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Retirement Realities Part 3

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3 New Retirement Realities You Need to Prepare For is a short eBook written to help you think about three of the major challenges (there are more, but this is a start) facing investors, and provides some possible solutions. 

Download your free copy at the bottom of the page or scroll down;

When you finish reading this, reach out if you need a little direction or have a question. 

The notion behind all this stuff is to help you make life better for yourself and those around you with a little investment education you might not get otherwise.  

A lot of people just assume retirement is going to be fine.  Maybe you even have an advisor that tells you that you are on track, but if you have mutual funds or annuities in your portfolio, you probably aren’t getting the whole story.  More importantly, those products may be hurting your retirement.  It’s a good idea to test your retirement plan or assumptions (and whatever financial products you own) to make sure they are going to work out.  

If you don’t know how to test your retirement plan or retirement portfolio so you know you are doing the best you can, get in touch. 

As the saying goes, it’s pretty hard to get to Point B from Point A if you don’t know which direction your are driving. 

When I can find the time, I offer an online retirement workshop jam-packed with quality information, including how to protect your investments when things get crazy and how to test your current plan/investments to see if they are going to get you where you want to go. 

If you want to be invited to the next workshop, just send a note via the contact page on the site.  CLICK HERE to request an invite to the next workshop. 

The strategies and information in the workshops are mostly geared toward retirement and retirement investing, but they work for accounts as little as $200,000. 

To get your free copy of 3 New Retirement Realities You Need to Prepare For just click here —> 3 New Retirement Realities

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Invest Smarter. Live Better.

–Dak Hartsock

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.

March 20 2017 Markets-in-Minutes

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Markets in Minutes  March 20, 2017

Markets in Minutes is intended to give our client partners and subscribers a quick and easy understanding of current market conditions.  This update covers March 1 – 17, 2017. 

In this update:  S&P 500, Bonds, Gold, World Stock Market, US Dollar, Commodities, the Economy, Recession Probability Indicator, & S&P 500 chart. 

Investor Learning:  “Your ultimate success or failure [in investing] will depend on your ability to ignore the worries of the world long enough to allow your investments to become successful.” – Peter Lynch. 

 

Market Updates:

 S&P 500:  +0.2% for the period, +5.3% year-to-date.  The S&P made an incremental new high on the 1st on the back of the largest overbought condition for the year so far, but the only thing that has changed since the last update is the Fed Funds target rate has increased by 0.25%.  The market continues to be supported by the promise of tax cuts & deregulation and an improved earnings picture.  As I’ve said, the market appears to have priced in a corporate tax rate of 25% or perhaps even 20%.  Look for volatility if the promised tax cut is meaningfully smaller, doesn’t materialize or is overly delayed.   The markets are showing signs of a near term top again as we saw in mid-December.  This suggests another period of consolidation such as December 9 until February 13, or we will finally see a pullback.  I’m leaning near term pullback.  A correction of 5% or more is a buying opportunity under current conditions.  The primary up trend is remains in control above $182 on the SPY, $1820 on the S&P.

Bonds:  The 10 year treasury yield closed up 2.9% at 2.53% from the prior period, pushing bond principal down incrementally.  The 10 year hit a high of 2.62% before pulling back.  With the economy likely to tolerate the Fed’s planned 2 additional 2017 rate hikes, passive investments in bonds (especially those with durations in excess of 5 years) should be carefully considered.  If yields drop because of an equity correction, it may benefit investors to have a hard think about longer duration bonds.

Gold:  Down -1.83% for the period after hitting a low of $1153 on 3/10, but +6.7% year-to-date.  The most recent action suggests gold may be trying to find a near term range trade as it held above its January low.   Regardless, it will stay positioned within a larger counter trend rally structure unless it can sustain a move above $1260.  Buying interest still doesn’t show commitment.  This may become a problem for gold bulls at or above $1195 if it makes it that far.  As before, recent dollar weakness is providing some support for gold and other commodities. 

World Ex-US:  +2.64% for the period and 7.6% run year-to-date.  World Ex-US stocks offer the distinction of good historical value at current valuations with the caveat that there are more unknowns in investing outside the US and also several knowns that are probably negative.  Rising rates in the US are not great for the rest of the world, particularly emerging markets.  My view, which may or may not be accurate, is that the US markets, despite uncomfortable valuations in some areas, will continue to benefit from capital flight from less stable markets over time.  My negative view on European/Asian/Emerging market stocks is unchanged despite gains year-to-date.  Time will tell if this is the correct perspective.  

US Dollar: USD began to fall March 10, but is flat for the period.  A stable dollar is better than a rising dollar, and a falling dollar even better at least where earnings are concerned.  Interestingly, the dollar has fallen about -2% from its March 9 high in the wake of a less than aggressive Fed plan to raise rates.  From the market’s perspective, it would be nice to see the dollar continue to show some weakness, but given other factors the higher likelihood is the dollar holding most 2016 gains and perhaps even moving higher at some point.   

Commodities:  Oil fell -8.8% for the period despite a -2% fall in the dollar, but still within the expected range I’ve talked about in the past.  The reality is that oil producers outside the US are not going to be able to consistently hold down supply with agreements.  There will be cheaters, and when prices are high enough to show profit (about $40) American producers are going to pump.  This is a benefit to US consumers and companies that use petroleum products in their supply chain. Copper futures rebounded from the March 9 low to finish the period down slightly, but barring a shock of some kind seem likely to hold most of the post-election gains.    

 

Economy:  Recent Fed data continues to support the notion of a slowly expanding economy, with Real Retail and Food Services Spending pulling back slightly in February as the holiday credit card hangover does what it does, but still moving upwards.  The March US Manufacturing report (ISM) also showed its sixth consecutive month of gains.   

Market Valuation:  Valuations are stretched, but with interest rates still in a range of historic lows, rising earnings, and the possibility of tax cuts before year end its unlikely valuations will drive a scary (or enduring) sell off.  However, the market is moving into a price zone that requires measurable earnings acceleration and tax cuts to sustain prices.   

Recession Probability Indicator:  The most recent reading on the RPI is 12 and indicates we are not currently in recession and the investment environment is stable.

 

S&P Technical Picture:  The S&P remains overbought on the weekly timeframe (red arrow), which hasn’t occurred since June of 2014.  Historically, this is suggestive of a near term top, but does not put the underlying uptrend (green line) at risk.   Fair Value is approximately $1800 – $1850, if tax cuts materialize the number is $1900 – $1950 but I would not look for the index to fall that far should a correction ensue.  Barring a nasty political or policy surprise, the weight of data suggests that pullbacks of more than 5% are likely buying opportunities.   

SPY Chart (S&P 500 Proxy)

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To Smarter Investing,

Dak Hartsock

Market Strategist

ACI Wealth Advisors, LLC

Process Portfolios, LLC

March 12 2017 Cut Your Taxes & Fatten Your Retirement

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Cut Your Taxes & Fatten Your Retirement  March 12, 2017

Uncle Sam wants his money and smart investors are looking for ways to reduce their tax burden.

One of the simplest ways is to contribute money to your retirement. If you are self-employed, you may be able to deduct up to $53, 000 from your 2016 Earned Income and then use that money to fund your retirement. The best part? In most cases, that contribution comes straight off your taxable income – it might even drop you a tax bracket.

The deadline for contributions is April 15, 2017. The earlier you make your contribution the better. If something happens and your contribution gets delayed for whatever reason the IRS couldn’t care less. They’ll tax you on that money. Give yourself time for the unexpected and get your contribution in as soon as possible.

 
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 2015 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 $117,000 in Modified Adjusted Gross Income. Partial contributions possible between $117,000 – $132,000.
ii. Joint tax filers: Up to $184,000 in Modified Adjusted Gross Income. Partial contributions possible between $184,001 – $194,000.
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 $53,000.
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 2016.

 
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.
 
Need some help? Feel free to call my office at 888.407.4472 or use the contact page on the site. Please share using the buttons below.

 
To Smarter Investing,

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

 

February 28 2017 Markets in Minutes

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Markets in Minutes  February 28, 2017

Markets in Minutes is intended to give our client partners and friends a quick and easy understanding of current market conditions.

In this update: S&P 500, Bonds, Bonds, Gold, World Stock Market, US Dollar, Commodities, the Economy, Earnings, Recession Probability Indicator, & S&P 500 chart. 

 

Investor Learning: Successful investing means focusing on what is knowable and important and pretty much ignoring everything else.  If something is important but unknowable (like what the Fed Rate will be in 24 months) remove it from your decision making process until it becomes it becomes knowable.  Focus on What IS, not What IF.       

 

Market Updates:
S&P 500: +0.7% for the week, +5.2% year-to-date. The S&P continues to rise as positive economic data, earnings, and the new administration’s chatter about tax cuts supports equities. The primary up trend is intact. Corporate tax cuts, if they materialize, are a positive for current valuations – it’s been estimated that for every 1% US corporate taxes drop, S&P aggregate earnings will rise by approximately $1.25. The market appears to have priced in at least a 10% cut in corporate tax rates, as of today.

Bonds The 10 year treasury yield closed down 4.55% from the week prior, pushing bond principal up incrementally. It will be interesting to see if a Fed rate raise in March causes a bond rally (as it did in 2015) or if the raise will encourage sellers. Either way, passive investments in bonds (especially those with durations in excess of 5 years) should be carefully considered at this point.

Gold: Up 1.68% for the week, and still experiencing what appears to be a counter trend rally since the beginning of the year. Buying interest has risen, but is not displaying exceptional strength and actually fell in the most recent week, suggesting the rally so far this year may be a countertrend rally nearing a selling point. At least part of this rally is related to dollar softening year-to-date.

World Ex-US: Down 0.3% for the week on the heels of a 7.5% run year-to-date. Many analysts think this will be the year emerging markets and 2nd world stocks from developing economies will make their long promised run. Entirely possible, but risks outside the US warrant careful consideration. US markets have benefited from capital flight from less stable markets including China, Europe, etc. I expect that to continue, and my view on European stocks is unchanged despite mild gains year-to-date.

US Dollar: USD rose slightly last week, but has been fairly stable for three weeks. A stable dollar is better than a rising dollar, a falling dollar even better. However, with the expectation of rising interest US interest rates, the dollar may be biding its time ahead of a move up.

Commodities: Oil rose about 0.5% last week but remains range bound. OPEC appears to be serious about holding down production, but with American frackers able to make money above $40 a barrel and falling, it seems unlikely OPEC will be successful in creating any upward price pressure in the near term. Dollar strength is also a negative for oil prices. Copper futures pulled back slight last week, but given statements out of the administration, copper is likely to continue to hold the majority of gains since the election and may be basing for a move higher if economic and policy positives continue to stack up.

 

Economy: Recent data supports the idea of an economy that is improving, but still below potential. As long as interest rates remain moderate, the potential for the economy to gain a little more speed moving into the 2nd half of the year seems solid, subject to negative surprises from the new administration (universal 30% border tariff would qualify as an unexpected negative surprise).

 

Earnings: 4th quarter reporting is nearing completion and earnings have mostly slightly exceeded expectations, continuing the theme of earnings expansion ACI anticipated occurring beginning in the 2nd half of 2016.

 

Market Valuation: Valuations are still stretched, but with interest rates still in a range of historic lows, rising earnings, and the possibility of tax cuts before year end it’s unlikely valuations will drive a meaningful (or enduring) sell off.

 

Recession Probability Indicator: The most recent reading on the RPI is 12.  This indicates we are not in recession and the investment environment is stable.

 

S&P Technical Picture: The S&P is now overbought on the weekly timeframe (red arrow), which hasn’t occurred since June of 2014. Historically, this is suggestive of a near term top, but does not put the underlying uptrend (green line) at risk. Fair Value is approximately $1800 – $1850, but I would not look for the index to fall that far should a correction ensue. Barring a nasty policy surprise, the weight of data suggests that pullbacks in excess of 5% are likely buying opportunities.

SPY Chart (S&P 500 Proxy)

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To Smarter Investing,

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

 

February 5 2017 Markets in Minutes

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Markets in Minutes  February 5, 2017

Markets in Minutes are short video updates that survey the 6 major asset classes US investors typically invest in. Each update features 3 asset classes to help investors understand what is happening in each market.

 

In this update:
S&P 500                                      0:30
10 Year Treasury                       3:44
Commodities (oil & copper)   5:11

Times denotes when coverage of each asset begins.

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To Smarter Investing,

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

Become a Stock Market Landlord January 29, 2017

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Become a Stock Market Landlord  January 29, 2017

Stocks are for buying, not renting.

Or are they?

The fact is that stocks can be used for consistent income while reducing the volatility (or risk) of holding stocks.

This is done by selling the rights to a stock for a pre-determined period of time to someone else, sort of like you sell the rights to a rental house to your tenant for a month in return for the rent.

In stock terms, rent is called premium. You collect premium when you sell someone else the right to buy your stock from you at a specific price at some future date. Sort of like a rent to own arrangement.

How does it actually work?

In stock investor parlance, it’s known as “writing options” or more accurately “writing covered calls.

It’s simpler than it sounds. “Writing” is Wall Street jargon for selling. “Covered” just means that you actually own the stock you are selling the purchase rights to. In the stock market, unlike the real estate market, you can sell someone the rights to a stock you don’t own (by the way, don’t do that- very bad idea).

“Call” just means that the buyer of the right to purchase can take your stock under certain conditions, or “call” it away from you.

So, you are selling someone the right to take possession of a stock you own, at some future date, at an agreed upon price, in return for a payment to you.

Well, wait a minute, some of you may be saying. If I do that, I lose the appreciation the stock is going to have when the market rallies. And you would be partially right – when you sell someone the right to purchase your stock at a certain price, you lose any gains above that price.

But this is overrated. The fact of the matter is that about 70% of the time the stock market doesn’t do much. It sort of trucks along while it moves a bit up and a bit down. During bear markets it moves down more, during bull markets up more.

But here’s the rub – if you collect premium on your stocks during the 70% of the time the market isn’t doing much, those rents (and dividends) pile up so much that missing the rallies doesn’t matter because you are also missing much of the valleys.

As you can see from the below, missing the rallies hurts, but missing the rallies and valleys is how the most successful investors do it – they aren’t worried about catching the next rally, instead they are looking to make their returns as consistent as possible while managing their risk of loss. They look for singles and doubles rather than home runs, while keeping an eye on the sky and trying to avoid any storms that roll in.

Source: Hepburn Capital Management 2009 Study – S&P 500
Source: Hepburn Capital Management 2009 Study – S&P 500

It turns out there is actually an index that tracks this call writing strategy. It’s called the CBOE Buy/Write Index or BXM (as an aside, it’s important to note you can’t actually buy shares of BXM. One more example of life’s sometimes perplexing realities).

Here’s a graph of what $1,000,000 invested in the S&P 500 and $1,000,000 invested using the Buy/Write index (after adding hypothetical dividends which you would get if you bought an S&P index fund and then wrote covered calls on it monthly) looks like over the last 15 years. Just for fun, let’s pretend you have to take out $50,000 a year for college expenses, or to pay for vacations, or even just to cover living expenses ($4,166 per month).

BXM-vs-SPY-vs-VBINX

It’s pretty clear that being a stock landlord is a way to both get greater consistency of returns while reducing risk.

It’s also pretty clear that using the BXM index as an investment model makes a heck of a lot of sense, especially for older folks or investors that want to keep a lid on investment risk.

In fact, this strategy makes so much sense, it’s one of ACI’s core portfolio strategies – we call it Market Income.

If you cut investment by 50% when the US moves into recession, things get even better.

CLICK HERE to learn more about Market Income and ACI’s other portfolios.

Click Here to learn about the Recession Probability Indicator.

Use the contact form if you have a question about this article or would like more information about how this strategy works.

Please share with one friend or family member that can benefit from this information.

To Smarter Investing,

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

Additional Disclosures regarding hypothetical illustrations:

It is not possible to invest directly in an index. The above hypothetical chart makes the assumption that an investor can mimic the strategy of the BXM index using a dividend yielding S&P 500 index tracking fund. This discounts the emotional impact events might have on an investor and makes assumptions with the benefit of hindsight. The illustration does not take into consideration the impact of management fees on the S&P 500, the 60/40 Stock/Bond portfolio, or the hypothetical Buy/Write with dividends portfolio prior to 2014. From 2014 on ACI’s Market Income Portfolio’s live results including fees has been substituted for the BXM index, which is when ACI begin tracking the Market Income strategy as a distinct portfolio. ACI’s Market Income has significantly outperformed both the BXM index and the S&P 500 with less risk since inception to date. Past performance is no guarantee of future results.

There are inherent limitations in hypothetical or model results as the securities are not actually purchased or sold. They may not reflect the impact, if any, of material market conditions which could have has an impact on the manager’s decision making if the hypothetical portfolios were real. Hypothetical performance is shown for illustrative purposes only and should not be interpreted as an indication of performance of any ACI portfolio.

Click the disclosure buttons at the bottom of the page to view additional disclosures.

January 22 2017 Markets in Minutes

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Markets in Minutes  January 22, 2017

This week I take a look at the current set up in gold, world stocks ex-US, and the US Dollar.

You may use the player controls to fast forward, stop, or review whichever sections of the update are most relevant to you. The numbers below reflect the point in the video where each market update begins.
 

Gold 0:35
World Stock Ex-US 2:55
US Dollar 4:53

Please share with one friend or family member that can benefit from this information.

To Smarter Investing,

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

January 15 2017 Process Portfolios 2016 Performance Summary

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Process Portfolios 2016 Performance Summary  January 15, 2017

It was a pretty good year for ACI portfolios with Market Income and Durable Opportunities providing particularly strong risk adjusted returns.

The video is front loaded with the key information first and then a brief discussion of how each portfolio did over the year. Those shorter on time (or interest) will get key performance questions answered in the first few minutes. I also take a look at the scorecard for ACI’s 2016 expectations, which were mostly on target.

Please share with one friend that can benefit from this information. Share buttons below for your convenience.

 

As always, feel free to get in touch with any questions.

To Smarter Investing,

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

© Copyright 2015
Dak Hartsock

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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

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My Commitment to You

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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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