Keys to Investment Success


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This presentation describes the core tenants of investment success. Elevation Wealth Management applies this approach to every client relationship and partners with our clients to create real long-term wealth.

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Keys to Investment Success

  1. 1. December 24, 2012Investment Management & Financial PlanningBarry Mendelson, CFP®President & Financial Advisor1
  2. 2. MissionElevation Wealth Management is an independent, privately held Registered Investment Advisor that provides investment management and financial planning to discerning individuals, families, and companies across the United States.  The firm specializes in helping investors grow, manage, and protect their wealth. Elevation’s investment process is based on more than 80 years ofwealth. Elevation s investment process is based on more than 80 years of academic research and is the same framework followed by the majority of institutional investors. Our goal is to bring clarity to difficult and complex financial decisions andOur goal is to bring clarity to difficult and complex financial decisions – and set the path for a secure financial future. As a Fiduciary and fee‐only –Elevation places the interests of clients above all else. 2
  3. 3. Barry Mendelson CFP®AboutBarry Mendelson, CFPPresident & Financial AdvisorProfessional Experience B.A. in Business Economics & Accounting from U.C. Santa Barbara in 1995.g More than 17 years experience working for leading asset management companies including Charles Schwab & Co., AXA Rosenberg, Neuberger Berman, and Franklin Templeton.   Partner & Financial Advisor – Just Plans, a fee‐only Registered Investment Advisor. 2010 – Present.P i t j i i J t Pl i 2010 d f i El ti W lth M t i 2011 Vi Prior to joining Just Plans in 2010 and forming Elevation Wealth Management in 2011, was a Vice President in Charles Schwab & Co’s $250 billion investment management division. There, he advised institutional investors, investment advisors , pensions, endowments, and foundations on leading investment strategies, investment policy, asset allocation, and manager selection. Certified Financial Planner™ certificate holder since 2008 Certified Financial Planner  certificate holder since 2008. Board of Directors, Financial Planning Association of the East Bay, since 2010. The FPA of East Bay seeks to promote financial literacy and a professional standard among financial professionals. Frequent lecturer to various organizations and companies including JFK University, DeVry University, Rotary Sons In Retirement and othersRotary, Sons In Retirement, and othersCommunity Involvement Board of Directors, Cancer Support Community of the Bay Area, since 2011. Barry is Testicular Cancer survivor and aiding those affected by cancer is of great importance to Barry and his family.3 Founded Chairs 4 Charity in 2009 – which has raised thousands of dollars (mostly in support of public education). 
  4. 4. Elevation’s Expert TeamJim Ellman ChFC ‐ President Just Plans Etc – a fee‐only RegisteredJim Ellman, ChFC  ‐ President, Just Plans Etc – a fee‐only Registered Investment Advisor based in Walnut Creek. Founded JPE in 1983 and has more than 30 years investment experience. I C i W l C k P b i Ch h Investment Committee, Walnut Creek Presbyterian Church.Doug Bergman – President, Bergman Investment Management – a fee‐only Registered Investment Advisor based in San FranciscoRegistered Investment Advisor based in San Francisco. Founded BIM in 1995 and has more than 20 years investment experience. Chairman ‐ Investment Committee, Lighthouse for the Blind and Visually $Impaired.  $30 million endowment fund.4
  5. 5. Elevation’s Expert TeamFounded in 1990 and head quartered in San Jose, California, Loring Ward is dedicated to bringing science, reason and innovation to investing. Their business is to serve as the back‐office to independent financial advisors and help them build custom‐tailored investment portfolios based on timeless economics principles.  f h 2012 i d h h $ 2 billi i dAs of March 2012, Loring Ward has more than $7.2 billion in assets under management.  Loring Ward’s Investment Committee helps advisors define investment objectives, determines investment strategies and monitor investments to meet both the current and future needs of investors. It is led by Chief Investment Officer Joni Clark, CFA, CFP®, as well as noted behavior economist Professor Meir Statman and the 1990 Nobel Laureate for Economic Sciences Dr Harry MarkowitzDi i l F d Ad i1990 Nobel Laureate for Economic Sciences, Dr. Harry Markowitz.Dimensional Fund AdvisorsFounded in 1981. Offices around the globe.More than $200 billion in assets under management exclusively for independent financial advisors and institutional investors such as CalPERS, City of San Francisco, Marin County Employees Retirement Association, San Francisco Foundation, Lucile Packard Foundation for Children’s Health, J. Paul Getty Trust, Caltech,  and California Wellness Foundation among others. The mission of DFA is to deliver the performance of the capital markets and increase returns through state‐of‐the‐art portfolio design and trading.5Deep working relationships with the world’s leading financial economists. In 2008, the University of Chicago Business School was renamed after a $300 million donation by DFA co‐founder David Booth. 
  6. 6. Elevation’s Investment PhilosophyM k ( i ) W kMarkets (over time) Work6
  7. 7. Elevation’s Investment PhilosophyM k ( i ) W kMarkets (over time) WorkActive Managers Have Difficulty Beating the MarketMutual Fund Manager Performance from 2006 2011Mutual Fund Manager Performance from 2006 – 2011Source: Standard and Poor’s Index Versus Active Group, March 2012Indexes are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actualportfolio. The fund returns used are net of fees, excluding loads. Returns are based upon equal-weighted fund counts. The data assumes7portfolio. The fund returns used are net of fees, excluding loads. Returns are based upon equal weighted fund counts. The data assumesreinvestment of income and does not account for taxes or transaction costs. The risks associated with stocks potentially include increasedvolatility (up and down movement in the value of your assets) and loss of principal. Bonds are subject to risks, including interest rate risk whichcan decrease the value of a bond as interest rates rise. Investing in foreign securities may involve certain additional risks, including exchangerate fluctuations, less liquidity, greater volatility, different financial and accounting standards and political instability. Passive moneymanagement, like active money management, cannot guarantee a profit or protect against a loss. Past performance is not a guarantee of futureresults.
  8. 8. Elevation’s Investment PhilosophyRisk and Return are Related. And Investors are compensated for bearing certain risks. p gIn US dollars. Developed markets value and growth index data provided by Fama/French (ex utilities). The S&P data are provided by Standard & Poors Index Services Group. US Small Cap Index is the CRSP 6‐10 Index. CRSP data provided by the Center for Research in Security Prices, University of Chicago. International 8Small Cap index data: 1970–June 1981, 50% UK small cap stocks provided by the London Business School and 50% Japan small cap stocks provided by Nomura Securities; July 1981–present: simulated by Dimensional from StyleResearch securities data; includes securities of MSCI EAFE Index countries, market‐capitalization weighted, each country capped at 50%. MSCI EAFE Index is gross of foreign withholding taxes on dividends; copyright MSCI 2012, all rights reserved. Indexes are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Compound returns have an assumed rate of return, are hypothetical, and are not representative of any specific type of investment. Standard deviation is one method of measuring risk and performance, and is presented as an approximation. Past performance is no guarantee of future results.
  9. 9. Elevation’s Investment PhilosophyDiversify With StructureDiversify With StructureDiversification and Portfolio Risk – 1952Harry Markowitz, University of Chicago1990 Nobel Prize in EconomicsDi ifi ti d i k Diversification reduces risk. Assets should be evaluated not by individual characteristics but by their effect on a portfolio. An optimal portfolio can be constructed to maximize return for a given risk level.Combine Multiple Asset Classes Seek to combine multiple asset classes that have historically experienced dissimilar return patterns across various financial and economic environments. Diversification does not guarantee a profit or protect against a loss. Diversify Globally More than 50% of global stock market value is non U S and international stock markets as a whole More than 50% of global stock market value is non‐U.S., and international stock markets as a whole have historically experienced dissimilar return patterns to the U.S.Invest in Thousands of Stocks Compared to a portfolio concentrated in a small number of stocks, investing in thousands of stocks around the world can limit portfolio losses during a severe market decline by reducing company‐specificaround the world can limit portfolio losses during a severe market decline by reducing company specific risk.9
  10. 10. Elevation’s Investment PhilosophyThe Need For DiversificationThe Need For DiversificationHighestReturnAsset Class Index Performance 1997‐2011LowestReturnData Sources: Center for Research in Security Prices (CRSP), BARRA Inc. and Morgan Stanley Capital International, January 2012. All investments involve risk. Foreign securities involve additional risks, including foreign currency changes, politicalrisks, foreign taxes, and different methods of accounting and financial reporting. Past performance is not indicative of future performance. Treasury bills are guaranteed as to repayment of principal and interest by the U.S. government. Thisinformation does not constitute a solicitation for sale of any securities. CRSP ranks all NYSE companies by market capitalization and divides them into 10 equally-populated portfolios. AMEX and NASDAQ National Market stocks are then placed intodeciles according to their respective capitalizations determined by the NYSE breakpoints CRSP Portfolios 1 5 represent large cap stocks; Portfolios 6 10 represent small caps; Value is represented by companies with a book to market ratio in theDiversification does not guarantee a profit or protect against a loss.10deciles according to their respective capitalizations, determined by the NYSE breakpoints. CRSP Portfolios 1-5 represent large-cap stocks; Portfolios 6-10 represent small caps; Value is represented by companies with a book-to-market ratio in thetop 30% of all companies. Growth is represented by companies with a book-to-market ratio in the bottom 30% of all companies. S&P 500 Index is the Standard & Poor’s 500 Index. The S&P 500 Index measures the performance of large-capitalization U.S. stocks. The S&P 500 is an unmanaged market value-weighted index of 500 stocks that are traded on the NYSE, AMEX and NASDAQ. The weightings make each company’s influence on the index performance directlyproportional to that company’s market value. The MSCI EAFE Index (Morgan Stanley Capital International Europe, Australasia, Far East Index) is comprised of over 1,000 companies representing the stock markets of Europe, Australia, NewZealand and the Far East, and is an unmanaged index. EAFE represents non-U.S. large stocks. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes and different methods of accounting andfinancial reporting. Consumer Price Index (CPI) is a measure of inflation. REITs, represented by the NAREIT Equity REIT Index, is an unmanaged market cap-weighted index comprised of 151 equity REITS. Emerging Markets index representssecurities in countries with developing economies and provide potentially high returns. Many Latin American, Eastern European and Asian countries are considered emerging markets. Indexes are unmanaged baskets of securities without the feesand expenses associated with mutual funds and other investments. Investors cannot directly invest in an index.
  11. 11. Elevation’s Investment PhilosophyDiversify With StructureyU.S. and International MarketsPerform DifferentlyRolling 12-month Variance (Jan 1972 – Dec 2011)Global Market Capitalization1970InternationalO tperformsU.S. Outperforms_________________U.S. 66%International 34%Outperforms2011_________________U.S. 40%International 60%2050* (Projected)*_________________U.S. 17%Source: Center forResearch in Security Prices(CRSP) January, 2012*Source: Impact of an Aging Population on the Global EconomyJeremy J. Siegel CFA Institute Conference Proceedings Quarterly (09/07)International 83%11Past Performance is not indicative of future results. All investments involve risk. Foreign securities involve additional risks including foreign currency changes, taxes and differentaccounting and financial reporting methods. International market performance represented by the MSCI EAFE Index (Morgan Stanley Capital International Europe, Australasia,Far East Index), comprised of over 1,000 companies representing the stock markets of Europe, Australia, New Zealand and the Far East, and is an unmanaged index. EAFErepresents non-U.S. large stocks. U.S. market performance represented by the Standard & Poors 500 Index, an unmanaged market value-weighted index of 500 stocks that aretraded on the NYSE, AMEX and NASDAQ. The weightings make each companys influence on the index performance directly proportional to that companys market value.
  12. 12. Elevation’s Investment PhilosophyCustomize Your PortfolioYour Portfolio Should Reflect Your Personal Situation What is your time horizon? What is your tolerance for risk? Do you need income or liquidity? What is your tax bracket? How might you benefit from “asset location” and other tax‐management strategies? What are your financial goals? What are your business goals?What are your financial goals? What are your business goals?  What are life goals? What type of legacy do you want to leave?Elevation’s Comprehensive Financial Planning Process can address all of these p g fmatters and more.12
  13. 13. Elevation’s Investment PhilosophyInvest For The Long‐TermgStay focused on the long term Emotion, trying to time the market and lack of discipline can affect your long‐term investing successinvesting success Make sure you are guided by an investment policyRegularly review your portfolio Make adjustments depending on changes in your life Rebalance periodically to keep your portfolio aligned with your goalsWhen in doubt, seek expert advice, p Elevation Wealth Management can help you stay on track and focused on your long‐term goals13
  14. 14. Elevation’s Investment PhilosophyInvest For The Long‐TermgThe Cycle of Market Emotions. Bad investments often lead to bad (investing) behavior.14
  15. 15. Contact InformationBarry Mendelson, CFP®President & Financial Advisor1399 Ygnacio Valley Rd, Suite 24 Walnut Creek CA 94598Walnut Creek, CA 94598925‐348‐5852barry@elevationwm.comwww.elevationwm.com
  16. 16. Opinions expressed are those of Barry Mendelson, CFP® and ElevationDisclosuresOpinions expressed are those of Barry Mendelson, CFP  and Elevation Wealth Management.  This presentation should not be construed as investment advice.  pThe information contained in this presentation is compiled from sources believed to be reliable.Investments in securities involve the risk of loss. Past performance is no guarantee of future results.The markets can remain irrational longer than you can remain solvent.16