Pursuing a better investment experience by Vistica Wealth Advisors

Pursuing a Better Investment Experience

World Equity Trading in 2014

Embrace market pricing

Number of Trades

The market is an e ective, information-processing machine. Millions of participants buy and sell securities in the world markets every day, and the real-time information they bring helps set prices.

Daily Average

Dollar Volume

$302

million

billion

US Equity Mutual Fund Performance

Don’t try to outguess the market The market’s pricing power works against mutual fund managers who try to outsmart other participants through stock picking or market timing. As evidence, only 19% of US equity mutual funds have survived and outperformed their benchmarks over the past

42%

Survive

19%

Outperform

15 years.

15 Years 2,711 funds at beginning

Do Outperforming US Equity Mutual Funds Persist?

Don’t try to outguess the market

25% Outperformed

682 funds

28%

The market’s pricing power works against mutual fund managers who try to outsmart other participants through stock picking or market timing. As evidence, only 19% of US equity mutual funds have survived and outperformed their benchmarks over the past 2000–2009 2,711 funds at beginning

Let markets work for you The nancial markets have rewarded long-term investors. People expect a positive return on the capital they supply, and, historically, the equity and bond markets have provided growth of wealth that has more than o set in ation.

Growth of a Dollar, 1926–2014 (Compounded monthly)

Academic research has identi ed these equity and xed income dimensions, which point to di erences in expected returns. These dimensions are pervasive, persistent, and robust and can be pursued in cost-e ective portfolios.

$21,655 US Small Cap Index $3,955 US Large Cap Index

$10,000

$1,000

$125 Long-Term Government Bonds Index

$100

$20 Treasury Bills $13 US In ation (CPI)

$10

$1 1927

Consider the drivers of returns

2010– 2014

1950

1972

1995

2014

Dimensions of Expected Returns EQUITIES

FIXED INCOME

Market Equity premium—stocks vs. bonds

Term Term premium—longer vs. shorter maturity bonds

Company Size Small cap premium—small vs. large companies

Credit Credit premium—lower vs. higher credit quality bonds

Relative Price Value premium—value vs. growth companies Pro tability Pro tability premium—high vs. low pro tability companies

Past performance is no guarantee of future results. Indices are not available for direct investment. Their performance does not re ect the expenses associated with the management of an actual portfolio.

Practice smart diversi cation

Home Market Index Portfolio

Global Market Index Portfolio

S&P 500

MSCI All Country World Index (IMI)

Diversi cation helps reduce risks that have no expected return, but diversifying within your home market is not enough. Global diversi cation can broaden your investment universe. 1 country, 500 stocks

46 countries, 8,603 stocks

Avoid market timing

You never know which market segments will outperform from year to year. By holding a globally diversi ed portfolio, investors are well positioned to seek returns wherever they occur.

Manage your emotions

Many people struggle to separate their emotions from investing. Markets go up and down. Reacting to current market conditions may lead to making poor investment decisions at the worst times.

Annual Returns by Market Index 2000 US Large Cap

2002

2004

2006

2008

2010

2012

2014

HIGHER RETURN

US Large Cap Value US Small Cap US Small Cap Value US Real Estate Intl Large Cap Value Intl Small Cap Value Emerging Markets Five-Year US Govt Fixed

LOWER RETURN

Reactive Investing in a Market Cycle HIGHER PRICES '()#$*+ !"#$%$&% !"#$%$&%

/-.0*1&+-&& ,-).

LOWER PRICES

Look beyond the headlines

Daily market news and commentary can challenge your investment discipline. Some messages stir anxiety about the future while others tempt you to chase the latest investment fad. When tested, consider the source and maintain a long-term perspective.

Focus on what you can control A nancial advisor can create a plan tailored to your personal nancial needs while helping you focus on actions that add value. This can lead to a better investment experience.

&'()*% !"#$% "%-.*" +(%,$ !"#$% &'()*+% ,-.+

Buy

!"#$!%&'($)**$+"%,-(

!$"% 0"*,%&./"% &'()*

Housing Market

!"#$%&'()$') &'*#+%,#'%)-.$')%/)0&%) 1/2")'##3+)$'3)"&+4)%/.#"$'5# 6%"25%2"&'()$)-/"%0/.&/)$./'( 3&,#'+&/'+)/0)#7-#5%#3)"#%2"'+ 8&*#"+&01&'()9"/$3.1 :#325&'()#7-#'+#+)$'3)%2"'/*#" ;&'&,&<&'()%$7#+

Disclosures: Exhibit 1: In US dollars. Global electronic order book (largest 50 Disclosures: exchanges). Source: World Federation of Exchanges. Exhibit 1: In US dollars. Global electronic order book (largest 50 exchanges). Source: World Federation of Exchanges. Exhibit 2: Beginning sample includes US equity mutual funds as of the Exhibit 2: Beginning sample includes US equity mutual funds as of the beginning of the 15-year period ending December 31, 2014. beginning the as15-year ending December 31,either 2014. Survivors Survivors are funds that were still inof existence of Decemberperiod 31, 2014. Non-survivors include funds that were liquidated or merged. Outperformers are funds that survived and beat their respective benchmarks over the period. are funds that were still in existence as of December 31, 2014. Exhibit 3: The graph shows the proportion of US equity mutual funds that outperformed and underperformed their respective benchNon-survivors include funds that were either liquidated or merged. marks (i.e., winners and losers) during the initial 10-year period ending December 31, 2009. Winning funds were re- evaluated in the subsequent five-year period from 2010 through 2014, the graph showing winners (outperformers) and their losers (underperformers). Outperformers arewith funds that survived and beat respective Fund count and percentages may not correspond due to rounding. Data Source (Exhibits 2 and 3): The US Mutual Fundbenchmarks Landscape 2015, Dimensional US-domiciled mutual fund data is over Fund theAdvisors. period. from the CRSP Survivor-Bias-Free US Mutual Fund Database, provided by the Center for Research in Security Prices, University of Exhibit 3: The graph thedataproportion of US equity Chicago. Benchmark data provided by MSCI, Russell, shows and S&P. MSCI © MSCI 2015, all rights reserved. Russell mutual data © Russellfunds Investment Group 1995–2015, all rights reserved. The S&P data are provided by Standard & Poor’s Index Services Group. Benchmark that outperformed and underperformed their respective benchmarks indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Mutual investmentand values will fluctuate,during and shares, when be worth period ending De(i.e.,fund winners losers) theredeemed, initialmay 10-year more or less than their original cost. Diversification neither assures a profit nor guarantees against a loss in a declining market. cember 31, 2009. Winning funds were re- evaluated in the subsequent Exhibit 4: In US dollars. Indices are not available for direct investment. Their performance does not reflect the expenses five-year period from 2010 2014, with the graph showing associated with the management of an actual portfolio. US Small Capthrough Index is the Fama/French US Small Cap Index; US Large Cap Index is the Fama/French US Large Cap Index; Long-Term Government Bonds Index is 20-year US Government Bonds; Treasury Bills and losers (underperformers). count are One-Month USwinners Treasury bills;(outperformers) Inflation is the Consumer Price Index. Fama/French data provided by Fama/French.Fund Eugene Fama and Ken French are members of the Board of Directors for and provide consulting services to Dimensional Fund Advisors LP. Bonds, and percentages may not correspond due to rounding. T-bills, and inflation data © Stocks, Bonds, Bills, and Inflation YearbookTM, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). Past performance is no3): guarantee future Mutual results. Data Source (Exhibits 2 and Theof US Fund Landscape 2015, Exhibit 5: RelativeDimensional price is measured by the price-to-book ratio; valueUS-domiciled stocks are those with lower price-to-book ratios. data Profitability is a Fund Advisors. mutual fund is from measure of current profitability, based on information from individual companies’ income statements. the CRSP Survivor-Bias-Free US Mutual Fund Database, provided by Exhibit 6: Number of holdings for the S&P 500 and MSCI All Country World Index–Investable Market Index (MSCI ACWI IMI) as of the Center for Research in Security Prices, University of Chicago. December 31, 2014. Indices are not available for direct investment and their performance does not reflect the expenses associated with the management ofBenchmark an actual portfolio. International investing involves special risksRussell, such as currency fluctuation political instability. data provided by MSCI, and S&P.andMSCI data © Investing in emerging markets may accentuate these risks. Past performance is not a guarantee of future results. The S&P data are provided by StandardMSCI & Poor‘s Index Services MSCIreserved. data © MSCI 2015, all rights reserved. 2015, allGroup. rights Russell data © Russell Investment Exhibit 7: In US dollars. Chart is for illustrative purposes only. Index descriptions for asset groups: US Large Cap is the S&P 500 Index, Group rights reserved. The S&PIndex. data areCap provided provided by Standard & Poor’s 1995–2015, Index Services Group.all US Large Cap Value is the Russell 1000 Value US Small is the Russell by 2000 Index. US Small Cap Value is the Russell 2000 Value Index. Russell data © Russell Investment Group 1995–2015, all rights Poor’s Services Group. Benchmark indices are reserved. US Real Standard Estate is the Dow& Jones US SelectIndex REIT Index, provided by Dow Jones Indexes. International Large Cap Value data not provided by Fama/French from Bloomberg and MSCI securities data. International Small Cap Value data compiled by Dimensional available for direct investment. Their performance does not reflect the from Bloomberg and Style Research securities data. Emerging Markets is the MSCI Emerging Markets Index (gross dividends), © MSCI 2015, all rights reserved. Five-Year US associated Government Fixedwith is the Barclays Treasury Bond Index 1−5 Years, formerly Lehman expenses the Capital management of an actual portfolio. Brothers, provided by Barclays Bank PLC. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

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