer than you expect? For most people, that means your last years may be a struggle just to get by, or even a situation where you are forced back to work of some kind or have to move to a government facility.

Now, consider this: Since 1950 the average American lifespan has increased from about 64 to 82. Medical technology and lifestyle choices have accelerated the potential increases in lifespan in recent years and there are too many scientists to cite that believe many people in their 50’s today will see their 90th or even 95th birthday. It seems a bit irresponsible to risk your happiness in your last years or your children’s legacy on the idea that you will die before you need the care that comes with aging just to save a few thousand dollars a year, which is about what long term care policies cost.

Depending on your age and health, you could obtain a long term care policies with $800,000 in benefits (or 10 + years of coverage) for an annual cost equivalent to about what 45 days stay in a nursing home would cost. When you are discussing policies with an agent, try to find a policy with an inflation or cost-of-living adjustment of some kind, and also try to find the longest benefit term possible. It isn’t helpful to have a million dollar policy with a benefit period of 1 year. Look for 4 or 5 year benefit terms, and stack policies if you can.

It’s also important to make sure that the policy you buy plays nice with other policies if you have them. It would be bad to pay on a policy for a few years and then find out it won’t pay benefits because of the other LTC policy you own. Then you get to spend your time trying to get your premiums back instead of relaxing by the pool or playing golf.

So when should you start getting long term care policies in place?

Americans are experiencing healthy aging in greater numbers than ever before, but once you start passing out of middle age the likelihood of problems increases with your years. My opinion is that you should have your long term care policies in place a couple years before retirement, and perhaps even earlier.

Will this cost you money that could have been used elsewhere for lifestyle or investment? Sure. But you need to find a way to protect yourself from potentially massive financial stress later in life when you are least able to handle it. For many, this is going to involve finding a balance between the costs of a LTC policy(s) and the needs of today.

Wherever that balance is, it’s better to identify it now before you find yourself at 83 years old writing checks for $7000 a month that you didn’t see coming.

It’s also best not to work this out in a vacuum. Talk to your financial advisor, not just your insurance agent. Also, ask your financial advisor if they have a fiduciary responsibility to you. If they don’t, find an advisor that does to help you build a financial life plan that includes addressing your long term health needs.

For those that don’t know, my firm and I are fiduciary advisors.

Some additional resources that may help:
http://www.aarp.org/health/health-insurance/info-06-2012/understanding-long-term-care-insurance.html
http://money.usnews.com/money/blogs/the-best-life/2013/02/20/what-you-need-to-know-about-long-term-care-insurance
http://www.consumeraffairs.com/insurance/ltc.html
http://www.consumerreports.org/cro/2012/08/long-term-care-insurance/index.htm
http://www.consumersadvocate.org/long-term-care-insurance/best-long-term-care-insurance

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To Smarter Investing (and smarter planning),

Warm Regards,

Dak Hartsock

Chief Market Strategist

ACI Wealth Advisors, LLC.

Process Portfolios

Buffett Buying Out ACI’s Largest Holding!

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Buffett Buying Out ACI’s Largest Holding

Precision Castparts announced this morning that it has agreed to be acquired by Warren Buffett’s Berkshire Hathaway for $235 a share, subject to shareholder approval. This is as a validation of the research process for ACI’s Durable Opportunities Portfolio.

Precision Castparts is the largest holding in the Durable Opportunities Portfolio. ACI began buying Precision Castparts in September 2014 and three additional add-on buys were made prior to June 2015. Each ACI buy was below the Berkshire offer price.

Mr. Buffet’s planned acquisition validates the ACI research process for Durable Opportunities and my view of Precision Castparts as a strong company with superior management and predictable growth prospects that will last for decades, providing investors with desirable long term rates of return.

ACI’s Durable Opportunities Portfolio focuses on buying companies that are going to be around for decades, at or below fair value, which feature ever growing equity for shareholders and target expected returns in the low double digit range – reasonable risk for reasonable return.

To learn more about ACI’s managed portfolios, visit www.aciwealth.com/portfolios

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To Smarter Investing,

Dak
Chief Market Strategist
ACI Wealth Advisors, LLC.
Process Portfolios, LLC.

May 2015 RPI Update — Recession Probability Recedes

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Recession Probability Indicator Update: May 2015.

As you may recall from last month’s reading, one of the key components of the RPI recorded a 3rd negative month in a row, an event that has only occurred three times in the last 15 years and two of those occurrences preceded recessionary bear markets.

The RPI indicator has moved back below 20 at this reading, indicating that the investment environment has returned to a stable footing.

This leaves other factors such as fundamental value or tactical/technical factors in charge of the market. For a more detailed analysis of these factors, CLICK HERE.

To review the history of the RPI including monthly readings and an illustration of the potential impact on investments, CLICK HERE.

2014 IRA Contribution Basic Guidelines

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Just a quick update as tax season is on us and in some situations contributing to your IRA may lower your tax bill. If you are self-employed, you may be able to deduct up to $52,000 from your 2014 Earned Income, and then use that money for your retirement investments. Read on.

2014 IRA contributions need to be made no later than April 15, 2015. The earlier you get it in the better – mistakes happen, and the IRS doesn’t care. Give yourself some time for the unexpected.

 
 
Traditional IRA
a. Under 50 — $5500
b. Over 50 — $6500
c. Remember to report your contribution – it’s a deduction UNLESS you have contributed to a 401k for 2014 in which case you may not be able to
deduct your IRA contribution. Check with your tax professional and/or 401k plan administrator.
d. You cannot contribute to an IRA if you do not have earned income.
e. If you are over 70 ½ you cannot make a contribution to a Traditional IRA.

ROTH IRA
a. Income limits as follows;
i. Single tax filers: Up to $114,000 in Modified Adjusted Gross Income
ii. Joint tax filers: Up to $181, 000 in Modified Adjusted Gross Income
b. Your contribution is not a deduction.
c. You can contribute to a ROTH IRA at any age, provided you have earned income, meet the income limits, and are not disqualified due to already funding a traditional IRA for the period.

SEP IRA (Self Employed)
a. 0 – 25% of your compensation up to $52,000.
b. Must be a sole proprietor, partnership, business owner or earn and report self employed income.
c. Eligible employees must receive the same percentage contribution.
d. Remember to report your contribution – generally SEP IRA contributions come off your Earned Income total on a dollar for dollar basis, so you might drop a tax bracket. Check with your tax professional.

You can contribute to an IRA subject to the above restrictions even if you have already contributed or maxed out your 401k for 2014.

ROTH vs. Traditional?
This is pretty simple. If you qualify and don’t need (or don’t qualify for) the tax deduction, put the money in the ROTH. Why? Qualified ROTH withdrawals are tax free. Traditional IRA withdrawals, even if made after 59 1/2, are subject to income taxes. Bet on that being a bigger and bigger bite of your retirement funds as time passes.

Just a reminder that these are guidelines – neither my firm nor I are qualified tax professionals and therefore do not provide tax advice. Check with your tax professional.

© Copyright 2015
Dak Hartsock

Check out the background of this investment professional on FINRA's Brokercheck --> http://brokercheck.finra.org/
CA Department of Insurance License #OI12504

Investment Management

For ACI, investment management begins with understanding and actively managing risk for our clients and partners.  We do this through smarter investments built on low cost, highly liquid and diversified investments rather than expensive financial products.

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RETIREMENT INCOME PLANNING

Understanding the needs of investors seeking stable results for portfolios greater than $500,000 is a core strength of ACI.  One of the most important things we do is help your investments to create stable income while generating sufficient growth to meet your future demands and the needs of those you care for. 

ACI uses customized planning and software to create retirement income plans to meet the specific needs of each of clients while providing confidence, flexibility, and cost efficiency.

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FINANCIAL PLANNING

Success in any endeavor comes from hard work, vision, and planning. We can help you create a more confident future by working with you, your CPA, your tax and estate counsel to make sure that when the tomorrow becomes today, you are where you want to be.

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Market Income

This portfolio invests in a basket of highly liquid Index or Sector securities and sells off atypical returns in exchange for a premium on a rolling basis. That’s a fancy way of saying we take the bird in hand and let someone else have the two in the bush.  We buy sectors that are undervalued relative to the rest of the market or vs. their historical value ranges which reduces downside risk vs. the broad market.  Typically out-performs in bear markets, neutral markets and mild bull markets.   while under-performs strong bull markets.

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Core Equity

Invests in diversified components of the financial markets and broad economy by targeting sectors which demonstrate the greatest potential for a consistent range of multi-year returns, while offering a risk adjusted investment profile equal to or lower than the broad markets.  Our research tells us which sectors demonstrate the greatest potential for consistent multi-year returns while offering greater risk efficiency than the broad markets.  We invest on an “Outcome Oriented” basis – meaning we have a good idea what the returns over time will be at a given purchase price.

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Durable Opportunities

This portfolio invests in companies possessing a Durable Competitive Advantage.  Such companies are likely to be around for decades, easing the concern of principal return.  DCA companies often suffer less in bear markets and usually lead recoveries.  These companies allow ACI to build portfolios with minimum expected returns that can be in the mid-single digit range over any 3-5 year period which can provide long term stability partnered with long term growth in equity.

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Full Cycle

This portfolio is derived from the ground breaking work in ‘risk parity’ by Ray Dalio, arguably one of the top 10 money managers in history and founder of Bridgewater Associates.  The Full Cycle portfolio is built on the allocation models Ray designed to provide the highest potential risk adjusted returns possible through all phases of the economic cycle.  Bridgewater’s “All Weather” fund was designed for pension funds and other large institutional investors that needed to earn stable returns with stable risk, and has been closed to new investors for years.  At the time the fund closed, the All Weather Portfolio had a minimum required investment of $100 million.

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Equity Builder

This is a risk management overlay which helps build and protect accounts by collecting small premiums against held positions on an opportunistic basis during correcting markets.  EQB seeks to collect an extra 2% – 5% per year against the cost of underlying investments.  While primarily targeted at increasing account equity, EQB gives an extra layer of protection to capital during periods of higher volatility.

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Fixed Income

Diversified, broad exposure to fixed income ETFs and best of breed no load funds including core fixed income components such as Government, Corporate or MBS, municipals, and unconstrained “Go Anywhere” funds.

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ACI Investment Team

 

Dak Hartsock; Investment manager with over 15 years of experience with securities & securities options. Dak has worked full time in the financial markets since 2007. He has more than a decade of operating experience as a business owner & developer, with substantially all personal net worth invested in ACI. He is a graduate of the University of Virginia.

Robert Hartsock; MBA. Bob has over 30 years of senior management experience in diverse markets, products and businesses. He brings an exceptional record that includes management roles in two Fortune 500 companies and leadership of 7,500+ employees. Bob’s career features a specialization in identifying and fixing management and operational problems for multiple companies including leading over a dozen acquisitions, private placements and a public offering. He is uniquely positioned to provide ACI with highly relevant C-Level management perspective. Bob provides operational & macro perspective on investments ACI undertakes for client portfolios. Bob holds degrees from University of Illinois and University of Washington.

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Privacy Policy & Disclosures

Privacy Policy & Disclosures

DakHartsock.com has a STRINGENT PRIVACY POLICY.

My Commitment to You

I will not share your email address or contact information with unaffiliated third parties under any circumstances except as required by law or at my discretion if information is requested by law enforcement.

DakHartsock.com protects the security and confidentiality of the personal information you supply to the site and makes efforts to ensure that such information is used for proper purposes in connection with your interest in the site or the published materials on www.dakhartsock.com I understand that you have entrusted us with your private information, and I do everything possible to maintain that trust. As part of protecting your privacy, subscribing to updates from dakhartsock.com requires you to opt-in twice: once when you complete the opt-in form on the site, and again via the email address you provided.

This is not a contract, but a clear statement of good intent.

Email dhartsock@aciwealth.com if you have additional questions or concerns regarding the site’s privacy policy or use the form provided on the contact page.

This web site reflects the opinions of Dak Hartsock and is not intended to offer personalized investment advice. Information regarding investment products, strategies, and services is provided solely for educational and informational purposes. Other information provided on the site, including updates on the Recession Probability Indicator (“RPI”) are presented for educational purposes and are not recommendations to buy or sell securities or solicitation for investment services.

Dak Hartsock does not provide personalized investment advice over the internet, nor should any information or materials presented here be construed as personalized investment or financial advice to any viewer. Mr. Hartsock is not a tax advisor and investors should obtain independent tax advice regarding investments. Neither Dak Hartsock, ACI Wealth Advisors, nor any affiliated persons or companies accept any liability in connection with your use of the information and materials provided on this site.

Dak Hartsock is a Series 65 licensed and registered Independent Advisor Representative with ACI Wealth Advisors, LLC (“ACI”). ACI is a Registered Investment Advisor (“RIA”), registered in the State of Florida and the State of California. ACI provides asset management and related services for clients in states where it is registered, or where it is exempt from registration through statute, exception, or exclusion from registration requirements. ACI is in no way responsible for the content of DakHartsock.com nor does ACI accept any responsibility for materials, articles, or links found on this site. A copy of ACI’s Form ADV Part 2 is available upon request.

Market data, articles, blogs and other content on this web site are based on generally-available information and are believed to be reliable. Dak Hartsock does not guarantee the accuracy of the information contained in this web site, nor is Mr. Hartsock under any obligation to update any information on the site. Information presented may not be current. Any information presented on this site should not be construed as investment advice or a solicitation to buy and sell securities under any circumstances.

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Model & Performance Disclosures

Disclosures Regarding Investment Performance Reporting in compliance with Rule 206(4)-1(a)(5).

Visit http://www.dakhartsock.com/process-portfolios-historical-performance/ for historical performance of ACI’s Process Portfolios.

Market Income Portfolio
1. The performance of the broad market over the same time periods is included for both model and live portfolio to help investors understand market conditions present during the period examined by the model and during live investment.
2. Listed Index models and graphs do NOT include transaction, fund or Advisor Management fees as the index model is not available for investment. Live portfolio results include all fees, including Advisor Management fees.
3. Model results do NOT reflect reinvestment of dividends or other earnings. Actual results reflect limited reinvestment of dividends and other earnings, but do not reflect the impact of any applicable taxes which vary by investor and account type (deferred account vs. taxable, etc.).
4. Investing involves risk, including risk of loss and/or principle. While the Index model has historically shown reasonable performance versus the S&P 500 on a risk adjusted basis, there is no guarantee that will continue into the future. Market Income is designed to provide reasonable returns for less risk than the broad market on a risk adjusted basis, and while the firm believes model portfolios are capable of continued outperformance on this basis, there is no guarantee they will do so. Comparisons with the S&P 500 are included to help the average investor understand how an investment in Market Income may differ from investment in an index fund such as an S&P 500 index fund.
5. The model for Market Income is the Chicago Board of Exchange S&P 500 Buy/Write Index or “BXM.” BXM has historically displayed less volatility than the S&P 500 and Market Income. BXM cannot be directly invested in. Market Income does not exactly follow the BXM index model – the mechanics of closing and opening positions differ – BXM opens, closes or rolls positions on the same day every month regardless of the profit or loss in a position – Market Income generally, but not always, waits until after expiration before transacting. Market Income will also close or roll ahead of expiration if the position has a high percentage of profit present in order to capture that gain. Options are generally sold again within a week of the closure of the prior position, but not always, and often new position may be opened the same day the prior position is closed.
Benchmark and index comparisons are made on a best available basis – meaning that both the index model and live performance are believed to be compared with market and the closest possible benchmark for simplicity of comparison. However, there is no guarantee future volatility will be either less than, equal to, or greater than the volatility experienced in the model or the S&P 500 although the firm invests with an eye on reduced volatility vs. the S&P 500.
6. The model portfolio (BXM) utilizes the S&P 500 as its basis. Market Income differs from BXM in that the underlying securities are primarily selected on the basis of “relative” value. This simply means that sectors are compared with one another and Market Income generally invests in the sector or sector(s) trading at the greatest discount or the smallest premium relative to its historical average valuation. Other factors are also considered including sector earnings growth and expected return versus other available sector instruments. Advisor believes this gives Market Income a higher margin of safety than repeatedly investing in the S&P 500 on a rolling basis without regard to value or prevailing economic conditions, while preserving liquidity.
7. The BXM model on which Market Income is based is a non-traded index. As such, results do not represent actual trading or investment and do not reflect any impact that material economic or market factors may have had on the advisors decision making if advisor had been managing live money during the period the model covers, including transaction, fund, or management fees.
8. Market Income also differs from the BXM model in that Market Income seeks to reduce investment during recessionary economic periods while BXM stays invested regardless of economic or market conditions. Advisor believes this will better protect capital vs. BXM model but is materially different than staying invested in all market conditions. This action may cause Market Income to have reduced participation in markets that continue to move up despite Advisors reduction in investment.
9. Advisor clients have experienced results that exceed the performance of the model to date. There is no guarantee Market Income will continue to outperform BXM in the future regardless of Advisor efforts to do so.

Core Equity Portfolio
1. The performance of the broad market over the same time periods is included for both model and live portfolio to help investors understand market conditions present during the period examined by the model and during live investment.
2. Model is a historical back test and includes brokerage and fund fees but does NOT include Advisor Management fees which vary by account size, but in general reduce annual performance by approximately 1.5%. Live portfolio results include all fees, including Advisor Management fees.
Historical back-test means the model portfolio has been tracked on a backwards looking basis prior to the beginning of live investments in order to establish historical risks and results for investment in this portfolio. Back testing has certain inherent limitations as detailed in item #7 below.
3. Model results reflect regular investment of dividends or other earnings. Actual results reflect limited reinvestment of dividends and other earnings.
4. Investing involves risk, including risk of loss and/or principle. While the back tested Core Equity model has historically shown desirable performance versus the S&P 500 on a risk adjusted basis, there is no guarantee that will continue into the future. Core Equity is designed to provide reasonable returns for the same or less risk than the broad market on a risk adjusted basis, and while the firm believes model portfolios are capable of continued outperformance on this basis, there is no guarantee they will do so. Comparisons with the S&P 500 are included to help the average investor understand how an investment in Core Equity may differ from investment in an index fund such as an S&P 500 index fund.
5. The model for Core Equity is built of highly diversified, highly liquid sector and index securities, most frequently low cost ETFs. Core Equity live portfolios do not exactly follow the Core Equity model – variances in investor contributions, withdrawals, and risk tolerances result in measurable drift from the model. Over time, client accounts come closer in line with the Core Equity model.
Core Equity live portfolios may differ from the Core Equity model in an additional material way; when valuations on certain sectors become overly stretched versus their historical average valuations, the Advisor may reduce exposure to those sectors in favor of a sector position which is priced in a more reasonable range in comparison to it’s typical historical valuation. Periodically, Core Equity may allocate a small but measurable percent of assets (up to 5%) in volatility linked instruments in an effort to better manage the portfolio.
These factors may result in greater or less than model performance over time.
Benchmark and index comparisons are made on a best available basis – meaning that both the index model and live performance are compared with market and other benchmarks the
Advisors believe to be suitable for simplicity of comparison. However, there is no guarantee future volatility or performance will be either less than, equal to, or greater than the volatility or performance experienced in the model or the S&P 500 although the firm invests with an eye on reduced volatility vs. the S&P 500.
6. Core Equity invests in diversified components of the financial markets and broad economy by targeting sectors or indices which demonstrate potential for a consistent range of multi-year returns, while seeking a risk adjusted investment profile equal to or lower than the broad markets. These sectors contain a range of equity stocks with an equally broad range of characteristics – some sectors are present in the Core Equity portfolio due to their historically defensive nature, some are present due to their historical growth characteristics, some are a blend of the spectrum between. The intent is to provide a balanced equity portfolio suitable for most investors as an S&P 500 index fund replacement but which seeks lower risk while experiencing, on average, a greater return than an S&P 500 index investment.
7. The Core Equity model results do not represent actual trading or investment and do not reflect any impact that material economic or market factors may have had on the advisors decision making if advisor had been managing live money during the period the model covers, including transaction, fund, or management fees as detailed above in item #2.
8. Core Equity live portfolios also differ from the Core Equity model in that Core Equity seeks to reduce investment during recessionary economic periods while the Core Equity historical model stays invested regardless of economic or market conditions. Advisor believes this will better protect capital vs. model but is materially different than staying invested in all market conditions. This action may cause Core Equity live portfolios to have reduced participation in markets that continue to move up despite Advisors reduction in investment.
9. Advisor clients have experienced results that slightly lag the performance of the model to date. This lag is due to a number of factors, primarily the fact that different clients allocate different dollar amounts to Core Equity at different times. In general, the longer a client has been fully allocated to the Core Equity portfolio, the closer it is to model performance.
The benchmark for Core Equity (The S&P 500) has historically displayed greater volatility (risk) than the Core Equity model or live Core Equity portfolios. This may or may not be the case in the future.

Market Momentum Portfolio
1. The performance of the broad market over the same time periods is included to help investors understand market conditions present during the period covered by live investment.
2. Listed comparison Index graphs and statistics do NOT include transaction, fund or Advisor Management fees. Live portfolio results include all fees, including Advisor Management fees.
3. Actual results reflect limited reinvestment of dividends and other earnings, but do not reflect the impact of any applicable taxes which vary by investor and account type (deferred account vs. taxable, etc.).
4. Investing involves risk, including risk of loss and/or principle. While the closest benchmark for Market Momentum has historically shown reasonable performance versus the S&P 500 on a risk adjusted basis, there is no guarantee that Market Momentum that will continue such performance into the future. Market Momentum is designed to provide reasonable returns for less risk than the broad market on a risk adjusted basis, and while the firm believes the portfolio is capable of outperformance on this basis, there is no guarantee it will do so. Comparisons with the S&P 500 are included to help the average investor understand how an investment in Market Momentum may differ from investment in an index fund such as an S&P 500 index fund.
5. The closest benchmark for Market Momentum is the Chicago Board of Exchange S&P 500 Buy/Write Index or “BXM.” BXM has historically displayed less volatility than the S&P 500 and Market Income. BXM cannot be directly invested in. Market Momentum differs in key ways from BXM – the mechanics of closing and opening positions differ – BXM opens, closes or rolls positions on the same day every month regardless of the profit or loss in a position – Market Momentum targets closing or rolling positions based on technical factors including trend support and resistance. Market Momemtum will also close or roll ahead of expiration if the position has a high percentage of profit present in order to capture that gain. Options are generally not sold again until the underlying investment has moved into an area of resistance but not always; new position may be opened the same day the prior position is closed.
Benchmark comparisons are made on a best available basis – meaning that live performance is believed to be compared with the closest possible benchmark for simplicity of comparison. However, there is no guarantee future volatility will be either less than, equal to, or greater than the volatility experienced in the model or the S&P 500 although the firm invests with an eye on reduced volatility vs. the S&P 500. Market Momentum , like BXM, is an options writing strategy seeking to reduce investment volatility and improve risk adjusted returns for investors.
6. The model portfolio (BXM) utilizes the S&P 500 as its basis. Market Momentum differs from BXM in that the underlying securities are primarily selected on the basis of “relative” value. This simply means that sectors are compared with one another and Market Momentum generally invests in the sector or sector(s) trading at the greatest discount or the smallest premium relative to its historical average valuation. Other factors are also considered including sector earnings growth and expected return versus other available sector instruments. Advisor believes this gives Market Momentum a higher margin of safety than repeatedly investing in the S&P 500 on a rolling basis without regard to value or prevailing economic conditions, while preserving liquidity.
7. The BXM model on which Market Momentum is compared is a non-traded index. As such, results do not represent actual trading or investment and do not reflect any impact that material economic or market factors may have had on the advisors decision making if advisor had been managing live money during the period the model covers, including transaction, fund, or management fees.
8. Market Momentum also differs from the BXM model in that Market Momentum seeks to reduce investment during corrective or recessionary economic periods while BXM stays invested regardless of economic or market conditions. Advisor believes this will better protect capital in comparison to BXM but such action is materially different than staying invested in all market conditions. This action may cause Market Momentum to have reduced participation in markets that continue to move up despite Advisors reduction in investment.
9. Advisor clients have experienced results that exceed the performance of the benchmark to date. There is no guarantee Market Momentum will continue to outperform BXM in the future regardless of Advisor efforts to do so.

Durable Opportunities Portfolio
1. The performance of the broad market in the form of the Dow Jones Industrial Index over the same time periods is included for live portfolio comparison to help investors understand market conditions present during the period covered by live investment.
2. The Index results do not include brokerage, transaction, or Advisor fees. Live portfolio results include all fees, including Advisor Management fees.
3. Actual results reflect limited reinvestment of dividends and other earnings.
4. Investing involves risk, including risk of loss and/or principle. Portfolios compromised of companies matching the profile of those selected for including in Durable Opportunities have historically displayed superior risk adjusted performance to the Index, but there is no guarantee that will continue into the future. Durable Opportunities is designed to provide investment in companies that firm believes meet a stringent set of criteria firm believes reduces the likelihood of permanent capital impairment while allowing investors to participate in investment in companies firm believes will stand the test of time and provide superior long term returns. While the firm believes the portfolio is capable of outperformance on this basis, there is no guarantee it will do so. Comparisons with the Dow Jones are included to help the average investor understand how an investment in Durable Opportunities may differ from investment in a concentrated index fund such as a Dow Jones Industrials index fund. Durable Opportunities is not restricted to investment in industrial companies or in companies with a specific level of capitalization, unlike the Dow Jones.
5. Durable Opportunities is primarily a value driven strategy; when valuations in holdings become overly stretched versus their historical average valuations, the Advisor may reduce exposure to those holdings by either liquidation or hedging, and may re-allocate funds into a holding which is priced in a more reasonable range in comparison to it’s typical historical valuation. Periodically, Durable Opportunities may allocate a small but measurable percent of assets (up to 5%) in volatility linked instruments in an effort to better manage the portfolio.
Benchmark comparisons are made on a best available basis – meaning that live performance is compared with the benchmarks the firm believe to be suitable for simplicity of comparison. However, there is no guarantee future volatility or performance will be either less than, equal to, or greater than the volatility or performance experienced in the Dow Jones Industrials although the firm invests with an eye on reduced volatility vs. the Dow Jones Industrials Index. 6. Durable Opportunties invests in companies firm believes to possess a Durable Competitive Advantage. Such companies are likely to be around for decades, easing the concern of principal return. DCA companies often suffer less in bear markets and usually lead recoveries. These companies allow ACI to build portfolios with minimum expected returns that may be in the mid-single digit range over any 3-5 year period which may provide long term stability partnered with long term growth in equity. There are no guarantees the strategy will be successful in this endeavor.
6. The Durable Opportunities portfolios also differ from the benchmark comparison in that Durable Opportunities reduce investment by hedging or raising cash during recessionary economic periods while Dow Jones Industrial Index reflects 100% investment at all times regardless of economic or market conditions. Firm believes this will better protect capital vs. model but is materially different than staying invested in all market conditions. This action may cause the Durable Opportunities portfolio to experience reduced participation in markets that continue to move up despite Advisors reduction in investment.
7. Advisor clients have experienced results that have lagged the performance of the benchmark to date. This lag is due to a number of factors, primarily the fact that the current high valuation investing environment has made it difficult to identify companies that fit the parameters of Durable Opportunities at a desirable valuation level. Different clients allocate different dollar amounts to Durable Opportunities at different times, which has also impacted the performance of the overall portfolio.

Full Cycle Portfolio
1. The performance of the broad market over the same time periods is included for both model and live portfolio to help investors understand market conditions present during the period examined by the model and during live investment.
2. Model is a historical back test and includes brokerage and fund fees but does NOT include Advisor Management fees which vary by account size, but in general reduce annual performance by approximately 1.5%. Live portfolio results include all fees, including Advisor Management fees.
Historical back-test means the model portfolio has been tracked on a backwards looking basis prior to the beginning of live investments in order to establish historical risks and results for investment in this portfolio. Back testing has certain inherent limitations as detailed in item #7 below.
3. Model results reflect regular investment of dividends or other earnings. Actual results reflect limited reinvestment of dividends and other earnings.
4. Investing involves risk, including risk of loss and/or principle. While the back tested Full Cycle Portfolio model has historically shown desirable performance versus the S&P 500 on a risk adjusted basis, there is no guarantee that will continue into the future. Full Cycle Portfolio is designed to provide reasonable returns for the same or less risk than the broad market on a risk adjusted basis in all phases of the economic cycle by holding risk weighted non-correlated assets, and while the firm believes model portfolios are capable of continued outperformance on this basis, there is no guarantee they will do so in the future. Comparisons with the S&P 500 are included to help the average investor understand how an investment in the Full Cycle Portfolio may differ from investment in an index fund such as an S&P 500 index fund.
5. The model for the Full Cycle Portfolio is built of diversified, liquid sector and index securities, most frequently low cost ETFs and low cost funds. The live Full Cycle portfolio does not follow the Full Cycle model exactly – variances in investor contributions & withdrawals result in measurable drift from the model. Over time, client accounts come closer in line with the Full Cycle model.
Full Cycle live portfolios may differ from the Full Cycle model in an additional material way; when valuations on certain sectors become overly stretched versus their historical average valuations, the Advisor may reduce exposure to those sectors in favor of a comparable position which is priced in a more reasonable range in comparison to it’s typical historical valuation.
These factors may result in greater or less than model performance over time.
Benchmark and index comparisons are made on a best available basis – meaning that both the index model and live performance are compared with market and other benchmarks the
firm believes to be suitable for simplicity of comparison. However, there is no guarantee future volatility or performance will be either less than, equal to, or greater than the volatility or performance experienced in the model or the S&P 500 although the firm invests with an eye on reduced volatility vs. the S&P 500.
6. Full Cycle invests in diversified components of the global financial markets and broad economy by balancing risks with non-correlating or reduced correlation assets in opposition to one another each of which is designed to prosper in some phase of the economic cycle and intended to offset reduced or poor performance in other portfolio holdings.
7. The Full Cycle model results do not represent actual trading or investment and do not reflect any impact that material economic or market factors may have had on the advisors decision making if advisor had been managing live money during the period the model covers, including transaction, fund, or management fees as detailed above in item #2.
8. Full Cycle live portfolios also differ from the Full Cycle model in that the live portfolio may be rebalanced more or less frequently depending on prevailing market conditions. While firm believes this difference positions portfolio for improved risk adjusted performance, it is not clear that this difference results in clear over or under performance versus the Full Cycle model.
9. Advisor clients have experienced results that slightly outperform the performance of the model to date. This outperformance may or may not persist. In general, the longer a client has been fully allocated to the Full Cycle portfolio, the closer it is to model performance.

Fixed Income Portfolio
1. The performance of the broad bond markets over the same time periods is included to help investors understand market conditions present during the period covered by live investment.
2. Listed comparison Index graphs and statistics do NOT include transaction, fund or Advisor Management fees. Live portfolio results include all fees, including Advisor Management fees.
3. Actual results reflect limited reinvestment of dividends and other earnings, but do not reflect the impact of any applicable taxes which vary by investor and account type (deferred account vs. taxable, etc.).
4. Investing involves risk, including risk of loss and/or principle. While the closest benchmark for Fixed Income has historically shown reduced volatility and reasonable performance versus many classes of fixed income investments, there is no guarantee that Fixed Income that will continue such performance into the future. Market Momentum is designed to provide reasonable returns for less risk than the broad market on a risk adjusted basis, and while the firm believes the portfolio is capable of outperformance on this basis, there is no guarantee it will do so. Comparisons with US Aggregate Bond Market and PIMCO Total Return are included to help the average investor understand how an investment in Fixed Income may differ from investment in an alternative index or fixed income fund.
5. The closest benchmark for Fixed Income is the Pimco Total Return Fund. Fixed Income differs in key ways from BOND – including selection of underlying investments and reduced diversification. Benchmark comparisons are made on a best available basis – meaning that live performance is believed to be compared with the closest possible benchmark for simplicity of comparison. However, there is no guarantee future volatility and performance will be either less than, equal to, or greater than the volatility and performance experienced by the benchmark although the firm invests with an eye on out performance.
6. The benchmark may include securities not contained in Fixed Income, and vice versa. Fixed Income currently holds significantly more cash than PIMCO Total Return Fund, a situation likely to continue in the near future. This action may cause Fixed Income to have reduced participation in markets that move up despite Advisors reduction in investment.
7. Advisor clients have experienced results that lag the performance of the benchmarks to date. There is no guarantee Fixed Income will continue to outperform benchmarks in the future regardless of Advisor efforts to do so.

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