Portfolio Construction

All model portfolios are created utilizing low–cost electronically traded index funds (ETFs) and are comprised of 4 major categories. (Please note that no individual stocks are used)

US Equities: There are 10 major sectors of the S&P 500. Depending on risk and return profiles, allocations to many will be selected through the use of sector fund ETFs.

Fixed Income and Cash: This category of investment may include allocations to bond funds represented by the following bond types: corporate bonds, municipal bonds, high yield bonds, floating rate funds, TIPs, mortgage bonds, and international bonds. Closed-end bond funds trading on the secondary market at attractive prices are considered in all portfolios.

International: We live in a global and interconnected world with more than 55% the MSCI World All Country Weighted Index comprised of foreign companies. Developed and emerging market indices are considered in all portfolios including Brazil, Russia, India and China.

Alternative Investments: Alternative investments are those that are not one of the three traditional asset types (stocks, bonds and cash). Alternative investments typically include hedge funds, managed futures, real estate and commodities and are used to provide greater portfolio diversification and the ability to perform in different market environments. In our ETF models we make investments in metals, commodities, REITs and other tradable alternatives to private investments.

Conservative Portfolio: The objective of this portfolio is to derive most of its rate of return from fixed income and other income producing securities. Because the risks of inflation are real, it is necessary to have some exposure to equities, commodities and other inflation protected asset classes like real estate. We seek to keep equity exposure under 20% to minimize volatility and create peace of mind. This portfolio offers a reasonable return while minimizing the risk taken to achieve it.

Moderate Portfolio: While still risk averse, the moderate portfolio may see equity exposure as high as 40%. This portfolio targets higher returns while still keeping risk in check.

Growth Portfolio: This portfolio seeks to perform in line with the S&P 500 over a full market cycle with greatly reduced volatility. Equity exposure may range from 40-80% with significant emphasis placed on reducing risk and achieving solid risk adjusted returns.

Each of these portfolios is designed to accommodate a balance of risk and return based on your comfort level and personal goals.

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