Investing Craig L. Israelsen, Ph. D Investing Craig L. Israelsen, Ph.D. Utah Valley University 2015 33 slides until total happiness

Philosophy Diversification Time Fuel Perspective Multiple asset classes needed – more than just stocks and bonds Time The value of investing & diversification is manifested over longer-time frames Fuel A diversified portfolio has to be given money (and time) to grow! Perspective Investing should not be life consuming. Develop rewarding hobbies, such as…

Successful investors… Behavior Successful investors… Contribute (save/invest) 10-15% of their income (FUEL) Rebalance their portfolios on a regular basis Understand that different asset classes take turns Have reasonable expectations and “benchmarks” Measure results in YEARS, not weeks or months

It’s 1970 and you’re 25 years old…

It’s 1970 and you’re 25 years old… For 45 years you invested money into… Bucket in your room $35,000 starting salary, 3% annual increase

It’s 1970 and you’re 25 years old… For 45 years you invested money into… Account Balance at age 70 in 2014 (you saved 10% of your income each year) Bucket in your room $325,000 $35,000 starting salary, 3% annual increase

It’s 1970 and you’re 25 years old… For 45 years you invested money into… Account Balance at age 70 in 2014 (you saved 10% of your income each year) Value after inflation… Bucket in your room $325,000 $213,000 $35,000 starting salary, 3% annual increase

It’s 1970 and you’re 25 years old… For 45 years you invested money into… Account Balance at age 70 in 2014 (you saved 10% of your income each year) Value after inflation… Bucket in your room $325,000 $213,000 Savings account (“Cash”) $759,000 $359,000 $35,000 starting salary, 3% annual increase

It’s 1970 and you’re 25 years old… For 45 years you invested money into… Account Balance at age 70 in 2014 (you saved 10% of your income each year) Value after inflation… Bucket in your room $325,000 $213,000 Savings account (“Cash”) $759,000 $359,000 Diversified Portfolio of Stock, Bonds, Cash, Real Estate, Commodities $3,460,000 $1,167,000 $35,000 starting salary, 3% annual increase

What is diversification?

Minimal Diversification The S&P 500 Index

Two-Asset Diversification 60% Stock/40% Bond Portfolio

Superior Diversification 12-Asset Portfolio

7Twelve®

Performance

15-Year Growth of $10,000 2000-2014

Growth of $10,000 US Large Cap Stock

By Design

Eight Equity and Diversifying Holdings 7Twelve® Eight Equity and Diversifying Holdings  8 “Growth Engines” US Stock Non-US Stock Real Estate Resources US Bonds Non-US Bonds Cash

Four Fixed Income Holdings 7Twelve® Four Fixed Income Holdings  4 “Safety Brakes” US Stock Non-US Stock Real Estate Resources US Bonds Non-US Bonds Cash

7Twelve® A Multi-Asset Balanced Strategy 8 “ENGINE” MUTUAL FUNDS  65% of Overall Portfolio Allocation 4 “BRAKE” MUTUAL FUNDS  35% of Overall Portfolio Allocation US Stock Non-US Stock Real Estate Resources US Bonds Non-US Bonds Cash www.7TwelvePortfolio.com

Brakes Have Outperformed 1/3 of the time Year 7Twelve Brakes (4 ETFs) 7Twelve Engines (8 ETFs) 2000 6.86 6.72 2001 3.93 -4.46 2002 12.36 -7.35 2003 7.67 36.80 2004 6.29 23.50 2005 -0.34 18.42 2006 4.01 20.72 2007 8.58 12.67 2008 3.73 -38.79 2009 4.65 35.03 2010 4.06 19.72 2011 6.30 -4.66 2012 4.05 14.25 2013 -3.53 16.08 2014 -0.65 2.40 3-Year Return -0.09 10.74 5-Year Return 1.98 9.16 10-Year Return 3.03 7.51 15-Year Return 4.46 8.27

Brakes Have Outperformed 1/3 of the time Engines Have Outperformed 2/3 of the time Year 7Twelve Brakes (4 ETFs) 7Twelve Engines (8 ETFs) 2000 6.86 6.72 2001 3.93 -4.46 2002 12.36 -7.35 2003 7.67 36.80 2004 6.29 23.50 2005 -0.34 18.42 2006 4.01 20.72 2007 8.58 12.67 2008 3.73 -38.79 2009 4.65 35.03 2010 4.06 19.72 2011 6.30 -4.66 2012 4.05 14.25 2013 -3.53 16.08 2014 -0.65 2.40 3-Year Return -0.09 10.74 5-Year Return 1.98 9.16 10-Year Return 3.03 7.51 15-Year Return 4.46 8.27

Brakes behaved very differently than Engines in 2008 Year 7Twelve Brakes (4 ETFs) 7Twelve Engines (8 ETFs) 2000 6.86 6.72 2001 3.93 -4.46 2002 12.36 -7.35 2003 7.67 36.80 2004 6.29 23.50 2005 -0.34 18.42 2006 4.01 20.72 2007 8.58 12.67 2008 3.73 -38.79 2009 4.65 35.03 2010 4.06 19.72 2011 6.30 -4.66 2012 4.05 14.25 2013 -3.53 16.08 2014 -0.65 2.40 3-Year Return -0.09 10.74 5-Year Return 1.98 9.16 10-Year Return 3.03 7.51 15-Year Return 4.46 8.27

Portfolios are like salsa

Salsa recipe

7Twelve® Equally-weighted exposure to 12 asset classes www.7TwelvePortfolio.com www.7TwelvePortfolio.com

How?

Where do we find the ingredients to build a diversified portfolio? Vanguard mutual funds T. Rowe Price mutual funds Fidelity mutual funds Schwab mutual funds Motif Investing (pre-built portfolios) Homestead Funds ($1 minimum to open their mutual funds if investing automatically) www.homesteadfunds.com

Questions? www.7TwelvePortfolio.com

This is a copyrighted document, copying for redistribution is This document is a research report presenting portfolio research and analysis. This document is neither investment advice nor an investment solicitation. Implementation of the 7Twelve® portfolio is no guarantee of performance. --------------------------------------------------------------------------------------------- This is a copyrighted document, copying for redistribution is prohibited unless written permission is obtained from Craig L. Israelsen 7Twelve® is a registered trademark belonging to Craig L. Israelsen   Copyright © 2008-2015 Craig L. Israelsen All rights reserved