2014_07_22 USE!!!Final_Portfolio_Project

Global Economic Outlook

INSIGHTS OF THE GLOBAL ECONOMY

RISI-VISION FIN-6909 – June 22n, 2014

Eric Risi, Brendan McCauley, Carl Schachter, Courtney Fenwick

*Note: This publication contains forward-looking statements and, there can be no guarantees that they will come to pass. 2

Introduction:

As progression into 2014 continues, projected forecasts reflect on past economic performance and our current belief is that the global economy will continue to experience a slow, but gradual recovery spawned from systemic risk factors from 2007. As we progress into 2015, there is a visible continuing upward trend in GDP growth amongst

advanced economies. Moody’s credit

rating data suggests a slow, but continuing .20% increase in US economic growth by the beginning of fiscal year 2015.

GDP Growth:

GDP and inflation suggest stronger economic growth in 2014. With a GDP of more than $16 trillion, the U.S. economy accounts for nearly 23% of world GDP. According to The Bureau of Economic Analysis, YOY statistics show U.S. GDP increased from 2.8% to 2.6% in the fourth quarter of 2013. Data shows GDP expanded 1.0% in the first quarter of 2014.

Structural shifts in U.S. growth stalled for the first three months of 2014 marking the second-worst quarterly performance since the recession ended in mid-2009. With the Federal Reserve unlikely altering its course in the coming months as it continues to wind down its bond-buying program, future strategies imply a bolster in the economy and overall GDP. More importantly, macro economists predict GDP in the second quarter will expand at a 4% annual rate. As global activity continues to strengthen, a decrease in downside risks indicate further improvement for 2014-2015.

US Unemployment:

The International Labor Organization shows the U.S. labor market unemployment rate declined 2.5%, starting from 10% in October 2009 to 7.5% in April 2013. The national jobless rate fell to 6.3% from March 2014 and was 1.2%age points lower than in April 2013. This decrease was accompanied by a monthly increase of 200,000 new jobs, contributing to a rise in consumer spending and economic recovery.


Furthermore, average median income employees saw a 1.7% pay increase.

The following table provides an in-depth analysis of unemployment rates. The table measures year over year unemployment rates and proves there is a steady decline from 2012 to 2013.

Consumer Confidence:

Heading into 2014, consumer confidence now stands at 80.7% from 77.5% back in December, a total increase of 4.12%. Data presently suggests that consumers are feeling more optimistic about US financial market conditions, the job market, and economic recovery.

As 2014 progresses, expectations suggest that there will be an increase by 5.04% from the previous month of 79.0% to 81.8%. For investors, statistical data show that there is an increasing trend in terms of domestic growth. As for consumer sentiment, as long as inflation remains below 3.5% (currently 2%) future returns will not be impacted significantly. Due to a rise to 2% from 1.5% last April, investors can expect a lesser expense for unadjusted cost of living expenses as long as inflation does not exceed 3%.

Housing:

According to Moody’s forecasting from

2014 to 2015, median-home prices will increase from 205.2 to 209.1 (thousands). As jobless rates decrease, consumer confidence in the housing markets will increase thus allowing housing markets to gradually rebound. At this rate of 1.9% price growth, the housing market will recover partially within the near future. This uptrend would allude to a gradual increase in consumer confidence for related markets such as transportation, medical care, and education. Freddie Mac forecasts the 30-year fixed mortgage rate to steadily rise, ending at a


4.6% rate by the end of 2014 from the previous rate of 4.3% in 2013. By the end of 2015, Freddie Mac estimates 30-year fixed mortgage rates around 5.4%. In addition, fixed interest rates are expected to climb as a direct result of the

Federal Reserve’s reduction of MBS

acquisitions. *Government bonds may be an attractive option for investors moving forward into 2015 for principal security.

Jobless Claims: Despite being a number associated with short term volatility, US jobless claims have slowly, but steadily, declined over the last three years. April 2011 showed us an unemployment rate of 9.1%, by comparison, the current unemployment rate sits at a much lower 6.7%. This represents a decline of roughly 1% year over year. Unemployment forecasts for September 2014 are at 6.3% continuing the downward trend. Jobless claims should reflect this proportionately. Jobless claims do fail to account for

several important factors, such as workers who have dropped out of the workforce entirely, the under-employed, and those people who are ineligible for unemployment benefits. The decreasing jobless claims coupled with recovering real estate values, has greatly contributed to a modest increase in average household spending. This is contributing to recovery as GDP is forecast to grow at a lean 2.8% in 2014. Though it may be slow, upward growth is happening in the economy and an inverse correlation exists in the form of an equally slowly decreasing amount of jobless claims. These conditions are projected to stay at the same performance levels for the next year. Conclusion: Based upon this economic outlook, we feel that it is prudent to invest with realistic goals in mind in terms of return on investment (ROI). Our suggestion for our long-term investors is to adopt a moderately conservative risk preference. An example of this asset allocation model would include an overweight allocation of government bonds and investment grade corporate debt. In conjunction with this particular allocation, it is advised to maintain underweight positions in dividend paying equities. Investors should simultaneously take advantage of dividend yields amongst exchange traded funds with strong performance.


Recommended Asset Allocation

In unpredictable market cycles, diversification allows the offset of possible losses in one investment type with the potential for gains in another, reducing overall levels of risk. We believe lead macro indicators, illustrated in our outlook, contribute to our rationale behind a moderate allocation risk profile.

In our report, we review 2013 past performances and identify future projections for 2014-2015. Considering an improving economy and the substantial returns from 2013 we recommend an allocation model consisting of 20% in Equities, 35% in Bonds, 40% MF/ETF, and 5% Cash. We advise that clients use our dividend reinvestment plan (DRIP) strategy to take advantage of high yielding dividends which will be reinvested into the principal amount of each chosen security. We recommend our clients to allocate liquidity needs into a CD, accruing an interest rate of .06%. Due to expanding energy consumption across the globe, we endorse overweight positions in Mid-Cap growth stocks with a hedge strategy encompassing consistent Large-Cap performers.

Aggregate Asset Allocation

Moderately Conservative

Stocks 20.00%

Bonds 35.00%

MF/ETF 40.00%

Cash 5.00%

Total 100.00%


IPS: Purpose: This document will describe client(s) investment objectives, risk tolerance, and other important factors in order to monitor and evaluate overall portfolio performance. We describe our investment objective General Information: Client Name: Jordan Belfort Date of Birth: 06/01/1969 Occupation: Architect Co-Client Name: N/A

Date of Birth: N/A

Occupation: N/A Current Investable Assets: $1,000,000 Investment Advisors: Eric Risi, Courtney Fenwick, Brendan McCauley, Carl Schachter Investment Objective/s: LONG-TERM GROWTH: After-tax & after-expense annual portfolio return that is at least five percentage points greater than the rate of inflation. Additionally, this portfolio will exist within a tax-deferred vehicle such as an Individual Retirement Account (IRA), while simultaneously utilizing a Dividend Reinvestment Plan

(DRiP) to reinvest dividend payments into the principal amount. *Inflation is measured by the U.S. Consumer Price Index (CPI) **A plan offered that allows investors to reinvest their cash dividends by purchasing additional shares or fractional shares on the dividend payment date. Time Horizon: 1 Year Cash Flow & Portfolio Withdrawals: Mr. Belfort is currently working and believes he will work for the next 5-10 years in the architecture industry. Cash flow requirements will be covered by salary, certificate of deposit and money market accounts. With these accounts in place, we do not foresee any drastic withdrawals from portfolio. Income Taxes: The accounts managed by our investment advisors and managers are subject to federal taxation excluding any retirement accounts. Our accounts will be managed and structured towards long-term growth and tax deferred strategies within the portfolio. Our advisors and managers recognize the importance of conversing with our tax accountant the effects of the current tax position. Risk Tolerance: MODERATELY CONSERVATIVE: Due to the volatility of capital markets, investment risk will need to be accounted for to achieve our investment goals.


Both our advisers and managers realize that a risk-free investment is not realistic and if employed, investment principal could be at a loss. In measuring our ability to endure short and intermediate market price and total return volatility, several factors have been measured. These factors are: Loss tolerance: Our risk tolerance target level will not exceed more than 3% Liquidity Reserve: A liquidity reserve in the form of CD and money market accounts will be at Mr.

Belfort’s disposal to prevent liquidation

of the portfolio during adverse times. The CD account will accrue interest annually at 6% while the money market account will enable the client to disperse checks. Risk Allocation & Asset Allocation: RISI-VISION recognizes the levels of risk associated with the asset classes in the current market and are classified in three large categories of higher risk, medium risk and lower risk. Through time the financial position, objectives and risk tolerance may be altered, in effect the asset allocation strategy will be examined annually. Tactical Portfolio Positioning: Asset Allocation Percentages 20% Equities, 40% Bonds, 35% ETF, 5% cash. The portfolio will be designed with a long-term asset allocation strategy. With investment markets and their volatile behaviors, opportunities

may be presented to increase return and reduce risk by deviating from the long-term asset allocation plan. Various asset classes may be evaluated by RISI-VISION as being undervalued involving a higher expected return or overvalued meaning a lower rate of return with increased risk. Consequently, RISI-VISION will under or overweight multiple risk categories and the asset classes of each category reflecting its evaluation of the investment markets. These strategic adjustments are restricted to the limits of each risk category designed within the Risk Allocation and Asset Allocation sections. Rebalancing the portfolio will incur costs to the client that include transaction costs and taxes. These costs will be accounted for by RISI-VISION prior to rebalancing the portfolio. Lastly, illiquid investments may limit rebalancing actions in the portfolio. Portfolio Rebalancing: The Portfolio should be assessed against its asset allocation model within client risk tolerances as stated in the IPS. Rebalancing will occur, if necessary, through the sale of over performing securities and the buy-back of underperforming securities. If this proves insufficient, cash shall be added to the portfolio until equilibrium is achieved. *Transaction costs, taxes, and fees may be incurred if rebalancing is necessary. Portfolio manager may recommend rebalancing at any time.


Portfolio Performance Expectations: Bases upon extensive buy side market research and analysis from RISI-VISION Investments, it is the belief that an 8% return can be achieved on an annual basis. Clients should benefit from better than average market returns through an increase of 5% on their portfolio above the rate of inflation (3%). *Performance may differ based upon market and global conditions. The portfolio will not always be perfectly allocated due to market fluctuations and as such is subject to rebalancing. These terms are merely illustrations and are subject to change. Account Manager:

Mr. Risi’s performance in equity, bond,

and fund markets have been impressive in the past few years. He has averaged 10% returns (7% above inflation) for the last three years. He hopes to raise to the bar this year with new upgrades to the OMEGA Algorithm.

Past performance consistency and improvement YoY

Acceptable risk-reward ratios Allocation Strategy, Turnover,

Capacity Organizational structure,

compensation, strategy, performance bonuses

Consistent and repeatable processes

“In Person” attention to clientele

Extensive Experience with above target performance

Mutual Funds-Evaluation & Selection Process: RISI-VISION takes into account geopolitical factors, market signs/trends, and a blended approach from many quantitative and qualitative sources to form a selection of the appropriate securities to match the desired performance of the fund.

Track record of performance, consistency, and over/under performance relative to appropriate benchmarks.

Appropriate returns for risk incurred

Asset cap, class, turnover, and returns

Sound investment processes Ability of manager to keep fees

low and fund returns tax efficient Reasonable cost structure

including, but not limited to, Transaction costs, fees, and taxes.


Risk & Return Assumptions:

Asset Class Pre- Tax Return Goal %

Beta (Risk%)

Large Cap Equity 8% 0.584

Medium Cap Equity 15% 0.71

ETF's (High Yield) ETF's 10% 1.009

Bonds (Fixed Income) PUERTO RICO ELEC PWR AUTH PWR REV BDS (74526QED0)

5% BBB

BNP PARIBAS US MTN LLC 5% A GOLDMAN SACHS GROUP INC (GS.JCT - 38143UVG3)

5% A

ANGLOGOLD ASHANTI HLDS FIN PL (03512TAC5)

5% BBB

T-NOTE 3.125% 31-JAN-2017 3.10% AAA T-NOTE 3.625% 15-FEB-2020 3.60% AAA Cash MM 1% 0 CD 1% 0


Performance Benchmarks:

Assets: Market Benchmark: Peer Group Benchmark:

Large Cap Equity (Hedge)

S&P 500 Composite Index S&P 100 INDEX (OEX)

High-Yield Fixed Income

Barclay's Aggregate Bond Index

Vanguard Intermediate Term Corporate Bond Index (VICSX)

ETFs S&P 500 Composite Index

Vanguard High Dividend Yield Index (VHDYX)

CDs US. T-Bill Synchrony Bank Optimizer Plus

Cash US. T-Bill N/A

Additional Information: We understand the asset allocation software used to estimate certain portfolio statistics, mainly risk and return, is maintained by RISI-VISION INVESTMENTS. In addition, we realize the returns, standard deviations and correlation coefficients of the various asset classes used in the program are based upon data provided by RISI-VISION INVESTMENTS. We understand these measurements are not

intended to accurately predict future investment performance, but are intended to be used as tools to gauge our tolerance for volatility. Accordingly, we recognize the information contained in this analysis should be viewed as an illustration and not as prediction and does not guarantee results.

Additional Risks Associated with Investments in Hedge Funds, Private Equity, and Private Real Estate:


Liquidity Risk: We have adequate

means of providing for current and future cash flow needs to have no need for liquidity with respect to our investment in hedge funds, private equity and private real estate. RISI-VISION INVESTMENTS has explained that these investments are illiquid interests in private partnerships and may subject us to certain lock-up periods where we may not be able to access some or all of the funds we have invested in such vehicles (the specific lock-up periods are contained in the subscription document of each investment) and that RISI-VISION INVESTMENTS cannot control (or influence) the lock-up period on any of these investments.

Transparency Risk: Investment in

hedge funds, private equity and private real estate are often made through investment in limited partnerships. The assets of the partnership are not transparent as is the case with traditional stocks and bonds. Transparency in this sense refers to the ability of an investor to look directly into an investment portfolio and see all its components, providing the opportunity to clearly gauge performance and assess risk exposure.

Lack of Marketability Risk: Once a

commitment is made, it can be difficult or impossible to transfer ownership in the investment to another investor.

Client Responsibilities: We will meet with our investment advisor, RISI-VISION INVESTMENTS, at least annually to confirm the accuracy and appropriateness of this IPS and RISI-VISION INVESTMENTS implementation of this IPS. We will provide RISI-VISION INVESTMENTS information necessary to update this IPS, including:

Any changes to our projected cash flow, portfolio withdrawal requirements, or tax situation;

Any changes in risk tolerance or investment constraints;

Any significant change to our net worth.

We have reviewed and understand this IPS and confirm that it is a suitable approach given our financial situation, objectives, return expectations, and risk tolerance. ______________ _______ (Client 1 Signature) Date

______________ _______ (Client 2 Signature) Date


Portfolio Positions - Equity Rational:

RISI-VISION has compiled data from a vast array of sources to produce a diversified equity allocation complimentary to a moderately conservative risk position. The main focus is on the energy sector and its growth that will be hedged through a diversified allocation of remaining securities to ensure minimal downside and a positive return within risk reward tolerances as stated by the IPS.

Allocation of 50% of the equity budget to growth ensures appropriate risk tolerances are adhered to while allowing for increases to equity and revenue through gains in stock value and

dividend payments. The advent of fractal mining for oil has led North Dakota and Texas to be the 5th largest oil producer in the world. This hint at energy independence for the U.S. has started a wave of awareness that spills over to every form of energy production within that sector.

The popularity of clean and renewable sources of energy, solar, wind, and hydroelectric are preferred methods of power generation that can be charged a premium price for. Expansion into these environmentally friendly sources of power generation offers investors astronomical growth prospects and promises strong returns from the energy sector.


Moderately Conservative Asset Allocation for Equities:

SYMBOL: WEIGHT: BETA: DIV PAY DATE:

INDUSTRY/ SECTOR:

LMT:US 0.09959 0.65 8/28/2014 Aerospace & Defense/ Industrials

(Large)

MRK:US 0.10010 0.43 6/12/2014 Biotech & Pharmaceuticals:

Health Care (Large)

T:US 0.10004 0.47 6/8/2014 Telecom: Communications

(Large)

PEP:US 0.09985 0.38 6/4/2014 Consumer Products: Consumer

Staples (Large)

TEG:US 0.50058 0.71 5/28/2014 Utilities: Utilities (Medium)

CME:US 0.09984 0.99 6/6/2014 Institutional Financial Services:

Financials (Large)

Equity Selection Rational:

Lockheed Martin (LMT) – Aerospace &

Defense: LMT was chosen based upon a long history of equitable gains and the payment of dividends over the life of the stock. With the government ceasing funding for NASA, the price for aerospace design and engineering for national defense is at a premium. Increases in private spending for space

tour logistics is also on the rise and in the news. This selection is a blue chip performer with a track record of dependable gains. Merck & Co. Inc. - Biotech & Pharmaceuticals: Merck is another company with an admirable track record of returns and performance. A standard bearer for the pharmaceutical industry, Merck has a proven history of positive slope


performance in the market. Backed by strong management and a string of popular products, Merck has the revenue stream and medical patents to ensure dividend payments and positive equity for several years to come.

AT&T – Telecom and Communications:

An established blue chip on the NYSE, AT&T has been a leader in the communications industry since the telephone was introduced to the public in

the early 1900’s. AT&T has a strong

history of growth and dividend payment to its investors. Having achieved a high degree of horizontal integration has put AT&T in front of customers in almost every aspect of public telecom while also carrying sizable contracts for industry and the government. AT&T has a strong revenue stream that will stay lucrative for the foreseeable future. Pepsi - Consumer Products/Consumer Staples:

Currently in a recognized “Duopoly” with COKE for its share of the American soda industry, Pepsi has horizontally and vertically integrated to a moderate extent through acquisitions under the name of YUM brands. It has established a strong distribution network with a reliable infrastructure for its core and ancillary products. Pepsi pays regular dividends and has a proven track record of success with growth and earnings.

Integrys Energy Group, Inc. – Utilities:

Integrys is a medium size market cap equity in the growth stages of its

company life cycle. Specializing in coal, wind, hydroelectric, solar, and peak power generation to supply the national grid, Integrys is also a leader in natural gas production and distribution. With the popularity of energy independence in the U.S., increasing demand for more energy from cleaner sources is a major topic of national focus. While individual home solar power generation is currently 1.5% of the consumer energy market, in 5 years it will comprise 15%. Unusually cold winters have put natural gas in high demand and reduced national reserves. Major growth and expansion is happening now in the energy industry and Risi-vision models predict that this trend will continue to increase over the next several years. *Relevant Asset Information (Weekly)


Equity News:

SYMBOL: WEEK 1

- 5/30/14

WEEK 2 -

6/6/14

WEEK 3 -

6/13/14

WEEK 4 -

6/20/14

WEEK 5 -

6/27/14

WEEK 6 -

7/3/14

WEEK 7 -

7/11/14

LMT:US 162.1 166.33 164.04 164.2 162.7 159.9 160.31

5/28/2014 -

Ex-Date for

dividend

payment of

$1.33 N/A N/A N/A

Lockheed

Martin Releases

Industrial

Defender

Platform

Update To

Improve

Critical

Infrastructure

Cyber Security

7/1/2014 -

LOCKHEED

MARTIN

CORP Files

SEC form 8-K,

Change in

Directors or

Principal

Officers,

Regulation FD

Disclosure

Lockheed Martin

and Lewis Innovative

Technologies

Collaborate Under

the Department of

Defense Mentor-

Protégé Program

MRK:US 56.4 58.1 58.24 58.3 57.53 59.2 58.44

5/29/2014 -

MERCK &

CO. INC.

Files SEC

form 8-K,

Submission

of Matters to

a Vote of

Security

Holders

Data on

Merck's MK-

3475 from

Largest Study

to Date of

Investigational

Anti-PD-1

Antibody in

Advanced

Melanoma

Highlighted at

ASCO 2014

6/11/2014 -

Ex-Date for

dividend

payment of

$0.44

Merck Launches

Global Patient

Registry Supporting

Expanded

Commitment to

Real-World

Outcomes Research

in Type 2 Diabetes

Award-

Winning

Actress S.

Epatha

Merkerson and

Merck

Challenge

African

Americans with

Type 2 Diabetes

to Get to Their

Goals N/A N/A

T:US 35.34 35.1 35.03 35.36 35.41 35.84 35.76

6/3/2014 -

AT&T INC.

Files SEC form

8-K, Other

Events

6/10/2014 -

AT&T INC.

Files SEC

form 8-K,

Other Events,

Financial

Statements

and Exhibits

New AT&T Store

In Sandy Features

An Innovative

Design That Mirrors

Customers' Mobile

Lifestyle

6/27/2014 -

AT&T INC.

Files SEC form

8-K, Entry into

a Material

Definitive

Agreement,

Financial

Statements and

Exhibits

AT&T Street

Charge Solar

Charging

Stations Arrive

At City Beaches

Just In Time

For Fourth Of

July Fun

7/7/2014 - Ex-Date

for dividend payment

of $0.46

PEP:US 87.07 87.76 87.19 90.01 88.76 90.02 89.85

6/3/2014 - Ex- 6/11/2014 - PepsiCo Announces Review on 7/1/2014 - N/A


Date for

dividend

payment of

$0.655

PEPSICO

INC Files

SEC form 8-

K, Entry into

a Material

Definitive

Agreement,

Termination

of a Material

Definitive

Agre

Timing of Second

Quarter 2014

Earnings Release and

Investor Call

Consumer

Staples Stocks -

- Research on

Mondelez Intl.,

Hershey, Coca-

Cola

Enterprises, and

PepsiCo

PEPSICO INC

Files SEC form

8-K, Other

Events

TEG:US 57.23 58.77 57.7 60.8 70.92 68.5 69.23

5/27/2014 -

Ex-Date for

dividend

payment of

$0.68

N/A N/A

SHAREHOLDER

ALERT: Brodsky &

Smith, LLC

Announces

Investigation of

Integrys Energy

Group, Inc. - TEG

INVESTOR

ALERT: Levi

& Korsinsky,

LLP Notifies

Investors of

Integrys Energy

Group, Inc. of

Class Action

Against Its

Board of

Directors in

Connection

With the Sale

of the Company

to Wisconsin

Energy Corp. --

TEG

LAWSUIT

ALERT: The

Law Firm of

Andrews &

Springer LLC

Announces That

A Class Action

Lawsuit Has

Been Filed

Against Integrys

Energy Group

Inc. -- TEG

INTEGRYS

ENERGY GROUP,

INC.

SHAREHOLDER

ALERT: Rigrodsky

& Long, P.A.

Announces

Investigation Of

Buyout

CME:US 71.93 69.51 71.45 71.73 70.42 72.36 70.49

5/28/2014 -

CME

GROUP

INC. Files

SEC form 8-

K, Entry into

a Material

Definitive

Agreement,

Submission

of Matters to

a Vote of Sec

6/5/2014 - Ex-

Date for

dividend

payment of

$0.47

CME Group

Announces

Record

Trading

Volume for

NYMEX

Brent (BZ)

and British

Pound

Futures

(GBP/USD)

CME Group and

BarclayHedge Honor

Managed Futures

Leaders at Third

Annual Managed

Futures Pinnacle

Awards

CME Group

Inc. Announces

Date of

Second-Quarter

2014 Earnings

Release,

Conference Call

CME Group

Volume

Averaged 12.7

Million

Contracts per

Day in June

2014, Down 2

Percent from

May 2014

CME Group

Announces Record

Trading Volume and

Open Interest for

NYMEX Brent (BZ)


Exchange Trade Funds-Evaluation & Selection Process:

RISI-VISION’s moderately conservative

approach within Mr. Belfort’s portfolio

focuses on a high concentration of conservative Exchange Traded Funds (ETF). Formation of ETFs in the portfolio is based on diversification of the indexes they span and also their longevity. Our evaluations on both domestic and international ETFs will be

measured against the S&P 500 and the Vanguard benchmarks. Selection of Exchange Trade Funds (ETF) by RISI-VISION develops a selection criteria based on the following:

Morning Star Ratings Expense ratios (Category Average) Portfolio turnover Sales Manager Tenure


The table below illustrates these criteria on selected ETF’s for the portfolio.

SYMBOL: Net Expense Ratio:

Category Average

Morning

Star Rating

Portfolio

Turnover

Sales Loads Manager

Tenure

CVY:US (15%) 0.32% 3 108.00% YES 1 year

DHS:US (5%) 0.32% 5 30.00% YES 6 years

IYLD:US (20%) 0.31 3 51.00% YES 2 years

PCEF:US (30%) 0.31% 3 33.00% YES 4 years

SDIV:US (20%) .50 % 2 46.64% YES 3 years

XLU:US (10%) 0.54% 3 3.53% NONE 14 years

Guggenheim Multi-Asset Income ETF Selection Rationale: The Guggenheim Multi-Asset Income ETF (CVY) will provide the portfolio substantial exposure to dividend paying equities and diversification with a heavier weight in financials and energy securities, ADRS and closed-end funds. Within diversifying the portfolio in conjunction with lower asset classes, CVY will provide appealing yields.

CVY’s investment performance will

reflect the Zacks Multi-Asset Income Index. The Zacks Multi-Asset Income Index selects a group of securities that have the capability of producing yields of outperforming the Dow Jones US Select Dividend Index. This index consists of 125 to 150 securities

organized based on liquidity. (Will utilize DRiP policy as mentioned before in the economic outlook.) Payments from dividends will hedge the ETF portfolio against risk along with low Beta value. WisdomTree Equity Income ETF Selection Rationale: Though Wisdom Tree Equity Income ETF (DHS) only consists 5% of the ETF allocation, its potential for high yielding dividends gives it strength. DHS asset allocation is differentiated through heavy investments in drugs & pharmaceuticals, electric utilities, REITS and financials. . (Will utilize DRiP policy as mentioned before in the economic outlook.)


iShares Morningstar Multi-Asset Income ETF Selection Rationale: Fixed income investing will be fundamentally incorporated throughout the entire portfolio and RISI-VISION continues that theme with a 20% investment of capital in the iShares Morning Star Multi-Asset Income ETF

(IYLD). This fund’s allocation strategy is

composed of 60% fixed income, 20% equity and 20% income invested towards alternative income sources. We feel that the index IYLD allows the portfolio to gain high current income and open the possibility of capital appreciation simultaneously. In the year-to-date period, IYLD has returned 8.5%. PowerShares CEF Income Composite ETF Selection Rationale: RISI-VISION believes a 30% portion of the ETF would be best invested under a conservative fund in the Powershares CEF Income Composite ETF (PCEF). While we have dedicated other portions of the ETF strategy towards funds that pay high yielding dividends, PCEF is constructed of diversified funds within the financial sector. This fund invests assets in common shares of funds within the S-Network Composite Closed-End Fund Index instead of individual securities pooled together. PCEF invests 90% of its assets into US closed end funds that comprise the underlying index.

Utilities Select Sector SPDR ETF Selection Rationale: Through the first half of 2014, the utilities sector has been on the rise. We plan on capitalizing on this continuing trend with a 10% allocation of our ETFs under the Utilities Select Sector SPDR ETF (XLU). Within the first half of the year, XLU has shown a 16.57% increase in their utilities sectors. This level of increase is a product of the broadness of sectors XLU covers within their portfolio and outperforming their peer group consistently. Growth in infrastructure plays an underlying role in evaluating the macro environment of the utilities sector. Utilities and gas are major components of infrastructure projects will be profitable as efforts towards infrastructure expansion both globally and domestically.


Global X SuperDividend ETF Selection Rationale: In our attempts to keep a well-diversified allocation of global ETFs, the Global X SuperDividend ETF (SDIV) fits very

well under RISI-VISION’s international

investment requirements with a 20%

allotment. The SDIV fund measures it’s

investment performance under the Solactive Global Super Dividend Index. We found that a fund that measures itself

under the top 100 international companies that provide high dividend paying securities aligns accordingly to

RISI-VISION’s conservative asset

allocation model. This fund is managed

under a “Passive Approach” and does not

solely focus its values against the underlying index. In staying consistent with our diversified approach, the figure below illustrates how broad of an investment horizon SDIV has

.


Equity News:

SYMBOL: WEEK 1 - 5/30/14 WEEK

2 -

6/6/14

WEEK 3 -

6/13/14

WEEK

4 -

6/20/14

WEEK

5 -

6/27/14

WEEK 6 - 7/3/14 WEEK 7 - 7/11/14

CVY:US 25.52 25.9 25.95 26.28 26.08 26.16 25.9

7/8/14 -

-LINN Energy is acquiring

and developing oil and gas

assets

-LINN Energy is interested in

the acquisition from Devon

7/7/14

-LINN Energy acquired assets

from Devon for $2.3 billion

DHS:US 57.86 58.73 58.56 59.66 59.37 59.55 59.51

Gentle slope with low volatility

- nothing significant.

IYLD:US 26.63 26.65 26.64 26.77 26.88 26.48 26.6

Gentle slope with low volatility

- nothing significant.

PCEF:US 25.27 25.25 25.23 25.32 25.46 25.33 25.46

5/29/14

-Invesco PowerShares

Lists First-of-Its-

Kind ETF

Referencing the

Morgan Stanley

Multi-Strategy

Alternative Index

(The PowerShares

LALT strategy is

designed to help

investors reach their

portfolio objectives by

reducing the volatility

of returns and

mitigating the risk of

drawdowns.)

7/8/14

-Invesco PowerShares

Announces Changes for

Municipal Bond ETFs (The

new indexes underlying the

PowerShares' Municipal Bond

ETFs include both insured and

uninsured municipal bonds.)

SDIV:US 25.39 25.84 25.83 26.04 26.05 26.06 25.73

6/12/14

-Super

Dividend ETF


Tops $1 Billion

in Assets for

Global X.

XLU:US 42.34 43.08 42.55 43.37 43.91 42.5 42.84

6/11/14

-Utilities fund

faces bearish

trade (The

SPDR Utilities

Fund is facing a

huge short-

term bearish

position as

shares pull back

from recent

highs - The

XLU is down

0.68 percent to

$42.40 in

midday

trading.)

7/3/14

-Utilities, REIT ETFs Lose

Luster After Jobs Report (The

SPDR Utilities Sector ETF

(XLU) slipped 1.35% to

$42.39 after the opening bell

with more than 5.2 million

shares changing hands, while

the Vanguard REIT Index

ETF (VNQ) gave up 0.6% to

$74.43. / The yield on the 10-

year Treasury note climbed to

a two-month high of 2.678%,

after nonfarm payrolls

increased and the

unemployment rate fell more

than expected. As of 11 a.m.,

the yield sat at 2.659%. / The

XLU had dropped 2.9%

during the two previous

sessions after closing at a six-

year high on June 30.)

7/2/14

-S&P 500 Earnings Guidance

Trends Improving (In Q4

2013, just 15.9% of earnings

guidance was positive, marking

a record low. That number

ticked up to 18.6% in Q1, and

24.3% in Q2. And negative

guidance is 6.9% below

expectations, which is an

improvement over the five-

year average of -10.7%. In Q2,

just 39.5% of revenue guidance

was positive, down from 44.0%

in Q1. However, it's better

than the five-year average of

33% positive.)

7/11/14

-Utility & REIT Funds Come

Roaring Back (REITs turned

in solid first-half 2014

performance of their own, as

reflected in the 17.7 percent

total return from the largest

REIT ETF, the Vanguard

REIT ETF (VNQ | A-88).

-Utilities and REITs hold

appeal as income producers,

with yields of 3.69 percent and

3.44 percent for VNQ and

XLU, respectively, over the

past 12 months, beating that of

the broad market proxy SPDR

S&P 500 ETF (SPY | A-98).)

7/6/14

-Analysts Call Energy Rally,

But Strike Out In Utilities (On

December 31, the Utilities

sector had the lowest

percentage of Buy ratings of all

ten sectors in the S&P 500

(INDEXSP:.INX). Since that

date, the Utilities sector has

recorded the highest increase

in price of all ten sectors at

16.4% (to 224.93 from

193.21))


Overall Equity Performance:

Overall ETF Performance:


Portfolio Questions:

1. How did each portfolio perform in comparison to the S&P 500 and to the Peer Group benchmark? What is the total dollar return on your portfolio?

A: The equity portfolio underperformed both the market benchmark (S&P500) and peer groups (S&P100). Total dollar return: $23,055.62 The Exchange Traded Funds (ETF) Portfolio underperformed in relation to the S&P500 and Vanguard Index. Total dollar return: $21,071.86 The bond portfolio performed both the Barclay's Aggregate Bond Index and the Vanguard Intermediate Term Corporate Bond Index (VICSX). The total dollar return: $15,680.12

2. Which portfolio’s performance was better and why? Give your best guess.

Was the performance a result of diversification? Was there some event (merger, accounting issue, etc.) that significantly impacted a particular

company’s performance?

A: The “Stock” portion of the portfolio performed the best, this is most likely due

to the overweight position in TEG (Integrys Energy Group) which experienced a

significant positive spike in performance due to WEC Energy Inc’s acquisition of

TEG on June 23rd.

3. How did your global asset allocation model impact the performance of your portfolio? Explain. What is your post-performance asset allocation model? Is it not significantly different from your initial asset allocation model? Why or why not? Explain.

A: Our asset allocation model generated a ($44,127.48) or 4.4% return on investment, actual total return amounted in ($14,000) or 1.4% over inflation. Post-performance rebalancing would consist of repurchasing more of underperforming shares and selling over performing securities. It would be significantly different than our initial asset allocation model because of such a low overall return.


4. Compare the average beta for each of the portfolios to the market beta and to each other. Is there a relationship between the average beta for each of the portfolios and their performance? Discuss the average beta for each portfolio relative to the market beta in terms of risk and return.

A: Stock Portfolio: Avg. beta (.605), the relationship amongst assets in portfolio

represents a low correlation. In relation to the market beta (1), the stock portfolio’s

reduced level of risk correlates with its beta falling below the market’s risk. With

a low beta of .605, upside potential is limited in correlation with limited downside risk. Returns were lower than original estimates under the asset allocation model. ETF Portfolio: Avg. beta (1.009), the relationship amongst assets within the portfolio represent a slightly high correlation in relation to the market beta (1), the ETF portfolio may have upside potential but is somewhat exposed as far as market risk is concerned. Returns were lower than original estimates under the asset allocation model.

5. From an economic perspective, in your view, has the level of economic recovery impacted the performance of your portfolio?

A: The level of economic recovery has had a slightly positive effect on the portfolio due to bullish market trends and increasing consumer confidence, all of this contributes to a gradual increase in the movement of investment capital, but until there is a change in interest rates and investor sentiment, this time horizon is very long.

2014_07_22 USE!!!Final_Portfolio_Project

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