Portfolio Presentation: Growth & Income and U.S. Diversified Equity The above portfolios are available through the Morgan Stanley Portfolio Management program, managed by Portfolio Manager Bernard Semon Presentation prepared by: Bernard Semon, Vice President Financial Advisor
How can you outsource your stock portfolio? Time to outsource and allocate a portion of your portfolio to U.S stocks. My portfolios are available through the Morgan Stanley Portfolio Management Group: Growth & Income Portfolio U.S. Diversified Equity Portfolio Active management of the portfolios based on my consistent buy & sell discipline. Financial Advisors who participate in the Portfolio Management program are a select group qualified by the firm to manage client assets based on training, experience and commitment to client service. 2
Introduction Mission Statement: I strive to deliver excellent returns in bull markets and superior preservation of capital in bear cycles. My goal is to protect and grow the portfolio. Know your hard earned money is working for you at all times with our defensive and flexible investment strategies regardless of market conditions, trends, or cycles. 3
I have a different perspective MYTHS REALITY 1. Fundamentals are correlated to future earnings. 2. Today high quality U.S. bonds are less risky than stocks. 3. Individual stocks have more risk than stock index funds or equity ETFs. 1. Fundamentals typically contribute to 40% of future earnings (Source: Vanguard ). 2. A rise of 1.0 % interest rate will significantly lower the value on most bond premiums (Source: Atalanta Sosnoff). 3. I believe stock index funds and ETFs are passively managed without downside protection in bear markets. 4. A stock is either Growth or Value. 4. A stock can be both Growth and Value (Source: Russell 2000). 4
Investment Philosophy I believe that U.S. stocks currently provide growth, value, income, protection from future inflation, and liquidity. Because of these unique features, most clients should benefit from exposure to equities over the long-term. I believe that my Growth & Income and U.S. Diversified portfolio has the potential to grow significantly within the next 3 to 5 years. A strong defense gives the offense the best chance to win Quote by Carl von Clausewitz The views expressed herein are those of the author and do not necessarily reflect the views of Morgan Stanley Wealth Management or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results. 5
Portfolio Assumptions Active management is crucial to portfolio performance, risk/reward analysis and preservation of principal. More stocks are better than less. We believe there is safety in numbers by not allowing one stock to negatively affect the overall portfolio s performance. Stocks are either a BUY or a SELL. Diversification among sector works. Since no one knows for sure what sectors will be next year s darling, we diversify across all sectors to reduce risk over time. The U.S. Diversified Equity portfolio is a pure play on the U.S. stock market. With no gimmicks. Efficient tax management with a focus on long-term gains. Diversification does not guarantee a profit or protect against a loss. 6
Portfolio Construction 1) Our U.S. equities selection is limited to the S&P 500 index. 2) Under normal market cycles, all 10 sectors within the U.S. S&P 500 have representation with a focus on diversification. 3) Stocks within each sector are initially equally weighted. 4) Active Buy & Sell Discipline with an entry level, pullback price, exit strategy, target price, etc. 5) On-going management of portfolio by monitoring DAILY changes involving statistical indicators, risk analysis, market behavior, momentum, volatility indicators, etc 6) Flexible & Defensive strategies for all market cycles: Eliminate underperforming securities that we think currently offer no value to the portfolio Eliminate exposure to high-risk stocks after significant appreciation 7
Investment management process To provide specialized risk-adjusted exposure to U.S. stocks within the S&P 500 Index. The goal of our Growth & Income Portfolio and U.S. Diversified Equity Portfolio is to outperform the S&P 500 benchmark with above average returns and less risk. PORTFOLIOS: Target Asset allocation U.S. Growth & Income Portfolio: U.S. Equities 0% to 50% Fixed Income 0% to 50% Alternatives 0% to 25% International Equities 0% to 15% U.S. Diversified Equity Portfolio: Equities 0% to 100% 8
Portfolio manager- Bernard Semon Accountability for decision-making process and portfolio rebalancing Independent research & market perspective Blog - Client approved market commentary Website - provides insight to our portfolio services FaceTime- conference calls (as needed) ipad- instant access to account activity via Morgan Stanley 9
Portfolio manager- Bernard Semon Portfolio manager in the Morgan Stanley Portfolio Management Group since November 2011 Has more than 30 years of investment management experience with commodities & stocks Investment process embraces commodity & macro perspective Commodity analyst & trader at the Chicago Mercantile Exchange from 1981 to 1998 Specializing in U.S. equities since 2001 10
Conclusion I believe U.S. equities offer growth, income, value, protection from inflation, as well as liquidity. Buy & Sell Discipline and defensive strategies for all market cycles. Our investment process is based on fundamentals, independent research, and statistical market indicators. Normal market conditions: Strive to grow and protect the principal of our portfolios with potential for above average returns with less risk. Volatile market conditions: Actively manage stocks to seek long-term positive returns in a down market, by moving into cash or shifting the portfolio allocation. Good Trading for the Long-Term 11
Let us manage your U.S. Equities Benefits of using Bernard Semon as your Portfolio Manager through a partnership: Access to your own personal Portfolio Manager Income growth opportunity Time management ** CLIENT APPROVED MATERIAL** Portfolio Presentation: Growth & Income Portfolio and U.S. Diversified Equity Portfolio REV6 REV. 01/16/13 12
Additional information Historically, stocks have offered a higher rate of return than bonds and other investments, but also carry a higher risk. You should consult with your Financial Advisor to select investments that are appropriate for your goals and risk tolerance. The U.S. Diversified Equity and Growth & Income portfolio may be appropriate for moderate to aggressive investors who are looking to keep up with inflation and add growth, income, and value to their portfolio. I believe that most investors could benefit from having a portion of their portfolio exposed to U.S. equities. 13
Disclosure This material is intended only for clients and prospective clients of the Portfolio Management program. It has been prepared solely for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or other financial instrument, or to participate in any trading strategy. The individuals mentioned as the Portfolio Management Team are Financial Advisors with Morgan Stanley participating in the Morgan Stanley Portfolio Management program. The Portfolio Management program is an investment advisory program in which the client s Financial Advisor invests the client s assets on a discretionary basis in a range of securities. The Portfolio Management program is described in the applicable Morgan Stanley Smith Barney LLC ADV Part 2, available at www.morganstanley.com/adv or from your Financial Advisor. 14
Disclosure Past performance of any security is not a guarantee of future performance. There is no guarantee that this investment strategy will work under all market conditions. Morgan Stanley Smith Barney LLC. Member SIPC. Morgan Stanley, its affiliates, Financial Advisors and Private Wealth Advisors do not provide tax or legal advice. This material was not intended or written to be used, and it cannot be used, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters. 15