Asset Allocation Models for Pros and Investors.

This is a Do-It-Yourself Money Management System for Individual Investors and the Only Complete Turnkey Investment Portfolio Building System for Advisors

First, What investing models Are

Model allocations are a very old investment strategy. You may know it as: Managing Managers, Composites, Composite Portfolios, Asset Allocation Funds, or Fund of Funds (FoF). Other variations are in the text below. They're all the same thing, regardless of how the words are mixed up.

Model is the name given to something that represents a facsimile of the real thing. For example, a model airplane is designed to look like the real aircraft. In this case, investment portfolios that actual people own in the Real World look and act like the master investment portfolio models. So if there's $1B of assets in a master model, and you own $25,000 of it, then you'd have something tiny that looked, and acted, just the real thing. This way you're able to get similar results of the whole pie, just by owning a tiny slice of it.

The results will never be the same, just similar. The only way someone would own an exact investing model is if they initially bought all of the investment vehicles in the exact amounts, on the first trading day of the year, the trades all magically settled the same day, all distributions were reinvested, they never made another trade other than the quarterly rebalancing and investment switches that occurred in the master model (and all of these trades settled on the same day), never put new money in, never paid taxes on it, and never redeemed shares. That never happens, so model investment portfolios are never the real thing. The actual results will be close, and sometimes even better, but never exactly the same as the master model portfolios.

Even though they are not real, model investment portfolios are very popular and helpful to get the point across. It's the standardized method of showing what actual investment portfolios would look like in terms of risk, asset class mix, income distribution, and what historical performance has been.

If a pre-existing investment portfolio (a set mix of asset classes funded with specific investment vehicles) exists before one invests in it, then it's a model portfolio. If a unique investment portfolio is created, and did not exist beforehand, then it's not a model portfolio.

There are 13 Versions of the Regular Portfolio Models
- plus -
Dynamic Target Date Models
- and -
A Market Timing Calculator

There are a total of 56 mutual fund model allocations; because most have five risk tolerance categories. They all use open-ended mutual funds. Then you get 11 variable annuity models with five allocations each (55 models). This makes a total of 111 model allocations to help manage most every way of investing.

In addition to all of this, you'll also get the Dynamic Target Date Models. Because these investing models are different, confusing, and this page is too long already, all of the information is here. Plus, you'll get the calculator for modeling market timing strategies, all of the information for that is here.

º Five Fee-based Models for advisors working on an investment management fee basis. Here mutual funds with front-end loads are bought at NAV (Net Asset Value, or in English the initial sales charges are waived so the investor doesn't pay them).

º Five all No-load Models for investors managing their own money, or investment advisors working on a fee-only basis.

º Five all Front-end Loaded Models for investment advisers working on a commission basis.

º One Conservative High-income Model for investors wanting to squeeze as much yield as possible out of a conservative mutual fund asset allocation model. It is more conservative than our conservative models. The last 12-month's income yield was 9.1% and the total return was 23.0%. In English, this is how the numbers work out over the last year: Yield is the combined distributions of something. For a mutual fund, it's the combined dividends and realized capital gains (profits the fund takes). It's part of total return. For example, if you invested $100 at the beginning of the year, and the total return was 27.1% and the yield was 7.0%, then at the end of the year you'd have around $7.00 in cash to spend (the purpose of this is to get retirement money to spend without having to sell/redeem shares) and your account would be worth around $120.10.This may not look like much, but on average it's twice the yield on all of our other investing models (and even more compared to what most everyone else is getting). One also must factor in risk and total return when considering how high or low yield is. This model's income is extremely high considering the low risk and high total return. Taking that into account, this compromise between high yield, low-risk, and high total return is better than anything else we've ever seen (if someone has a better strategy to get higher yield with less risk, then we'd be doing that too).

If you're retired and need the money from an investment portfolio to live off of, then this may help make the portfolio last a lot longer (because the more income distributions a portfolio gives off without selling shares, the fewer shares you need to sell to get money, and the fewer shares you sell, the more money you're going to have later. Also the more conservative a portfolio is constructed, the longer it will last too. Once you sell shares, they do not automatically grow back, so two if the main tricks to not run out of money is to not sell shares, and of course, not to invest in "Crap Bonds" as explained in the Money eBook).

There is only one asset allocation here, whereas there are five each on all of the others. If you can get by with this kind of a dividend yield annually, then this is ideal for investors that do not want to sell shares to raise money to spend on living expenses. If you do your research, you'll see that it's extremely difficult to get this kind of a yield without selling anything, while getting the low-risk, great returns, and other advantages of using only open-ended mutual funds.

º Five Benchmark Index Models. This is used for properly comparing passive investment management with active investment management (because they also serve as benchmark portfolios).

The same asset classes and allocation weights as the other normal portfolio models with 16 asset classes are used, but they are funded with benchmark indices. These investment vehicles cannot be invested in like all of the other model portfolios, and so they just serve as a proper point of reference for comparison purposes.

º Five Index Fund Models for both investors managing their own money and fee-only professionals that like to use index funds. These have two less asset classes than the regular models because there are no index funds for them yet (14 total). All of the picks are no-load, under $5,000 minimum initial investment, and there are no LW (Load Waived) funds, so any individual investor can buy them. The Index Fund Models were overhauled in June '10 as Morningstar told us how to do a work-around in their screener that doesn't work right, so they have two more asset classes, and are much better now.

º Five ETF (Exchange Traded Funds) Models for both investors managing their own money, and fee-based professionals that like to use ETFs. We were not doing much in the way of screening them in the past, due to Morningstar problems, but they fixed their thing in June '10, so now we can screen them. Now the ETF Models are much better, and contain all 16 asset classes.

º Two sets of investing models for $60,000 minimum accounts (ten models total). The same five-investment risk tolerance categories use 13 asset classes. This allows you to get the great benefits of this investment management strategy, with only $60,000 worth of either no-load or front-end load mutual funds.

º Two sets of investor models for $20,000 minimum accounts (ten models total). The same five-investment risk tolerance categories use eight asset classes. This allows you to get the great benefits of this investment management strategy with only $20,000 worth of either no-load or front-end load mutual funds.

º Five allocation models made from only American Funds. We optimized their 22 funds, and use it to compare against our Fee-Based Moderate Model, as you can see on the table of returns on the main asset allocation page.

º Variable Annuity Models. Models are constructed from 11 VA policies, each with the same five risk categories, for a total of 55 models. All of the VA model information is here. Please note that the VA Models are no longer updated because of lack of interest (the last update was Jan '09).

The Asset Allocation Models Include:

º The Dynamic Target Date Models.

º The Market Timing Calculator.

º The 13 mutual fund asset allocation portfolios described above, and 11 VA models, for a total of 111 asset allocations.

º The mutual fund picks spreadsheet for all 21 asset classes. There's 21 mutual fund recommendations, times five ways of managing money, for a total of 96 investment recommendations. These portfolio models only use 16 asset classes (the other five are for use with the comprehensive asset allocator).

To keep it updated and balanced, you can also subscribe to keep the mutual fund recommendations fresh on a monthly basis. You'll receive the reasons for all switches to decide whether or not to sell the old mutual fund and buy the new one.

º A monthly 'newsletter" explaining what happened over the last month (with a futile market timing forecast).

º A sheet for inputting a comparison portfolio. This has two purposes. First, it allows for quick and easy rebalancing of actual portfolios. Next, it displays both past portfolio returns, and the asset allocation mix of the comparison/actual portfolio. Which then shows how much the actual allocation mix is off by, both in percentage and dollar amounts. This tells you exactly how much to buy or sell in each asset class to bring the portfolio back into balance when compared to one of the 20 model investment portfolios. Then you can compare the asset allocations, the returns, and the difference in returns, between any of the 20 model portfolios and the actual portfolio. There is also a matrix of these returns, and the differences between the actual investment portfolio. This is not shown in the demo to protect content.

º Over 50 charts graphically show all of the asset allocations, and the actual/comparison model portfolio. The five showing the allocation weights are not shown in the demo to preserve valuable content.

º Five html files that instruct one on how to use model asset allocator with 401(k) plans.

º The 11 variable annuity models described on the VA page.

º Three spreadsheets showing the linked returns and fund switches since inceptions: Fee-Based, No-Load, and Load Models.

The Fee-Based Investing Model has linked returns since 1/99 and the No-Load and Load Models have linked returns since 1/03.

Linking returns uses the "Time Weighted" methodology, and is the standard used in accounting for past trades in computing historical investment performance.

You can use all three of these spreadsheets to audit the returns yourself. If you maintain your own model allocations, you can also hire us to calculate your true historical returns by linking all of the past trades in the same way.

The vast majority of investment managers' models do not account for past trades, so the actual returns investors realize are sometimes not even in the ballpark of what's advertised. When this happens, their actual returns are usually somewhere between 10% and 30% less than what's shown on their hypothetical models. You can see the difference between our hypothetical and actual returns on the table of the asset allocation page. This is all explained in the directions.

Other Information

Most of the 13 portfolio models have five asset allocations that correspond to the most commonly used investment risk tolerance categories: Conservative, Moderately Conservative, Moderate, Moderately Aggressive, and Aggressive.

All mutual fund asset allocations display the last 12-months income yield, except the benchmark index allocation models.

The portfolio models, mutual fund selections, and all of the portfolio returns are updated (and sent out to customers) around the 20th of each month.

The same asset allocation model concepts can also be used with variable annuities, variable life insurance, and 401(k)/457/403(b)s using only the funding options you're limited to. This is the only way to squeeze out risk, get good returns, and safely maximize retirement income without having to transfer accounts to new custodians.'

You can input your own fees and trading cost numbers into the Fee-Based Model's Linked Returns spreadsheet to see how the returns change.

Using the Table of Historical Investment Model Returns Below

The table below shows the actual returns for the Fee-Based Model Portfolios. They are not "hypothetical" as shown in the "demo." There are no historical returns for the target date models.

These are the actual returns from inception (1 January 1999) showing the returns as if you invested on the first trading day of 1999, then made no more deposits or withdrawals, paid no taxes, reinvested all capital gains and dividends, rebalanced on the first trading day of every new quarter and when allocation weights changed, and switched all of the funds on the first trading day of the month after the switch was announced.

Compare these results to what you, or your advisors, have been getting. They are probably much better. Why? Because buy-and-hold asset allocation strategies works better than stock picking or market timing. It's just that simple. Read a summary, or go here or here or here for more details.

The great debate that's been going on since the beginning of time is finally over: Can active investment management ever consistently profit more than passive management, after expenses?

These investing models are proof that active management works! And the cost is so low that it's almost insignificant. As long as you don't try to pick stocks and/or time the markets with the investing models, and use mutual funds that even slightly outperform their asset classes, you'll almost always beat the markets. The returns shown below are also NOT due to luck. They are very consistent over the time we've been tracking them (1996, but the history of trades were not recorded until '98).

Since 12/31/98, the Moderate Fee-Based Model has beaten the exact same investment model with the asset classes funded with indices/index funds about 98% of the time. You can see the current numbers compared to the Index Model by looking at the demo's charts. Here you can also see graphs comparing the returns, and see current portfolio statistics, like alpha.

There have been only a few months when the Moderate Index Model beat the Fee-Based Moderate Model. If these returns were due to luck, then it would have been less than half of the time. Also, there have only been around a dozen individual months when the Conservative Fee-Based Model has lost ANY money at all (this was 2002 when the S&P500 was down over 23% and the Conservative Model only lost 3%, and then a few months in '08 and '09).

When the markets are down, the Conservative-to-Moderate Models are usually down about 25% less than the S&P500. When the markets are up, the Moderately Aggressive and Aggressive Models are usually up about 25% more than the S&P500.

See a table of asset class returns on the mutual fund picks page that show how and why the negative correlation coefficients of asset allocation work so well (AKA Modern Portfolio Theory).

These tables are worth a million words when it comes to understanding asset allocation, and how it's used to get outstanding long-term investment portfolio returns. It also reveals the details of how and why this active investment management strategy consistently beats a passive investment strategy. It does this by showing the historical performance of all of the actual mutual fund selections under that asset classes' benchmark index.

The most Real World thing to do when looking at the table below, is to compare the Moderate Model with the S&P500 over the various time frames. The longer the time frame, the more meaningful the comparisons are.

The returns are after all mutual fund fees and expenses (e.g., 12b-1s) are taken into account. There are no mutual funds with redemption fees (B shares) used in any of the model allocations.

These returns use no annual management fees (that a professional investment advisor would charge a client), or trading costs. This is because individual investors wouldn't be charged any of these kinds of fees. Also trading costs would be insignificant. For example, if a $10,000 trade was made, with a ticket charge of $20, then this is only a 0.2% trading fee. Since this is a low-turnover buy-and-hold strategy, trading costs are insignificant.

The returns on the main asset allocation page show both the hypothetical and actual model investment portfolios with an assumed 1.1% fee deducted from them (1% investment management fee and 0.1% average trading costs).

Table of returns assuming you charge your clients 0.5% annual management fees (low)

Table of returns assuming you charge your clients 1.0% annual management fees (average)

Table of returns assuming you charge your clients 1.5% annual management fees (high)

Table of returns for the No-Load Mutual Fund Models

Table of returns for the All-Loaded Mutual Fund Models

To download the demo, right click on the link below, and then choose "Save (Target) As..." to save to your hard drive. Then find it and open with Word. Answers to frequently asked demo questions and how to use demos

Download the Model Portfolio "demo" 4.5Mb Word doc, which has charts showing historical returns for all 56 investing models. So this is the best place to view the differences in returns between the No-Load and Fee-Based Models

Download text that explains the model investment portfolios (to investment management clients)

To preserve content, the demo only shows a screen print of the Fee-Based Conservative Model and the Benchmark Conservative Index Model. This shows how well it's doing compared to the same weighted mix of benchmark indices. There are also several graphs to help show the superior returns compared to the markets.

The old hypo historical returns for the variable annuity models are on the variable annuity page.

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Asset Allocation for 401(k) / 403(b) and Similar Retirement Plans

The Models and Comprehensive Asset Allocation Software are two different programs. The most asked question is,

"What's the difference between our asset allocation software and asset allocation models?"

With the asset allocation software, unlike allocation models which exist before someone is around to invest in them, the investor submits various life factors needed to calculate a custom allocation mix that reflects their life situation. So it's not just using one of a few generic pre-existing model allocations.

Model portfolios only take one life factor into account - investment risk tolerance category. This is determined by filling out and scoring an investment fact finder. There's little to no "work" involved. You just determine investor risk tolerance, allocate money according to the appropriate allocation model, and then make the trades. So from an investment manager's point of view, model portfolios are best suited for smaller clients (e.g., under $250,000).

The comprehensive allocation calculator also takes investing risk tolerance into account as the most important factor in determining the mix. But it also uses several more life factors. The investor's portfolio is then analyzed after inputting current holdings. This is then compared to the recommended mix of asset classes. Then investments are shuffled around to create the proposed mix of asset classes. These are the investment recommendations (proposed snapshot). It then displays current and proposed snapshots, and future projections of both current and proposed portfolios. This allows complete control over every aspect of the asset allocation process. Model portfolios only show investment recommendations (proposed snapshot).

So with the comprehensive asset allocation software, there's work involved in creating an investment portfolio that's custom tailored to fit the investor's life. This makes comprehensive asset allocation calculator best suited for larger clients that are paying enough to make it worth doing the extra work (or investors managing their own money).

Our portfolio models only use 16 asset classes, and the comprehensive asset allocation calculator accommodates an unlimited amount of asset classes (but we screen mutual funds for 21). The models have less asset classes to minimize the amount of money needed to buy everything. Right now, it's about $90k to buy the Moderate Model. For every new asset class, that would go up by about $10k. Models are meant to be a turnkey system for "smaller accounts" that get returns similar to portfolios with more asset classes.

The asset allocation software costs more than models because it provides more value. You don't subscribe to the asset allocation software, because it doesn't change monthly. You'd only subscribe to the mutual fund picks to keep portfolios current. It's best to subscribe to the model portfolios to help keep investment portfolios updated.

About Investing Models for Individual Investors

This is the same type of service that TD Ameritrade is now spending millions advertising on TV. They basically finally got around to copying our service that's been around for over ten years, and made a way for the masses to get a generic version of what we're doing. The difference is that here you're getting an actual seasoned veteran doing the work, instead of a who knows who with no track record (and who knows what third-world country). Then they can only steer you into buying the same old lame bloated mutual funds that Morningstar recommends. This is just a recipe for the same mediocre high-risk low-return results everyone's been getting for decades. This here is the real original deal.

Non-professional investors can ignore the Fee-based and All Load Models, because they would have to pay the front-end commission/loads themselves, which is not what anybody wants to do.

These model investment portfolios are a superb turnkey system for the individual investor. It's the best way to quickly build a long-term, inexpensive, low-transaction, simple, easy-to-manage, and well-diversified investment portfolio. This is the best alternative if you, or your advisor keeps losing money, charges too much, or continually lag behind the markets.

You should also get the investment fact finder to help calculate your investment risk tolerance, because a wrong guess will result in sub-par results. This is the best gauge available, because we've evaluated everything else since 1988. You self-score it, and it selects one of the five portfolio allocations to invest in.

If you want to easily keep your investment portfolio updated and rebalanced with no-load funds, ETFs, or index funds, just subscribe to the monthly mutual fund recommendations too.

Get an investment portfolio more suitable to your life than investment managers would recommend; with less risk, better returns, and save tons of money compared to what they charge.

Look at the historical returns on the table above, the graphs on the demo, and the main asset allocation page and compare. The returns are most likely much better than what you, or your advisor, have been getting. All it takes to double your retirement income is getting just 2% to 3% more in return over a 20-year period (the math proof is in the money eBook). Once you compare, you'll see that these model allocations have probably done better than just 3% over a time frame longer than five years.

Fire your money-losing investment advisor that brainwashed you into thinking they could pick stocks and/or time the markets. Then move your account to a custodian like Ameritrade or Charles Schwab, and save all of their commissions and fees - forever! You've probably had consolidating your old 401(k)s and IRAs into one rollover IRA on your to do list for years, so why not do it all now?

About opening a discount brokerage account so you can manage your own money

After setting up an account with a new custodian, it's just a few minutes work to use the investment fact finder to select a portfolio model. Then less than half an hour making the trades, and you're done.

No more hype, worries, lies, self-enrichment schemes, phone tag, conflicts of interest, confusing/bad advice, trust issues, commissions, or investment management fees to pay - ever! You'll also be able to look at your account anytime online, make trades, and do a better job by managing your own investments.

If you buy support, then you can get help with this, and get custom mutual fund replacements for those you can't buy from your custodian (and advice on how to buy these investing models if you have less than the minimums).

The choice of using the investing models or the asset allocation software is not governed by how much money you have. It depends on how much time and work you're willing to put into matching the portfolio to your life. Using the portfolio models is fast, easy, and simple. Once you know your risk tolerance category, everything is done except making the trades. The asset allocation calculator is complex and will take an extra hour to create your investment portfolio, but it will match your life better.

Must-read page for investors holding American Funds

About Investing Models for Professional Money Managers and Financial Planners

Asset allocator models are the quickest, most inexpensive, and easiest way to do a great job of managing money for smaller clients (under $250,000 for example).

Asset allocation software for larger clients is here

All you need to do is use the investment fact finder to determine their investment risk tolerance, and then allocate investment vehicles by asset class using the appropriate investment model. In other words, you make buy trades with either existing cash, or money freed up by selling old investments. It comes with exact recommendations of what to buy and how much.

You don't have to sell everything or anything in their current investment portfolio to obtain the correct mix. For example, if they already own 20% of a Large-cap Growth fund that's fine (we can tell you if it's good or not for $9), and they scored Moderate risk tolerance, then you'd only need to sell 5% of it, because the recommendation is 15%. Actually, you could leave it the way it is, because you can do anything you want. You could just let them be overweighted, change the model's allocation weights, or let 5% spill into the Mid-cap asset class by saying the fund holds some Mid-cap Growth stocks.

This is a turnkey investment management system with excellent marketing and backup pieces for professionals practicing asset allocation. When presenting it correctly, it has a very high closing ratio (over 80%), because it's easy to show new prospects what you would do with their money going forward. Most of the time, they say to make it so as soon as they see you have a system using more than a few asset classes, the returns compared to the markets, there's a healthy amount of bonds, you're only recommending small amounts of risky asset classes, and you're using mutual funds.

Why Most Professional Money Managers and Financial Planners Use Portfolio Models

· They can usually do it themselves for free. The very most ours is going to cost is $269 annually

· Although there is a lot of work involved in setting them up (which we have already done), there is very little work when it comes to implementing them for people in the Real World (presenting/selling them, tracking, compliance paperwork, analysis/computer work, making trades, rebalancing, and keeping them updated).

You just buy investments in the proportions given in the model allocation. For example, if a client gave you $100,000 of new money, and scored Moderate risk tolerance, then you'd just buy $15,000 of the Large-cap Growth mutual fund pick (because the allocation is 15%). The combination of being easy to sell, simplicity, low risk / turnover / trading / maintenance, easy to keep in compliance, and great returns are very attractive. This is especially so for younger financial planners without the big education in investment management, or the decades of experience in developing their own investment management strategies. All of this time saved on not having to develop a money management system can be put to better use building infrastructure, drumming up new business, and maintaining client relationships.

· These model allocations work for all methods of doing business: Fee-based (where mutual fund front-end loads are waived), no-load mutual funds/Index funds/ETFs, and all front-end loaded mutual funds. Unlike all other allocation calculators, they work great using all investments you like using: Closed-end mutual funds, bank investments, real estate, stocks, bonds, VA or life insurance subaccounts, 401(k) investment options, stock options, fixed annuities, GICs, non-publicly traded securities, etc. Stockbrokers and life agents can use whatever they want to sell in these investing models with just a few minutes of work.

You can also use only your favorite mutual fund families. For example, American Funds has eight of the sixteen asset classes (so our AF Model uses all eight). Oppenhiemer has 13. You can modify these model investment portfolios to accommodate anything you want to do like this. You're going to get the best returns, with the least amount of risk, by using our mutual fund recommendations, but you can fund the asset classes with anything you want to.

· Compared to other investing strategies, they're very easy for you and your clients to understand. It works well if you like the KISS philosophy (Keep It Simple Stupid!).

· They're easy to get Broker Dealer compliance/FINRA/SEC approval, compared to other investment strategies. This is because they're used to seeing them because everyone else is doing something similar. You'll need to show people both the investing models along with this Word document that explains the investing models to clients, and everyone will be happy, including your compliance department.

If you're interested in using these model allocations, but your Broker Dealer didn't approve them after submitting them (or told you you'd have to spend too much money on getting FINRA's opinion), then here's what to do:

Gather the data needed for input into the investment software using any investment fact finder that's approved. Print it and keep it on file. Then use the investment software at home and write the bottom line trades down. When you get back to the office, make the trades and manage the portfolio as usual. Just don't show, print, or give any of the reports to anyone. Don't tell anybody, don't put anything in their file (at home or at work), and nobody will ever know. You'll get the same great results as if everyone had hard copies.

Then just make the trades and manage the portfolio as it recommends. All you need to do is not show or give any of the reports to clients, don't put anything in their files, don't store the spreadsheets on a computer that anyone can poke around in, and nobody will ever know that you're using an "unapproved system" to manage money.

You'll get the same great results and people will think you're a genius and wonder how you're doing it. Just tell them you use a little of this and a little of that and you're a good mutual fund picker. The only difference is that clients won't have printed reports. If what you're limited to using doesn't have any printed reports of value anyway, then they won't be missing anything. This way you can get the low-risk and great returns of using mutual funds with asset allocation, you'll save tons of time, money, and work, and there's no way to get into trouble.

· They are something investors want and need, so it's easy to get prospects to say yes and become clients. After determining someone's risk tolerance category, you just print one of the model pages and present just that one page. This way, they never see the other investor models. This minimizes having to spend time on questions like, "Why do you want to put me in a loaded moderately conservative model and not the no-load conservative model?" If they do ask to see the others, and/or the Index Model to compare returns, then you can just pull out what they asked for.

· You can track investment returns that match what actual investors hold to a reasonable degree (as well as possible unless you want to spend ~$10,000 annually on portfolio management software or you want to pay up for a service that does this for you).

For example, if a client calls and wants to know ballpark how the portfolio is doing, you can just pull out the model allocation you put them into and give them the answer in seconds. It won't be exact, but it will be in the ballpark. Any other way, like calling the BD, custodian or looking it up online, would take at least ten minutes to get a more accurate number.

· It only takes a few minutes per day to update investing models with fresh year-to-date mutual fund returns from a newspaper or online source, so it's practical to do it daily. Having a fresh allocation model on salespeople's desks when they come in to work is a great motivational tool to get on the phone and use it to drum up new business. Hounding the same elusive prospect is much easier when you can tell them you beat the markets, and the prospect's current investment manager, month after month after month. Just get on the phone and say, "So what's your performance been? Oh, the S&P500 did better than that. The Moderate Model I've been wanting to put you in is up x%, so that's x% better!" We've seen over $100 million moved by using this simple technique alone.

· When salespeople present them, it's far easier to remember the details on only five investment portfolios. The best salespeople we've seen are old, fluffy, computer illiterate, seasoned "people people" that can barely remember their employees' names. But when they get their sales scripts down when it comes to presenting the model investment portfolios, they can open up ten times more new accounts than anyone else. These folks just want something simple that works, and that they can KISS (Keep It Simple Stupid!).

· Investor models are a lot less work when you manage money for hundreds of clients (especially from a compliance point of view). When it comes time to switch a mutual fund, or rebalance, some trading software can accommodate large numbers of essentially the same trade. When you have hundreds of clients, you can get rid of all of the same investment (e.g., a mutual fund), and then turn around and use all of the sale proceeds to buy all of the same new investment, all with relatively few mouse clicks, and only in a few minutes.

This is also very helpful for people that have compliance people watching their every move, because when they see hundreds of trades in one day, it only takes one phone call to figure out what you're doing. After seeing the same thing a few times, they'll eventually stop bothering you. When they want to know why you're switching mutual funds, just say you're using our service. When they read about it, they'll leave you alone (assuming you got it approved).

· It's quick and easy to rebalance. Just input the actual current holdings into the Comparison Models sheet (not shown in the demo) and it automatically compares it with all of the model portfolios. Then it tells you how much it's off by, so you can make trades to bring it back into balance.

· Pros can input annual investment management fees charged to clients into the Fee-Based Model Linked Returns spreadsheet, and it recomputes the actual historical performance (accounting for past trades). You can also input your fees into the model portfolios.

· You don't need a FINRA Series 7 securities license to manage money using these asset allocation models on a commission basis. A Series 6 is all that's required because it just uses mutual funds.

· Even though using these allocation calculators eliminates the need for you to waste time and money on stock picking (security selection) and market timing, it still has to be done by someone. That's the mutual fund manager's job. They have the armies of analysts and millions invested in computer hardware and software needed to perform these mostly futile tasks. You don't, and that's the point!

If you want to compete with them, you're just going to lose. Even if you do occasionally get lucky and get superior returns, you lost tons of money because the time it took could have been spent drumming up new business. Using asset allocation with mutual funds is just about the only way to win these days. Winning means keeping your clients happy by getting low risk and great returns, while at the same time, not wasting/losing time and money trying to manage money.

Why Our Asset Allocation Software is Superior Compared to the Competition

NaviPlan, Ibbotson, MS Money, Morningstar, MoneyTree, Money Guide, Frontier Analytics, AdvisoryWorld, and Financial Profiles Users:

Financial Profiles was doing so well that NaviPlan had to buy them in Sept '06. Ibbotson was bought by Morningstar around the same time. MS Money went under in 2008.

This is partially because they don't have a turnkey money management system. In August '08, Profiles made their users upgrade to their new version, which costs around $1,200 annually. People that didn't want to upgrade were deliberately abandoned because the old version stopped working, rendering all of the past work of inputting client data useless (so they lost everything with no hope of recovering any data). This could never happen with our system

Unlike most all other investment software, this is a turnkey system, which allows you to actually manage money for clients without having to use or buy any other software/database/system/or service.

Most all Broker Dealers and other investment software vendors have tools to allow one to manage money, but only after the user already has a methodology to do so. The investment manager still needs to develop an actual system to do the work of portfolio management before they can use their investing software to put it into practice. They offer little-to-no system to actually do anything useful, because:

º It's too hard to program and maintain.

º They're too cheap to employ real money managers to help them come up with a feasible system, so they don't know how.

º They're afraid of compliance problems and don't want to be on the hook as being labeled a fiduciary (because they know their buggy software, conflicts of interest, and biased investment recommendations will just get them into trouble).

º And last but not least, most investment managers eventually come up with their own way of managing money anyway and don't want to use whatever concept investment software vendors come up with. So even if they did spend the resources to develop a working system, very few of their customers would actually buy and use it. With all of our investment software, you can tweak it to fit any money management strategy.

In other words, all of the usual investment software vendors have tons of tools and data that are great to combine investments into portfolios, backtest to compare past results, display portfolio statistics, make nice presentation reports, and support peoples' money management methodologies.

But they offer no way of actually coming up with a system of doing anything useful in the first place. There is no step-by-step process one can follow to do anything that will get decent investing results over time. If one already has a money management strategy or methodology, then there are step-by-step instructions on how to implement that program into their software to get meaningful reports with current and historical data. But one has to develop their own way of managing money in the first place to use it.

For example, take Morningstar (Principia). They are the best at maintaining investment data, and we buy their software for the historical return data and to screen the mutual funds. One can input all of a client's current holdings and come up with slick pie charts and statistics on the asset allocation mix that prints out nice and easy. Then one can use various tools to generate its historical performance and portfolio statistics. But - only assuming everything was bought and held since inception. This doesn't account for any past trades, distributions, or rebalancings which results in a gross misrepresentation of performance.

Then one can input what investments they think clients' should have for a proposed/recommended portfolio. Then these two portfolios are compared. These reports have all of the popular Sharpe ratios and dozens of other cool statistics, which have no predictive ability and thus are useless when it comes to getting decent investment performance in the future. The proposed portfolio usually has better returns when using this kind of sales method, so clients usually say yes and buys.

This is how the vast majority of investments have been sold in the past. Because it works and is easy, there appears to be no change in sight.

But it doesn't give you a methodology to select appropriate asset classes, what to fund them with, or determine how much of each people should own considering their life situation. This is the most important factor that goes into matching portfolios to people lives, so they can get the performance they need and expect. If there is, then you're limited to a too small number of major asset classes the vendor hard-coded into the program (and can't be changed).

Because of the state of the investment and financial planning industries, financial planners usually just input proposed mutual funds from whatever mutual fund families either they, or their Broker Dealer likes or makes the most money from. This usually results in an "all American Funds" portfolio.

Read about the mutual fund recommendation, screening, and analysis service where you can get professional, unbiased, opinions on just about any open-end mutual fund, with no conflicts of interest.

Why aren't you taking advantage of this? Send e-mail and if you have an interesting reason, then you may get a freebie.

This is the best place to post that we're currently seeking RIA professionals that want to set up and manage five mutual funds made from these model portfolios. An RIA firm needs to be the named advisor for the fund(s). You be then be the named advisor, and would hold the fund advisory contract and would be responsible for fund creation costs (approximately $35k), distribution of the funds, and ongoing operation costs of the funds. All Mike wants is 0.25% management fee (25bp), and you can keep the rest of the money. Mike would be the one and only fund advisor and would make all of the trades. The goal is to turn the five Fee-Based Models into actual open-ended mutual funds with normal tickers, so anyone can buy them. For example, if you read this page and wanted to invest in the Fee-Based Moderate Model without having to make your own trades (and do your own fund switches and rebalalncings), all you'd have to do is place a buy order for T4$MX with your discount broker just like any other mutual fund, and you'd essentially have the same deal as if you bought the whole model program and did all of the work yourself. Setting this all up is not a lot of money, nor a lot of time or work, but it is a moderate amount of work doing the daily drudgery of keeping everything going, staying in compliance, and keeping the investors happy via good stewardship of the daily mundane details (which Mike wants absolutely no part of!). So once it's set up, all Mike would do is do the monthly fund swaps and rebalalncings, and you'd do EVERYTHING else - and you'd get to keep ALL of the money except for 0.25% of assets (this fee goes to Mike). So if you're looking for an awesome stable business in this industry, then this is an opportunity of a lifetime. Please keep the bottom line in mind - the long-term returns for individual investors are better than any one person, any firm, or any other investment strategy we've ever seen ever. Plus there's probably between two to four $Billion with a B in these investor models right now. So if you got with this program five years ago, then you'd be making around $20 million per year in fees for not doing very much at all (assuming an overall 1% fund management fee with $3B under management. Plus this calculation does not take into account the annual $5M in 12b-1 fees on top of that!). So what are you waiting for!? E-mail Mike now!

We keep getting the same questions/comments about our unusual performance, so here's an e-mail paste that will help:

Yes on one hand, the investment performance is remarkable. On the other hand it shouldn't be, because it's exactly what the CFA program teaches. It just so happens that I'm apparently the only CFA Charterholder that practices exactly what's taught. Everyone else went off to get rich being a hedge fund manager or creating derivatives like CDSs that started the current crisis.

What the CFA program teaches in a very small nutshell is this: Individual investors should not be market timing at all, period, as this is worse than futile. Individual investors should also not be trying to pick stocks (bonds or anything else), unless they have quasi-insider information, like they work there, used to work there, or know someone working there that's not technically an insider that's feeding them accurate and timely info. The only "people" that have enough information, resources, and data to profit by picking stocks (and/or time markets) are large institutions like mutual funds.

So once that huge battle is understood and won (99% of investors still don't get it), and since there are only three ways to make investment decisions, and the most popular two are taught to be no-no's by the CFA program, there is only one methodology left - asset allocation. So I took that to mean that this is what I should become an expert on, because my biz is managing money for investors in a RIA and financial planning setting (my job as an employee at the time).

What you're supposed to is determine a mix of viable asset classes that fits an individual investor's life, and then either fund it with something very diversified like mutual funds, ETFs, or index funds (the CFA program likes index funds the best, as most people can't even pick open-ended mutual funds well enough to beat an index fund). So the questions then become, how do you determine what asset classes to use and how much? Well, I did it in both the Comprehensive Asset Allocation software and the Model Portfolios using the best asset-level portfolio optimizer, educated guesses, and way too much trial and error. After doing it a million times, I found what works and am sticking with it. I've looked at every else's harebrained investment strategies since the mid-'80s, and found none to be better (I admit I've stolen many ideas from many people (mostly from the hundreds of job interviews I went on), and so I've tinkered with just about everything everyone else has come up with since 1986. The ideas that work, I keep, and the ones that don't, I poke fun at on the site).

Once that war is over, the battle is reduced to what to use to fund the asset classes with? To make a very long story short: Stocks - no, no diversification compared to a mutual fund that may own 100 stocks. Closed-end funds, no - there's no way to screen them to get any predictive value whatsoever because of the large and random premiums and discounts. ETFs, no they are just lame index funds... with fees (and then on top of that, commissions to pay when you buy and sell them. This is all terrible compared to a no-load mutual fund). Index funds, maybe, but the way I pick open-ended mutual funds creams index funds by way too large of a margin about 90% of the time. So all of these questions are now answered - the way I screen and pick mutual funds adds by far the best value to the investment process than anything else I've ever seen, so I'm sticking it with it to the bitter end.

The magic isn't all in the infrastructure (the software), it has a lot to do with finding predictive value in the mutual fund picks (I look at many things, like historical performance, and try to predict that it will keep up long enough to be useful). After millions of trials and errors, I found a way to pick mutual funds that have a one- to two-year predictive value (all mutual funds crap out eventually and have to be replaced, which is why it's critical to keep the subscription going and rebalance. When I say crapped out, I don' t mean it in a smelly sense, but the casino gambling way). It doesn't always work, but the winning picks beat the duds enough to add more long-term value than any other investing strategy I've ever seen. Plus every month I learn something new, so the screening process is continually refined and saved, so it gets better all the time. I had a major breakthrough in '07 when I figured out how to get around the software stupidity and lousy data Morningstar maintains. It seems to be working so I'm sticking with it.

I used to sell these little Morningstar screening filter mcr files that can be used by others in their offline version of Morningstar, but a big NY firm tried to copy my screening process in '03, so I don't sell them anymore. So if the information about how I pick mutual funds is not on the mutual fund recommendations page already, then it's a trade secret now. There's no secrets about the software nor models. Just the opposite, every tiny little detail is explained ad nauseum somewhere on the site. And when you buy the allocation software or model portfolios, not much is protected, so you can see exactly what's going on. Plus you'll get the same spreadsheet I use to calculate returns to account for mutual fund switches, fees, rebalancings, and all that since 1/1/99. So you can audit the returns and figure everything out.

Disclaimer: This financial plan software is designed to allow financial planners, investment managers, other financial services professionals, and investors, to demonstrate and evaluate various financial strategies in order to help achieve their clients', or their own financial goals. The investment choices and services on this site are provided as general information only, and are not intended to provide investment, tax, legal, financial planning, or other advice. This site is for information purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security, which may be referred herein. Mutual fund recommendations made are suggestions only, and customers should evaluate the suitability of each fund for their own holdings on their own or seek professional advice. Consult with your financial, legal, or tax advisor with regard to your individual situation. Toolsformoney.com is not engaged in rendering legal, accounting, tax, or other professional advice. In no event shall Toolsformoney.com be liable to customers for any damages whatsoever, including lost profits or savings, missed gains, or other incidental or consequential damages arising out of the use, or inability to use, any of the software or information obtained from this website.

Time Frames	Conservative Model	Moderately Conservative Model	Moderate Model	Moderately Aggressive Model	Aggressive Model	DJIA	S&P 500	NASDAQ	Russell 2000	MSCI EAFE	BarCap Agg Bond
1999	25.83%	37.21%	48.69%	64.62%	85.37%	25.22%	19.53%	85.59%	21.26%	27.30%	-0.83%
2000	4.50%	-1.04%	-6.10%	-7.53%	-9.80%	-6.18%	-10.14%	-39.29%	-3.02%	-13.96%	11.63%
2001	3.66%	2.62%	2.97%	1.91%	1.42%	-7.10%	-13.04%	-21.05%	2.49%	-21.21%	8.42%
2002	-3.03%	-11.04%	-19.80%	-26.75%	-32.01%	-16.76%	-23.37%	-31.53%	-21.58%	-17.52%	10.27%
2003	21.88%	30.24%	35.80%	39.56%	40.41%	28.28%	28.68%	29.28%	47.25%	17.41%	4.11%
2004	11.71%	13.79%	14.95%	15.88%	15.21%	5.32%	10.87%	8.59%	18.33%	10.18%	4.34%
2005	9.84%	11.63%	13.10%	14.21%	13.86%	1.72%	4.91%	1.37%	4.55%	25.96%	2.43%
2006	11.69%	13.66%	15.59%	16.56%	16.60%	19.05%	15.79%	9.52%	18.37%	13.81%	4.33%
2007	16.01%	20.84%	22.47%	23.31%	22.83%	8.89%	5.49%	9.81%	-1.57%	11.17%	6.97%
2008	-8.91%	-18.64%	-25.03%	-30.91%	-33.87%	-31.93%	-37.00%	-40.54%	-33.79%	-45.09%	5.24%
2009	17.06%	21.76%	27.12%	31.65%	35.34%	22.68%	26.46%	43.89%	27.17%	27.75%	5.93%
The Month of June '10	-1.32%	-2.62%	-2.99%	-3.75%	-4.38%	-3.43%	-5.24%	-6.55%	-7.75%	-1.16%	1.57%
2008 YTD (31 Dec '09 to 30 June '10)	-0.10%	-1.73%	-3.10%	-4.07%	-4.87%	-5.00%	-6.65%	-7.05%	-1.95%	-14.72%	5.33%
Last 12 Months	12.52%	14.52%	15.08%	16.22%	17.00%	18.94%	14.43%	14.94%	21.49%	3.13%	9.50%
Last 3 Years Annualized Average	4.55%	1.94%	0.17%	-1.75%	-2.59%	-7.39%	-9.81%	-6.77%	-8.60%	-15.85%	7.55%
Last 5 Years Annualized Average	7.32%	7.22%	7.31%	6.82%	6.36%	1.66%	-0.79%	0.50%	0.37%	-1.77%	5.54%
Last 10 Years Annualized Average	7.34%	6.63%	5.61%	4.35%	2.91%	1.68%	-1.59%	-6.12%	3.00%	-2.17%	6.47%
Annual Average Since Inception (31 Dec '98 - Monthly compounding)	8.72%	8.77%	8.55%	8.48%	8.35%	2.81%	0.23%	-0.34%	4.61%	-0.36%	5.88%
	Conservative Model	Moderately Conservative Model	Moderate Model	Moderately Aggressive Model	Aggressive Model	DJIA	S&P 500	NASDAQ	Russell 2000	MSCI EAFE	BarCap Agg Bond

Asset Allocation Models This is not the Comprehensive Asset Allocation Software, which is here The Variable Annuity Models are also included	Unsupported	With E-mail Only Support	With E-mail and Phone Support
One-time Asset Allocation Models and Mutual Fund Picks	$99	$119	$129
One-time Asset Allocation Models and Mutual Fund Picks, with Investment Fact Finder	$118	$139	$149
One-time Asset Allocation Models with only the Mutual Fund Picks updated monthly for one year This is a great option for individual investors that just need to set things up once using the no-load models, then want the mutual funds updated to keep the portfolio up-to-date	$138	$159	$179
One-time Asset Allocation Models with only the Mutual Fund Picks updated monthly for one year, with Investment Fact Finder	$158	$178	$199
Asset Allocation Models with Mutual Fund Picks, both updated monthly for one year (~$22 per month)	$249	$269	$279
Asset Allocation Models with Mutual Fund Picks, both updated monthly for one year, with Investment Fact Finder (~$23 per month)	$259	$278	$289