BetterInvesting Portfolio Manager Portfolio Asset Allocation Decisions Created by: QUANT IX SOFTWARE, Inc. This Microsoft PowerPoint presentation is designed to help you understand how BetterInvesting’s Portfolio Manager Software can help you make more informed asset allocation and diversification allocation decisions. Revised: November, 2005

BetterInvesting, Portfolio Manager and Asset Allocation What is BetterInvesting? BetterInvesting is a community of like-minded people committed to becoming better, more informed investors. For over 50 years, BetterInvesting’s community of individual investors has used the power of collaboration to take the mystery out of investing. What is Portfolio Manager? Portfolio Manager is BetterInvesting’s official software offering providing complete portfolio management and investment record keeping. What are asset allocation and diversification? Asset Allocation refers to the process of combining asset classes (i.e. stocks, bonds, and cash) in a portfolio in order to meet your investment objectives. Diversification refers to the variety of investments within an asset class or portfolio. BetterInvesting is a community of like-minded people committed to becoming better, more informed investors. For over 50 years, BetterInvesting’s of individual investors has used the power of collaboration to take the mystery out of investing (http://www.betterinvesting.org/about/). Portfolio Manager is BetterInvesting’s comprehensive portfolio management software offering for investors (www.quantixsoftware.com). Asset Allocation is the process of combining asset classes (i.e. stocks, bonds, and cash) in a portfolio in order to meet your investment objectives. Diversification refers to the variety of individual investments held within an asset class or portfolio. 2

Asset Allocation and Portfolio Diversification Combining asset classes such as stocks, bonds, and cash in a portfolio in order to meet your goals Diversification Spreading portfolio assets over sufficient number of securities to avoid excessive risk from any one security Common stocks should be diversified by industry sector and company size Asset Allocation and Diversification An important part of the portfolio management process includes the asset allocation decision. Portfolio asset allocations are the single largest determinant of overall portfolio risk and return. Each investor will decide on the asset allocation mix based upon the investment goals of the portfolio, and the portfolio’s risk tolerance. Regardless of the asset allocation decision, diversification helps to reduce specific risk – i.e., the risk of carrying to many eggs in one basket. Diversification is accomplished by holding an adequate number of securities Common stock investors should diversify by both industry sector and company size. 3

Portfolio Manager and asset allocation How to distribute investment funds among different broad asset classes – i.e. cash, bonds, stocks and others. Over time, the major source of investment risk and return is based on the asset allocation decision. Determined by an investor’s objectives: risk tolerance profile. short-term and long-term needs. goals and expectations The types of assets held are the major determinant of the amount of risk that can be expected for a given portfolio. That is why the asset allocation decision is one of the most important decisions that can be made when constructing a portfolio. Different asset classes fluctuate based on their riskiness, and therefore combining different asset classes within a portfolio will help to “smooth” the volatility of the returns. Asset allocation provides protection from big differences between the “ups” and the “downs”. 4

Portfolio Manager and diversification Spreading portfolio assets over a variety of securities to avoid excessive risk from any one security Common stocks should be diversified by industry sector and company size One of the BetterInvesting’s guidelines for successful long-term investing Adequate diversification is one of the BetterInvesting’s guidelines for successful long-term investing. So too are invest regularly (regardless of the short-term market outlook) and reinvest all earnings to take advantage of the magic of compounding. Diversify to reduce risk : Improves the investment process! It helps you to identify where you are, and then what is needed to reach your goals In addition to asset allocation tools to measure diversity by asset type (stocks v. bonds v. mutual funds, etc.), Portfolio Manager also provides diversification by common stock industry/sector and by common stock size. 5

Importing allocation and diversification data from BetterInvesting Import BI S&P Stock Data Service S&P Stock Data Service: online access to CompuStat financial data provided by S&P on over 7,000 publicly traded companies BetterInvesting’s website site provides quick access to detailed data used for asset allocation and diversification analysis within Portfolio Manager: Common Stock Data: S&P Stock Data Service— online access to CompuStat financial data provided by S&P on over 7,000 publicly traded companies including: stock industry sector stock size – large, medium or small capitalization other common stock fundamental data used for common stock analysis (please check our website for additional PowerPoint ® Presentations) S&P Stock Data Feed and Mutual Fund Resource Center are available from BetterInvesting, at www.BetterInvesting.org for a low cost annual subscription. 6

Importing allocation and diversification data from BetterInvesting Importing S&P Stock Data Service data allows examination of the characteristics of stocks held in portfolios Additional common stock data used for fundamental analysis is also retrieved from BetterInvesting BetterInvesting’s website site provides quick access to detailed data used for asset allocation and diversification analysis within Portfolio Manager. It also provides fundamental stock data used for stock analysis within the program. S&P Stock Data Feed and Mutual Fund Resource Center are available from BetterInvesting, at www.BetterInvesting.org for a low cost annual subscription. 7

Importing allocation and diversification data from BetterInvesting Importing S&P Mutual Fund Resource Center data allows examination of the true asset allocation and diversification characteristics of a portfolio Provides detailed fund characteristics for asset class, industry sector and stock size BetterInvesting’s website site provides quick access to detailed data used for asset allocation and diversification analysis within Portfolio Manager: Mutual Fund Data: Access to Standard and Poor's mutual fund data and Standard and Poor's Mutual Fund Reports on over 17,000 mutual funds including: asset allocation percentages (cash, bonds, stocks, other) diversification by industry sector diversification by stock size S&P Stock Data Feed and Mutual Fund Resource Center are available from BetterInvesting, at www.BetterInvesting.org for a low cost annual subscription. 8

Importing allocation and diversification data from BetterInvesting Importing S&P Stock Data Service and Mutual Fund Resource Center data allows examination of the true asset allocation and diversification characteristics of a portfolio Mutual Fund Resource Center Provides Standard and Poor's mutual fund data and Standard and Poor's Mutual Fund Reports on over 17,000 mutual funds BetterInvesting’s website site provides quick access to detailed data used for asset allocation and diversification analysis within Portfolio Manager: Mutual Fund Data: Access to Standard and Poor's mutual fund data and Standard and Poor's Mutual Fund Reports on over 17,000 mutual funds including: asset allocation percentages (cash, bonds, stocks, other) diversification by industry sector diversification by stock size other fund data used for fund analysis S&P Stock Data Feed and Mutual Fund Resource Center are available from BetterInvesting, at www.BetterInvesting.org for a low cost annual subscription. 9

Asset Allocation and Portfolio Diversification Important point: When Portfolio Manager examines your portfolio’s asset allocation and diversification, the software will include the proportional impact of any mutual funds you may hold. In other words, based on the dollars you have invested in each fund, Portfolio Manager will drill-down into the funds characteristics to allocate your mutual fund investments. Provides true asset allocation and diversification analysis Identifies rebalancing needs Including the proportional impact of your mutual funds holdings is necessary for determining your portfolio’s true asset allocation. For example, if you own several mutual funds along with individual securities in a portfolio, you need to know how the mutual fund’s allocation affects your allocation. Portfolio Manager will proportionally include, based on dollars invested, the impact of a fund’s holdings along with the portfolios individual holdings. This ability to “drill down” to another level provide you with a true asset allocation analysis of your portfolio. 10

First setup your portfolio allocation targets … Portfolio Manager allows you to set your portfolio target allocations ( File Menu | Portfolios | Portfolio Targets) These targets are used to compare your objectives with the actual allocation Entering your target allocation percentages The portfolio allocation targets can be used to set target percentages for asset classes (i.e., cash, bonds, stocks and other) market values in relation to total portfolio market value. Once the targets have been entered for the portfolio, you can generate several reports that will identify current portfolio allocation vs. your target portfolio allocations. These reports will also show the dollar amount of any portfolio rebalancing needed, to return to your target allocations. 11

Selecting the reports Select one of Portfolio Manager’s several useful reports to examine your actual portfolio allocations versus your target allocations Portfolio Manager enables investors to track multiple asset types, and then produce several reports and graphs to identify how a portfolio is allocated and diversified. Additionally, since Portfolio Manager can easily manage multiple portfolios (taxable, retirement, 401k, spousal, etc.), these portfolios can be easily combined on reports and graphs to provide an immediate view of overall diversification for the combined portfolios. 12

Compare your targets to actual asset allocation This is an example of an asset allocation report for the portfolio based on asset classes. It shows current allocations, target allocations, and the rebalancing needed. Note: please recall that Portfolio Manager includes the proportional impact of your mutual funds holdings when determining the current asset allocation of the portfolio. This ability provides a true picture of the portfolio’s asset allocation. 13

Analyze your targets to sector diversification: This is an example of an asset allocation report for the portfolio based on common stock industry sector. It shows current allocations, target allocations, and the rebalancing needed. Note: please recall that Portfolio Manager includes the proportional impact of your mutual funds holdings when determining the current asset allocation of the portfolio. This ability provides a true picture of the portfolio’s asset allocation. 14

Compare targets to stock size diversification: This is an example of an asset allocation report for the portfolio based on common stock size – large, medium or small capitalization. It shows current allocations, target allocations, and the rebalancing needed. Note: please recall that Portfolio Manager includes the proportional impact of your mutual funds holdings when determining the current asset allocation of the portfolio. This ability provides a true picture of the portfolio’s asset allocation. 15

Understand portfolio allocation & diversification Maintain accurate, timely investment records Review current holdings Identify rebalancing needs Implement changes to weed and feed portfolio to maintain proper diversification, meet new objectives or goals Ongoing process for long term investing success! 16

Portfolio Manager for asset allocation decisions BetterInvesting’s Portfolio Manager will lead you to better portfolio management decisions. Please visit these web sites to find out more about the software, and to try a free demo version: www.betterinvesting.org www.quantixsoftware.com (developer’s site) Thank you for your interest in Portfolio Manager! Thank you for taking the time to review this PowerPoint® Presentation. If you have questions regarding Portfolio Manager, please – visit BetterInvesting’s web site @ www.betterinvesting.org visit the developer’s web site @ www.quantixsoftware.com Call BetterInvesting @ 877-275-6242 Call QUANT IX SOFTWARE @ 800-247-6354 A free demo is available for downloading @ www.quantixsoftware.com Other PowerPoint presentations are available @ www.quantixsoftware.com End of PowerPoint Presentation demonstrating several of Portfolio Manager’s important portfolio management and investment decision making tools. 17