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Cash Equivalent Philosophy

Maintaining adequate liquidity is an important consideration in determining a portfolio's allocation. An income portfolio should sustain enough liquidity to safely meet income needs over a reasonable amount of time. We employ cash equivalent securities for our clients with liquidity needs. We use a number of different types of cash instruments, primarily money market funds, ultra-short bond funds, and fixed income securities maturing in less than one year.

Index Fund Philosophy

Unlike managed mutual funds, index funds strive to replicate large, well-known stock indices such as the S&P 500, Russell 2000, Wilshire 5000, etc. Index funds offer several advantages:

• Low Expenses - Because an index fund is designed to replicate a group of securities, there is no need to employ the management staff found with an actively managed fund.


• Tax Efficiency - Index funds typically buy and hold securities for long periods of time, thus the capital gains distributions to shareholders are kept to a minimum.


• Consistent Investment Approach - Each index fund is simply a replication of a particular list of securities; therefore shareholders never have to worry about the suitability of securities as they would with an actively managed fund.


• Superior Performance vs. Managed Mutual Funds - Index fund investors are assured that their investment's performance will be based on the broad market in general and not be subject to the successes or failures of a particular manager in any given year.

Fixed Income Philosophy

We employ a conservative fixed income philosophy that is rooted in capital preservation, income generation, and diversification. The primary intention of a fixed income portfolio is to maintain wealth rather than create it. The fixed income portfolio should provide for steady cash flow and lower volatility returns. We have arrived at our conclusions through years of experience in organizing fixed income strategies, and every strategy we utilize is geared toward generating higher after-tax income consistent with ones' risk profile. Whether you are an individual, trust, or institution, the fixed income portion of your allocation can be managed using very similar techniques.

ETF Philosophy

Similar to index funds, exchange-traded funds (ETFs) are unmanaged pools of securities grouped together by predetermined criteria. Each ETF is further concentrated based on industry, market capitalization, or stock valuation. And because the number of shares outstanding is constant, an individual's performance is not affected by the actions of other investors as is the case with traditional mutual funds. ETFs provide greater trading flexibility because they are exchange-traded, and unlike mutual funds, they may be bought and sold during market hours.

These securities allow us to gain exposure to specific segments of the market in cases where, for various reasons, company-specific risk would be inappropriate. For example, the size of the portfolio does not allow for adequate diversification with individual stocks, or a particular investor's risk tolerance is not conducive to the volatility associated with owning non-diversified equities. ETFs are the perfect securities for these cases.

Managed Equity Philosophy

Managed Equity, which includes stocks, options, and commodities, is an important component for anyone with wealth creation goals. The use of these securities allows us to more closely tailor a portfolio to an investor's specific needs. Examples of these needs are the use of dividend income or options premiums as an effective inflation hedge and the tax-efficient growth associated with appreciating assets. In addition, managed equity gives us the ability to accommodate the particular preferences of any client. These preferences can range from broad ownership of a specific industry group due to considerable knowledge that the client has of that industry, or the desire to only own companies with which the client is very familiar.

Our Philosophy

Our investment philosophy is centered on the disciplined allocation of assets into three major categories: equity, fixed income, and cash. To determine a proper allocation strategy, we thoroughly evaluate each client's financial profile to create an Investment Policy Statement that provides invaluable information in assisting us with devising an ideal allocation for your current situation and future goals. Our proprietary computer modeling, which takes into account all relevant facts, will provide us with a strategic mix of asset categories that best fits your individual profile. Armed with this strategic asset allocation, we design an individual portfolio by choosing specific investments with the characteristics we feel are best suited to obtain your goals. For example, if income generation is your primary goal, this situation would dictate a greater use of income producing securities such as bonds and dividend paying stocks with a smaller use of growth oriented securities. Others may need a more aggressive portfolio with a high focus on managed equity and a small number of fixed income securities. Each client is a unique situation, and we are fully prepared to accommodate your individual investing needs.

"Through both peaceful and turbulent times, the Alder Financial Group can help guide you to the fulfillment of your investing goals."