1. I have little confidence even in the ability of analysts, let alone untrained investors, to select common stocks that will give better than average results. Consequently, I feel that the standard portfolio should duplicate, more or less, the DJIA. Benjamin Graham

2. Risk Long Term – lose everything Short Term – Investments are down and we need cash now, forced to take losses

3. Liquidity – Where? T-bills: minimum $1,000 face value maturities of 4 weeks, 3,6,12 months. Exempt from state and fed taxes www.treasurydirect.gov --- don’t buy in secondary marketwww.treasurydirect.gov Aggregate Bond funds: SCHZ, BND, LAG

4. www.treasurydirect.gov TIPs i-Bonds

5. Preferred Stock* ETF: iShares S & P U.S. Preferred Stock Index (PFF) 302 Preferred Stocks Preferred stock is like a bond that never matures. Well not quite, since many have call provisions. REITs* Vanguard VNQ (ETF) Schwab SCHH (ETF)

6. Bond Index Funds Aggregated Funds* Government* TIPs* – for tax advantaged accounts – inflation hedge, diversifies the portfolio with real return

7. Bonds – Indexes, sort of High-Yield (Junk) Foreign Emerging Market Real-Estate

8. Bonds? Vanguard offerings in your Text Fidelity on their website CEF Connect for others including PIMCO funds Schwab on Handout Munis – 2 weeks ago

9. Index Bond Funds? Index funds are purportedly available for all bond asset classes S&P 500 –400 to 480 companies rarely leave the index –Top 100 companies comprise 80% of the index

10. Index Bond Funds? 8,000 to 20,000 bonds in an asset class –Simulation and Manipulation Those in the Government bond arena which is somewhat uniform, traded actively, and lends themselves to modeling Bond Mutual Funds Only

11. Aggregate Bond Funds Underperform almost all managed bond funds U.S. Gov‘t bonds that they comprise 70% of the market cap of all bonds issues Low risk low return government bonds Very stable How much – what can you afford

12. Finding Bond Funds How to evaluate bond mutual funds: Look at some Examples Not a recommendation

13. Close Ended Bond Funds Trades like a stock on a market exchange Holdings are selected by the fund manager The price of a unit is determined by the market and is seldom = NAV May be leveraged CEF Connect

14. 6 Pages of information What use Morningstar? –Quintiles –Change with time –Good for firms, not funds, generally

15. Morningstar Fund Family Ratings Domestic Stock International Stock Municipal Bonds Taxable Bonds Vanguard4.03.04.03.5 Schwab3.92.83.02.7 Fidelity3.7 3.63.5 PIMCO4.43.22.13.7 Nuveen2.82.14.03.5 Blackrock (iShares) 3.12.84.13.8 State Street (SPDRs) 3.93.0

16. Morningstar Fund Family Ratings All Index Funds average between 3.0 and 4.0 in any asset class and do affect the ratings. http://quicktake.morningstar.com/fundfamil y/0C00001Z4B/all-fund-family.aspxhttp://quicktake.morningstar.com/fundfamil y/0C00001Z4B/all-fund-family.aspx

17. Two Portfolios? 1.Tax deferred (IRA) investments 2.Taxable investments Weighted toward Munis and Equities Cap Gains and Dividends

18. 4 Abilities Needed By Successful Investors 1.An interest in the process 2.More math ability than manipulating a spreadsheet. 3.A firm grip on financial history 4.Emotional discipline to execute their planned strategy faithfully

19. Hire an Advisor They charge me 1% or my assets I expect income of 6% return on my portfolio, I am paying them: 1/6 of my income or 16% of my expected income, realized or not.

20. Hire an Advisor Put you into a conservative, balanced, or aggressive portfolio Along with any other clients with the same profile

21. Robo-Advisors The cost is less than for a personal advisor The portfolio may have more personalization Work done by computers Vanguard and Schwab Not Fidelity (August 2015)

22. Robo-Advisors Vanguard –$50,000 minimum –0.4% of your assets as an annual fee Schwab –$5,000 minimum with no annual fee

23. Schwab Intelligent Portfolios 1.Go to https://www.schwab.com/public/schwab/c lient_home https://www.schwab.com/public/schwab/c lient_home 2. Select Schwab Intelligent Portfolios 3. Answer 12 multiple choice or simple information questions to get suggested asset allocation portfolio. 4. Examine results.

24. Schwab Intelligent Portfolios No obligation to sign up or open an account. Uses ETFs, primarily index funds Rebalance the account when needed You do all the entry of the information to determine your asset allocation You transfer in or out cash.

25. Schwab Intelligent Portfolios No advisory fees, commissions, or account service fees. So how does Schwab make any money? –Operating expenses on the index funds –Use of cash in the account that is placed in their bank

26. If you can keep your head when all about you are losing theirs… Yours is the Earth and everything that’s in it… --Rudyard Kipling, If