INVESTMENT PLAN For Sample Client May 04, 2012 Prepared by : Sample Advisor Financial Consultant sadvisor@loringward.com Materials provided to approved advisors by LWI Financial Inc., ( Loring Ward ). Securities transactions may be offered through Loring Ward Securities Inc., an affiliate. Member FINRA/SIPC.
Table Of Contents IMPORTANT DISCLOSURE INFORMATION 1-5 Results Comparison 6-7 Portfolio Detail 8 Changes Needed to Re-Allocate 9 Current Asset Distribution by Asset Class 10 Your Target Portfolio 11 Risk Questionnaire 12-15
IMPORTANT DISCLOSURE INFORMATION IMPORTANT: The projections or other information generated by Investment Planning Center regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. The return assumptions in Investment Planning Center are not reflective of any specific product, and do not include any fees or expenses that may be incurred by investing in specific products. The actual returns of a specific product may be more or less than the returns used in Investment Planning Center. It is not possible to directly invest in an index. Financial forecasts, rates of return, risk, inflation, and other assumptions may be used as the basis for illustrations. They should not be considered a guarantee of future performance or a guarantee of achieving overall financial objectives. Past performance is not a guarantee or a predictor of future results of either the indices or any particular investment. Investment Planning Center results may vary with each use and over time. SA Funds are sponsored by LWI Financial Inc. and distributed by Loring Ward Securities Inc., member FINRA/SIPC. For a copy of a prospectus or to obtain performance information current to the most recent month-end, please call toll-free 1-800-366-7266. Investors should consider the investment objectives, risks and charges and expenses of these funds before investing. This information can be found in the prospectus. Before investing in any fund, please carefully read the prospectus. The simulated performance based on index data shown is "gross performance," which includes the reinvestment of dividends and other earnings but does not reflect the deduction of investment advisory fees. A client's investment returns will be reduced by advisory fees and other expenses incurred in the management of an advisory account. For example, if a 1% annual advisory fee were deducted quarterly and a client's annual return were 10% (based on quarterly returns of approximately 2.41% each) before deduction of advisory fees, the deduction of advisory fees would result in an annual return of approximately 8.91% due, in part, to the compound effect of such fees. Advisory fees are described in Part II of your Advisor's and Loring Ward's Forms ADV which may be obtained, without cost, from your Advisor. A financial advisor may not provide an investor with "gross performance" information unless the advisor does so in a one-on-one presentation. The securities recommended may be affiliates of the Advisor or Loring Ward. Other securities not recommended may have characteristics similar or superior to those being analyzed or suggested. Investment Planning Center Assumptions and Limitations Information Provided by You Information that you provided about your assets, risk tolerance, and personal situation are key assumptions for the calculations and projections in this Report. Please review the Report sections titled Results Comparison, Risk Questionnaire, and the last page of Monte Carlo Results to verify the accuracy of these assumptions. If any of the assumptions are incorrect, you should notify your financial advisor. Even small changes in assumptions can have a substantial impact on the results shown in this Report. The information provided by you should be reviewed periodically and updated when either the information or your circumstances change. All asset and net worth information included in this Report was provided by you or your designated agents, and is not a substitute for the information contained in the official account statements provided to you by custodians. The current asset data and values contained in those account statements should be used to update the asset information included in this Report, as necessary. Assumptions and Limitations All results in this Report are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. All results use simplifying assumptions that do not completely or accurately reflect your specific circumstances. No Plan or Report has the ability to accurately predict the future. As investment returns, inflation, taxes, and other economic conditions vary from the Investment Planning Center assumptions, your actual results will vary (perhaps significantly) from those presented in this Report. All Investment Planning Center calculations use asset class returns, not returns of actual investments. The average annual historical returns are calculated using the indices contained in this Report, which serve as proxies for their respective asset classes. The index data are for the period 1972-2011. The portfolio returns are calculated by weighting individual return assumptions for each asset class according to your portfolio allocation. The portfolio returns may have been modified by including adjustments to the total return and the inflation rate. The portfolio returns assume reinvestment of interest and dividends at net asset value without taxes, and also assume that the portfolio has been rebalanced to reflect the initial recommendation. No portfolio allocation eliminates risk or guarantees investment results. Page 1 of 15
IMPORTANT DISCLOSURE INFORMATION Asset Class Historical Return Index Cash & Cash Alternatives One-Month US Treasury Bills (1972-2011) Short Term Fixed Income 5 Yr US T-Notes (1972-1984), 50% 5 Yr US T-Notes and 50% Citigroup WGBI 1-5 Years (hdg) (1985-1986), 50% BofA ML 1-3 yr US Corp/Govt Index and 50% Citigroup WGBI 1-5 Years (hdg) (1987-2011) Short-Term Fixed Income 1-3 Five-Year US Treasury Notes (1972-1986), BofA Merrill Lynch 1-3 Year US Corporate and Government Index (1987-2011) Short-Term Fixed Income 1-5 Five-Year US Treasury Notes (1972-1986), BofA Merrill Lynch 1-5 Year US Corporate and Government Index (1987-2011) Short-Term Global Fixed Income 1-5 Years Five-Year US Treasury Notes (1972-1984), Citigroup World Government Bond Index 1-5 Years (hedged) (1985-2011) Intermediate-Term Fixed Income Five-Year US Treasury Notes (1972-1975), Barclays Capital US Aggregate Bond Index (1976-2011) Long-Term Government Fixed Income Long-Term Government Bonds (1972-2011) Long-Term Corporate Fixed Income Long-Term Corporate Bonds (1972-2011) TIPS Long-Term Government Bonds (1972-1997), Barclays Capital US TIPS Index (1998-2011) Municipal Bonds Long-Term Corporate Bonds (1972-1980), BarCap Municipal TR USD (1981-2011) High Yield Bonds Morningstar High Yield Bond EW (1972-2011) US Market CRSP Deciles 1-10 Index (market) (1972-2011) US Large Value Fama/French US Large Value Index (ex utilities) (1972-2011) US Large Neutral S&P 500 Index (1972-2011) US Large Growth Fama/French US Large Growth Index (ex utilities) (1972-2011) US Small Value Fama/French US Small Value Index (ex utilities) (1972-2011) US Small Neutral CRSP Deciles 6-10 Index (1972-2011) US Small Growth Fama/French US Small Growth Index (ex utilities) (1972-2011) US Micro Cap CRSP Deciles 9-10 Index (1972-2011) REITs FTSE NAREIT Equity REITs (1972-2011) International Large Value DFA Developed International Large Company Composite Index (1972-1974), Fama/French International Value Index (1975-2011) International Large Neutral MSCI EAFE Index (net div.) (1972-2011) International Large Growth DFA Developed International Large Company Composite Index (1972-1974), Fama/French International Growth Index (1975-2011) Page 2 of 15
IMPORTANT DISCLOSURE INFORMATION Asset Class Historical Return Index International Small Value Dimensional International Small Cap Index (1972-1981), Dimensional International Small Cap Value Index (1982-2011) International Small Neutral Dimensional International Small Cap Index (1972-2011) International Small Growth Emerging Markets Global Stock MSCI World Index (net div.) (1972-2011) Dimensional International Small Cap Index (1972-1989), S&P Developed Ex US Small Growth (1990-2011) MSCI Pacific ex Japan Index (net div.) (1972-1987), MSCI Emerging Markets Index (gross div.) (1988-1998), MSCI Emerging Markets Index (net div.) (1999-2011) Commodities S&P GSCI (1972-1990), DJ UBS Commodity (1991-2011) Other Assets S&P 500 (Price Return) (1972-2011) Actual advisory fees under a current portfolio may be higher or lower than the fee input in a specific calculation. Advisory fees may vary. Input of an advisory fee will result in the decrease of a simulated portfolio's overall value. Page 3 of 15
IMPORTANT DISCLOSURE INFORMATION Risks Inherent in Investing Investing in fixed income securities involves interest rate risk, credit risk, and inflation risk. Interest rate risk is the possibility that bond prices will decrease because of an interest rate increase. When interest rates rise, bond prices and the values of fixed income securities fall. When interest rates fall, bond prices and the values of fixed income securities rise. Credit risk is the risk that a company will not be able to pay its debts, including the interest on its bonds. Inflation risk is the possibility that the interest paid on an investment in bonds will be lower than the inflation rate, decreasing purchasing power. Cash alternatives typically include money market securities and U.S. treasury bills. Investing in such cash alternatives involves inflation risk. In addition, investments in money market securities may involve credit risk and a risk of principal loss. Because money market securities are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency, there is no guarantee the value of your investment will be maintained at $1.00 per share. U.S. Treasury bills are subject to market risk if sold prior to maturity. Market risk is the possibility that the value, when sold, might be less than the purchase price. Investing in stock securities involves volatility risk, market risk, business risk, and industry risk. The prices of most stocks fluctuate. Volatility risk is the chance that the value of a stock will fall. Market risk is chance that the prices of all stocks will fall due to conditions in the economic environment. Business risk is the chance that a specific company s stock will fall because of issues affecting it. Industry risk is the chance that a set of factors particular to an industry group will adversely affect stock prices within the industry. (See Asset Class Stocks in the Glossary section of this Important Disclosure Information for a summary of the relative potential volatility of different types of stocks.) International investing involves additional risks including, but not limited to, changes in currency exchange rates, differences in accounting and taxation policies, and political or economic instabilities that can increase or decrease returns. Report Is a Snapshot and Does Not Provide Legal, Tax, or Accounting Advice This Report provides a snapshot of your current financial position and can help you to focus on a possible Asset Allocation strategy, and to create a plan of action. Because the results are calculated over many years, small changes can create large differences in future results. You should use this Report to help you focus on the factors that are most important to you. This Report does not provide legal, tax, or accounting advice. Before making decisions with legal, tax, or accounting ramifications, you should consult appropriate professionals for advice that is specific to your situation. Investment Planning Center Methodology Monte Carlo Simulations Monte Carlo simulations are used to show how variations in rates of return each year can affect your results. A Monte Carlo simulation calculates the results of your Plan by running it many times, each time using a different sequence of returns. Some sequences of returns will give you better results, and some will give you worse results. These multiple trials provide a range of possible results. Monte Carlo Simulations illustrate the likelihood that an event may occur as well as the likelihood that it may not occur. In analyzing this information, please note that the analysis does not take into account actual market conditions, which may severely affect the outcome of the results over the long-term. In the Monte Carlo simulation in an Asset Allocation Plan, Investment Planning Center runs 1,000 separate scenarios of your Plan, using the information you entered, while varying the sequence of returns and inflation rates. To create the sequences of returns and inflation rates, Investment Planning Center starts with the average returns and standard deviations for the portfolio and for inflation. If you are using historical returns, the return, inflation rate, and standard deviations are calculated based on the time period you have selected. If you are using projected returns, the return, inflation rate, and standard deviations are as indicated by you. Standard deviation is a statistical measure of volatility, and indicates how much a typical sequence of portfolio returns (or inflation rates) may vary from the average. A small standard deviation indicates that the returns (or inflation rates) over a period of time will typically be closer to the average than returns or inflation rates with a larger standard deviation. For each scenario, Investment Planning Center creates a random sequence of returns and a random sequence of inflation rates (using the average return and standard deviation as guidelines for a range of returns, and the average inflation and standard deviation as guidelines for the range of inflation rates), which it uses to calculate the results for that scenario. Each scenario has a different sequence of returns and inflation rates. In an Asset Allocation Plan, you can select a Monte Carlo Simulation for an accumulation period, or for an accumulation period followed by a distribution period. When you select only an accumulation period, Investment Planning Center calculates, using the assumptions you have provided, a range for the amount of money that you could accumulate in the period specified. Page 4 of 15
IMPORTANT DISCLOSURE INFORMATION When you select an accumulation period followed by a distribution period, in addition to providing a range for the amount of money you could have at the end of the period specified, Investment Planning Center also tabulates whether each scenario is successful or unsuccessful. A scenario is counted as successful if you can withdraw the amount specified for the total number of years in the distribution period. A scenario is counted as unsuccessful if the portfolio is depleted prior to the end of the distribution period. The percentage of successful scenarios is shown as the Likelihood your money could last for the number of years specified. The highest calculated likelihood that your money could last until the end of the distribution period is 99%. Even a likelihood of 99% does not constitute a guarantee that the outcome will be as projected, because the results presented are based on multiple assumptions, each of which is subject to change as a result of market volatility, economic factors and world events. Remember that each scenario had a different sequence of randomly generated returns and inflation rates. While each scenario is a possible outcome, there are other possible outcomes that are not shown. These scenarios illustrate a range of possible returns using the assumptions you specified. Investment Planning Center Presentation of Results Range of Possible Results Chart Investment Planning Center takes the 1,000 Results from the 1,000 scenarios, and puts them in order from highest to lowest, based on the ending portfolio value. The range of these Results is usually very wide. Rather than showing all 1,000 Results, the Chart shows the Results of three of the scenarios that provide a summary of the range of Results from this simulation. The Results are shown in both Current Dollars and Future Dollars. High Result - Portfolio Value Graph This is the Result of the scenario that had the 25th Highest Result. Only 24 Results were Higher, and 975 were Lower. Median Result - This is the Result that was in the middle. This means 499 were Higher, 500 were Lower. It is close to the average Result. Low Result - This is the Result of the scenario with the 25th Lowest Result. This means 975 Results were Higher, and only 24 were Lower. If you selected an accumulation period followed by a distribution period, Investment Planning Center also displays the percentage of scenarios that were successful as the Likelihood your money could last for the number of years specified. Rather than attempting to graph the Results of all 1,000 scenarios, Investment Planning Center shows 20 of the Results that provide a representative sample of all the Results. Investment Planning Center first ranks all 1,000 Results from highest to lowest, based on the ending portfolio value. It then divides them into 20 groups of 50 Results each. For each group, it takes the middle Result, and displays it on the graph. Therefore, each line on the graph represents a group of 50 scenarios that had Results slightly higher or lower than the one shown. Page 5 of 15
Results Comparison Based upon the information you provided, your Target Portfolio is Defensive 60-5. This Chart compares your Current Portfolio with your Target Portfolio. Current Portfolio Target Portfolio Defensive 60-5 Assumptions 9.67% Total Return 8.59% 4.34% Base Inflation Rate 4.34% 5.33% Real Return 4.25% -31.90% Worst One-Year Loss (or Lowest Gain) -6.82% 15.21% Standard Deviation 6.46% Current Amount $20,000 $20,000 $110,000 $90,000 $0 $50,000 $420,000 $144,000 $0 $0 $30,000 $50,000 $66,000 $0 % of Total 2% 2% 11% 9% 0% 5% 42% 14% 0% 0% 3% 5% 7% 0% Portfolio Comparison Asset Class % of Total Target Amount Cash & Cash Alternatives 4% $40,000 Short Term Fixed Income 71% $710,000 Intermediate-Term Fixed Income 0% $0 High Yield Bonds 0% $0 US Market 5% $50,000 US Large Value 5% $50,000 US Large Neutral 0% $0 US Large Growth 0% $0 US Small Neutral 3% $30,000 REITs 3% $30,000 International Large Value 7% $70,000 International Large Neutral 0% $0 International Large Growth 0% $0 International Small Neutral 2% $20,000 Page 6 of 15
Results Comparison $1,000,000 $1,000,000 Page 7 of 15
Portfolio Detail Portfolio Detail - Defensive 60-5 While Average Historical Returns are important when selecting your Target Portfolio, it is important to remember that returns have actually varied by substantial amounts from year to year. This graph shows the Annual Historical Returns by year for this portfolio. This graph shows how a hypothetical investment of $100,000 would have grown during this period. This chart summarizes the growth and return information for the portfolio for this period. Results for Period 1972-2011 Ending Portfolio Value (Hypothetical) $2,706,514 Biggest Loss or Smallest Gain -6.82% in 2008 Largest Gain 24.52% in 1982 Years with Loss 5 Average Total Return 8.59% Inflation 4.34% Average Real Return 4.25% Standard Deviation 6.46% Page 8 of 15
Changes Needed to Re-Allocate Here are the changes you would need to make to your current investments to match the allocation of your Target Portfolio. Before you sell any assets, you must consider the tax consequences of doing so. Consult with your tax advisor for advice. Any decisions to buy or sell securities or participate in one or more investment programs, as a result of this report, should be made by you after careful review and in the context of your overall investment plan. Changes Required Asset Class Increase By Decrease By Percentage Change Cash & Cash Alternatives $20,000 2% Short Term Fixed Income $690,000 69% Intermediate-Term Fixed Income -$110,000-11% High Yield Bonds -$90,000-9% US Market $50,000 5% US Large Neutral -$420,000-42% US Large Growth -$144,000-14% US Small Neutral $30,000 3% REITs $30,000 3% International Large Value $40,000 4% International Large Neutral -$50,000-5% International Large Growth -$66,000-7% International Small Neutral $20,000 2% Total : $880,000 -$880,000 Page 9 of 15
Current Asset Distribution by Asset Class Current Portfolio - Amount in Each Asset Class Description Cash & Cash Alternatives Short Term Fixed Income Intermediate- Term Fixed Income High Yield Bonds US Large Value US Large Neutral US Large Growth International Large Value International Large Neutral International Large Growth Total Value Sample Funds American Funds Trgt Date Ret 2025 A American Funds Washington Mutual A American Funds EuroPacific Gr A American Funds Fundamental Investors A American Funds New Economy A American Funds Invmt Co of Amer A Cash $20,000 American Funds Intl Gr And Inc A American Funds American Hi Inc Tr A American Funds Bond Fund of Amer A American Funds New Perspective A $20,000 $50,000 $30,000 $50,000 $20,000 $180,000 $100,000 $190,000 $30,000 $90,000 $110,000 $44,000 $66,000 $100,000 $50,000 $20,000 $180,000 $100,000 $190,000 $20,000 $30,000 $90,000 $110,000 $110,000 Total : $20,000 $20,000 $110,000 $90,000 $50,000 $420,000 $144,000 $30,000 $50,000 $66,000 $1,000,000 Page 10 of 15
Your Target Portfolio The Risk-Based Portfolio was selected from this list of Portfolios, based upon the answers you provided in your Risk Tolerance Questionnaire. The Target Portfolio was selected by you. The Average Real Return is equal to the Average Total Return minus the inflation rate of 4.34%. Current Risk Based Average Return % Target Name % Cash % Bond % Stock Total Real Alternative The Target Portfolio you selected is : Defensive 60-5 Worst 1 Year Loss Standard Deviation Defensive 60-5 4% 71% 25% 0% 8.59% 4.25% -6.82% 6.46% Conservative 60-5 3% 57% 40% 0% 9.51% 5.17% -14.20% 8.78% Current 2% 22% 76% 0% 9.67% 5.33% -31.90% 15.21% Balanced 60-5 3% 47% 50% 0% 10.10% 5.76% -19.39% 10.66% Moderate 60-5 2% 33% 65% 0% 10.88% 6.54% -26.87% 13.51% Capital Appreciation 60-5 2% 13% 85% 0% 11.69% 7.35% -36.76% 17.43% Equity 60-5 2% 0% 98% 0% 12.13% 7.79% -43.33% 20.04% Return vs. Risk Graph When deciding how to invest your money, you must determine the amount of risk you are willing to assume to pursue a desired return. The Return versus Risk Graph reflects a set of portfolios that assume a low relative level of risk for each level of return, or conversely an optimal return for the degree of investment risk taken. The graph also shows the position of the Current, Target, Risk-Based, and Alternative Portfolios. The positioning of these portfolios illustrates how their respective risks and returns compare to each other as well as the optimized level of risk and return represented by the Portfolios. This graph shows the relationship of return and risk for each Portfolio in the chart above. Page 11 of 15
Risk Questionnaire Purpose, Assumptions, and Limitations Updated : 04/26/2012 This Structured Investing Risk Assessment Questionnaire is designed to help your Financial Advisor decide how to allocate your assets among different asset classes (stocks, bonds, and short-term reserves), based on your investment objectives and experience, time horizon, risk tolerance, and financial situation. This Questionnaire is provided as a guide to help you and your Financial Advisor in choosing an appropriate investment portfolio and should not be construed as investment advice. The suggestions provided are based on generally accepted investment principles. There is no guarantee, however, that any particular asset allocation or mix of funds will meet your investment objectives. All investments involve risks, and fluctuations in the financial markets and other factors may cause declines in the value of your account. You should carefully consider all of your options before investing. Assumptions: The questionnaire bases the rate of return on historic data from 1972 to 2011. Some estimates may be high because the inflation rate during this period of 4.3% was higher than the longer-term historic average inflation rate of 3% from 1926 to 2011. Investors in stocks, bonds and other asset classes can reasonably expect to see the value of their investment portfolios fluctuate. Depending on global economic conditions and the makeup of their portfolios, investors may experience unsettling periods of mild, moderate or even severe losses. Such losses can be difficult to tolerate and may lead investors to lose confidence in their investment policy. Investors in stocks, bonds and other asset classes can reasonably expect to see the value of their investment portfolios fluctuate. Depending on global economic conditions and the makeup of their portfolios, investors may experience unsettling periods of mild, moderate or even severe losses. Such losses can be difficult to tolerate and may lead investors to lose confidence in their investment policy. Limitations: Please note that the suggested asset allocations within this Questionnaire depend on subjective factors such as your risk tolerance and financial situation. The results should be considered along with the specific details of your personal financial situation for more comprehensive advice from your Financial Advisor. The potential tax implications of any modifications to your current mix of investments should also be considered. Remember, past performance is not indicative of future performance. All investments involve risk, including loss of principal. Bonds are subject to risks, including interest rate risk, which can decrease the value of a bond as interest rates rise. Small company stocks have additional risks, including greater volatility and less liquidity than stocks of larger companies. Value companies have more risk than growth companies and may underperform when the market favors growth companies. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. Diversification and buy-and-hold strategies do not guarantee a profit or principal protection. The ability to accept investment risk is determined by your investment goals, investment time horizon, spending requirements, liquidity needs and income expectations. LWI Financial, Inc. ( Loring Ward ). Securities may be offered through Loring Ward Securities, Inc. (or your advisor s affiliates), member FINRA/SIPC 10-255 (04/2012) Risk Capacity (Your ability to accept risk) 1. 2. Investment Time Horizon An important consideration is your investment time horizon the length of time you will remain fully invested. Because of the increased possibility of losses, there should be a minimal allocation to stocks in portfolios with relatively short investment time horizons. How long do you plan to hold this investment portfolio? Less than 5 years 5 to 9 years 10 to 19 years 20 years or more Income Needs Your current need for income from your portfolio is an important factor in designing your portfolio. How much will you need to withdraw from your portfolio each year? 0% 0-2% 2-4% 4-5% Over 5% Page 12 of 15
Risk Questionnaire 3. Liquidity/Cash Needs Beyond your income needs above, will you need to make significant withdrawals from your portfolio within the next five years to fund major expenses (i.e. college funding, vacation home)? If yes, please indicate the estimated amount of withdrawals as a percentage of your portfolio: Less than 15% 15 35% 35 50% 50 60% 60 75% 75 100% This example is for illustrative purposes only and is not intended to represent a specific investment or portfolio of investments. The highest 1-year gain and greatest 1-year loss are based on rolling 12 month returns from January 1972 to December 2011 for portfolios represented by Five-Year U.S. Treasury Notes and the S&P 500 Index. Returns assume the reinvestment of dividends and capital gains, but do not include the deduction of management fees or taxes, which will reduce an investor s returns. Indices are unmanaged and do not reflect the payment of advisory fees and other expenses associated with an investment in a mutual fund or separate account. Investors cannot directly invest in an index. Portfolios were constructed using the following assumptions: 4. Portfolio Returns vs. Potential Losses What level of returns do you expect from your portfolio and what losses can you withstand? The example below is for illustrative purposes only and not representative of any specific investment. The table below shows six hypothetical portfolios and their greatest 1-year loss and highest 1-year gain for a hypothetical investment of $100,000. Which portfolio would you feel most comfortable with? Risk Tolerance (Your willingness to accept risk) 5. a. Reaction to Financial Market Declines What has been your personal experience with financial market declines? Consider your feelings during the steep market declines that occurred during the Great Recession when the S&P 500 Index lost more than 40% over a six month period from September 1, 2008 through February 28, 2009. How did you (or would you have) reacted during that period. I sold/would have sold all of my stock investments. I sold/would have sold some of my stock investments. I made/would have made no changes to my stock investments. I increased/would have increased my stock investments. b. Based on my past investment experience, I tend to sell stock investments and invest the money in safer assets during market declines. Strongly disagree Disagree Somewhat agree Agree Strongly agree Page 13 of 15
Risk Questionnaire 6. Reaction to Fluctuations in Portfolio Values 8. Value Investing a. b. How would you react if you lost $50,000 on your $250,000 investment portfolio tomorrow? Please select the statement below that best reflects your reaction to the decline in investment value. I maintain a long-term focus with my investments and wouldn t change my investment plan. I would be very concerned, but probably wouldn t change my investment plan. I m not sure what I would do. I would probably make a change to my investment plan. I would definitely make a change to my investment plan. Generally I prefer a portfolio with little or no fluctuation in value, and I am willing to accept the lower potential returns associated with this type of portfolio. The style of stock market investing can affect your long-term rate of return. Investing in companies experiencing rapid growth in revenues and profits is called growth investing. Investing in companies experiencing slow growth, difficult business conditions, and/or declining revenues and profits is called value investing. Historical data suggests the expected returns of value stocks are higher than those of growth stocks in both U.S. and international markets because there are higher risks associated with investing in value stocks. While the stocks of value companies may be likely to outperform over the long term, such investments are also likely to underperform the market for certain periods of time. How comfortable are you with including value company investments in your portfolio? I am very comfortable with value company investments. I am comfortable with value company investments. Strongly disagree I am somewhat comfortable with value company investments. Disagree Somewhat agree Value companies have more risk than growth companies and may underperform when the market favors growth companies. Agree Strongly agree Investment Preferences (Optional) 7. International Investment Preference International investing can help increase your portfolio s diversification as it enables you to spread risk across a variety of economies and financial markets. International investments include developed markets, such as France and Germany, with well-established companies and listing standards similar to the U.S., and also include more speculative emerging markets in countries with rapid but volatile economic growth. Which statement best reflects your view on international investing? I am very comfortable with international investments. I am comfortable with international investments. I am somewhat comfortable with international investments. I am somewhat uneasy with international investments. I am very uneasy with international investments. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. Page 14 of 15
Risk Questionnaire 9. Small Company Investing Investing in the stocks of smaller, lesser-known companies can also affect long-term returns. Generally, small company stocks have a market value that falls within the smallest 10% of the market universe. Large company stocks are typically represented by the Standard & Poor s 500 Index (S&P 500) and include well-established companies with relatively high stock market value. Historical data suggests the expected returns of small company stocks are higher than those of large company stocks in both U.S. and international markets. However, there are higher risks associated with less-established companies, and such investments may underperform the market for certain periods of time. How comfortable are you with including small company investments in your portfolio? I am very comfortable with small company investments. I am comfortable with small company investments. I am somewhat comfortable with small company investments. Small company stocks have additional risks, including greater volatility and less liquidity than stocks of larger companies. All investments involve risk, including loss of principal. Bonds are subject to risks, including interest rate risk, which can decrease the value of a bond as interest rates rise. Small company stocks have additional risks, including greater volatility and less liquidity than stocks of larger companies. Value companies have more risk than growth companies and may underperform when the market favors growth companies. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. Diversification and buy-and-hold strategies do not guarantee a profit or principal protection. Page 15 of 15