Strategic Asset Management A Time-Tested Investment Strategy Linsco/Private Ledger
What s on your hori Financial independence. Funding a child s education. A secure retirement.
zon? Whatever your destination, a solid investment program can help speed your progress. For most people, the core of any successful approach to investing is the strategic allocation of their assets. Strategic asset allocation involves spreading your investments across several asset classes such as stocks, bonds and cash equivalents to reflect your particular goals. Asset allocation allows your portfolio to participate in a variety of market sectors, while reducing its overall volatility. Take advantage of this proven approach to building an investment portfolio designed to help you reach your destination.
The Power of Advice Keeping up with increasingly complex financial markets demands a high level of expertise and extensive resources. Your financial advisor has access to world-class research, state-of-the-art technology and comprehensive investment tools. Together, you and your advisor will map out an investment plan that s tailored to your goals, risk tolerance and time horizon. FEE-BASED GUIDANCE Fee-based asset management allows you and your financial advisor to share a common goal to grow the value of your assets. A long-term approach to investing, fee-based asset management ties your advisor s compensation directly to the performance of your account. Instead of commissions, your advisor earns an annual fee based on the market value of the account.you and your advisor concentrate on what matters most building an investment portfolio designed to help meet your specific needs. FLEXIBLE SOLUTIONS There is no one-size-fits-all solution.your unique circumstances and personal objectives dictate the method of investing as well as the types of vehicles chosen to help achieve them.your advisor is free to offer you the investments best suited to meet your financial goals. Investments you already own can be combined with those selected by your advisor to complete your customized portfolio and help ensure the success of your long-term plan.
The Value of Asset Allocation Throughout all cycles of the financial markets and regardless of your investment objectives, a well-devised and executed asset allocation strategy is central to helping you achieve your long-term goals. LPL s Strategic Asset Management (SAM) platform allows investors to take advantage of strategic asset allocation, a time-tested approach to constructing portfolios. Each portfolio is individually crafted and designed to achieve an optimal blend of investments tailored to your personal goals, time horizon and risk profile. The process encompasses setting investment objectives, establishing weightings for various asset classes, choosing specific investments and making adjustments as circumstances dictate. MARKET PERFORMANCE BY ASSET CLASS ASSET CLASSES Highest returns Lowest returns 95 96 97 98 99 00 01 02 03 04 05 Russell 1000 Growth Index Large Co. U.S. Growth Stocks 37.2 23.1 30.5 38.7 33.1-22.4-20.42-27.88 29.76 6.30 5.26 Russell 1000 Value Index Large Co. U.S. Value Stocks 38.4 21.6 35.2 15.6 7.35 7.01-5.59-15.52 30.03 16.49 7.05 Russell 2000 Growth Index Small Co. U.S. Growth Stocks 31.0 11.3 13.0 1.23 43.1-22.4-9.23-30.26 48.53 14.31 4.15 Russell 2000 Value Index Small Co. U.S. Value Stocks 25.8 21.4 31.8-6.45-1.49 22.8 14.02-11.43 46.02 22.25 4.71 Morgan Stanley EAFE International Stocks 11.2 6.10 1.80 20.0 30.0-14.2-21.44-15.94 39.16 20.70 17.02 MSCI Emerging Markets Index SM Emerging Market Stocks -5.21 6.03-11.59-25.33 66.42-30.6-2.37-6.00 56.26 25.95 34.54 Lehman Bros. Aggregate Bond Index U.S. Aggregate Bonds 18.5 3.60 9.70 8.70-0.80 11.6 8.44 10.25 4.11 4.34 2.43 Lehman Bros. High Yield Bond Index High Yield Bonds 19.2 11.1 12.8 1.90 2.40-5.86 5.28-1.41 28.96 11.13 2.74 Solomon Bros. Non $ World Govt. Bond International Bonds Index (unhedged) 19.6 4.10-4.30 17.8-5.10-2.63-3.54 21.99 18.52 12.14-9.20 Short-term Govt. Securities Cash (T-Bills) usually sold with 3-, 6-, or 12-month maturities 5.40 5.00 5.20 4.90 4.90 6.09 5.21 1.68 1.16 1.33 3.07 Source: Zephyr. Data as of 12/31/05. Values represent the total return (%) of unmanaged indices assuming full investment of capital gains and dividends. Past performance is no guarantee of future results. Indices may not be invested into directly. *Treasury bonds and bills are backed by the full faith and credit of the United States. Please note that the value of bonds generally have an inverse relationship to interest rates. Stocks will experience market fluctuations which can include loss of principal value while bonds offer a fixed-rate of return. Small-cap stocks may be subject to a higher degree of market risk than large-cap stocks, and the illiquidity of the small-cap market may adversely effect the value of these investments so that when redeemed, shares may be worth more or less than their original cost. High-yield securities inherently have a higher degree of market risk and there are credit risks associated with the underlying issuers. In addition, the lack of liquidity associated with high-yield securities may impair their value. International and emerging market securities are also subject to additional risk such as currency fluctuations and political instability. The MSCI Emerging Markets Index SM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. As of December 2003 the MSCI Emerging Markets Index consisted of the following 26 emerging market country indices: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, Turkey and Venezuela. Prior to investing in any security, consult with your financial professional.
Strategic Asset Management: Your Customized Investment Solution INDEPENDENT RESEARCH Your financial advisor is supported by one of the largest independent research organizations in the industry. With access to timely, detailed information, computer-modeling tools and market intelligence, your advisor makes informed decisions on your behalf. No conflicts of interest are imposed by the constraints of proprietary products, investment banking relationships or other activities that may be inconsistent with your needs. Your advisor will thoroughly analyze the research provided and select those investments best suited to your unique financial situation. CUSTOMIZATION WORKING TOGETHER FOR YOUR FINANCIAL One of SAM s distinguishing hallmarks is its extraordinary capacity to facilitate custom-tailored portfolios. Portfolios can be created to minimize the tax consequences of investing, address current income needs, protect your retirement assets or seek capital appreciation. Regardless of your investment objectives, your portfolio will be constructed to reflect your personal goals, time horizon and risk parameters, as well as other considerations. Your financial advisor will formulate an asset allocation plan based on the combined performance attributes of the individual asset classes. Your portfolio may include, but is not limited to, mutual funds, stocks, bonds, conservative option strategies, a no-load variable annuity, cash equivalents or a combination of these vehicles. What s more, you have the ability to include investments you already own, such as long-held performers and sentimental favorites. SUCCESS
ONGOING MANAGEMENT Portfolio rebalancing is a critical component of the strategic asset allocation process and essential to the long-term success of your portfolio. Rebalancing is designed to ensure that the allocation of your assets remains in line with your stated investment objectives. Because the relative performance of various asset classes will vary, portfolios that are not reviewed on a regular basis tend to drift from their target allocations. A portfolio that is not regularly rebalanced could assume a risk/reward profile that is not in keeping with your investment objectives. Your portfolio will be reviewed on a periodic basis, and adjusted when needed, to help maintain the optimal allocation of your investments. SIMPLICITY One account. One statement. One fee. Strategic Asset Management allows you to have all your investments under one roof, making it easy to monitor, manage and make changes to your portfolio when necessary. Quarterly performance reports provide clear, concise information about your investments. These reports provide an excellent opportunity for you and your advisor to review your investment mix and determine whether your current portfolio correctly reflects your long-term financial goals. ACCOUNT PROTECTION To give clients the maximum level of protection for their accounts, cash and securities held in LPL brokerage accounts are protected up to $100 million. LPL s SIPC membership provides account protection up to a maximum of $500,000,of which $100,000 may be in cash. For more information,visit www.sipc.org.additionally, through Lloyds of London, LPL accounts have additional securities coverage of $99.5 million per account, subject to a $500 million aggregate firm limit. The account protection applies when a SIPC firm fails financially and is unable to meet obligations to securities clients, but it does not protect against losses from the rise and fall in the market value of investments. Through LPL s multi-bank Insured Cash Account Program, deposits are eligible for up to $1 million of deposit insurance for individual accounts, and for up to $2 million of deposit insurance for joint accounts through the FDIC.At each bank, your Insured Cash Account deposits are insured by the FDIC to a maximum amount of $100,000 (including principal and accrued interest) when aggregated with all other deposits held by you in the same recognized legal capacity (e.g., individual, joint, IRA, etc.) at the same bank. For example, if you have an individual brokerage account, you would be eligible for up to $100,000 of FDIC deposit insurance per bank. If you and your spouse have a joint account, your account would be eligible for up to $200,000 of FDIC deposit insurance per bank. If you have any questions about FDIC insurance coverage, visit www.fdic.gov.
The Consultative Process: A Comprehensive Methodology Strategic Asset Management leverages an extensive consultative process that focuses on understanding and meeting your needs. This goal-oriented process follows a comprehensive, four-step approach. STEP 1: DEFINE YOUR GOALS AND OBJECTIVES Together, you and your financial advisor will work to determine your customized financial solution taking into consideration the following: Investment goals Risk tolerance Time horizon Performance expectations Income needs 1 Define Liquidity requirements 2 Tax considerations Determine Current investments 4 Manage 3Build SAMPLE ASSET ALLOCATION BY INVESTOR OBJECTIVE Stocks Bonds Cash 5% 95% 5% 80% 15% AGGRESSIVE GROWTH GROWTH
STEP 2: DETERMINE YOUR INVESTMENT STRATEGY Accessing the expertise of world-class research strategists, your financial advisor will identify the most appropriate investment solution, applying the concepts of: Asset allocation Diversification Risk/reward characteristics of asset classes Correlation between asset classes STEP 3: BUILD YOUR PORTFOLIO Next, your financial advisor will begin building a portfolio of investment vehicles designed to meet your specific needs. Security selection includes: Access to over 4,600 well-known no-load, load-waived and institutional mutual funds* Individual stocks and bonds Funds of hedge funds Managed futures A no-load, multi-manager variable annuity Margin UITs Currently held investments *Certain no-load mutual funds may incur 12b-1 fees. Your financial advisor can provide you with a prospectus. STEP 4: MANAGE AND MONITOR YOUR PORTFOLIO Once your investments are in place, the process of monitoring and managing your portfolio begins.this includes: Regular meetings and discussions Active ongoing portfolio reviews Periodic re-examination of your investment strategy Rebalancing decisions Consolidated quarterly performance reports 60% 5% 35% 40% 7% 53% 10% 21% 69% GROWTH WITH INCOME INCOME WITH MODERATE GROWTH INCOME WITH CAPITAL PRESERVATION
A Relationship Built to Last Your financial advisor is committed to your long-term success. By working with your advisor to develop and execute an asset allocation strategy tailored to your goals, you can be confident of having a sound investment plan, one designed to help increase your wealth over time. By enlisting a financial advisor in support of your investment goals, you benefit from extensive expertise and resources. You can take comfort in the fact that your experienced advisor monitors market developments and provides ongoing advice and portfolio management focused solely on growing the value of your assets. The knowledge that your investment program will reflect your changing needs over time gives you the freedom to focus on life s other important pursuits.
ABOUT LINSCO/PRIVATE LEDGER (LPL) LPL, a national broker/dealer and registered investment advisor, is a leading independent securities firm with a history of helping individuals and businesses achieve their financial goals for more than 25 years. LPL offers independent, non-proprietary investment products, which are intended to serve the client s best interests. With dual headquarters in Boston and San Diego, LPL provides premier service and support to financial advisors nationwide. Linsco/Private Ledger A Registered Investment Advisor Member NASD/SIPC AD024BR0-0306