Welcome

John R RuoccoAsset Management Associates

South Windsor, CT

Welcome to my world!

Situation• Attorney

– Trust Account

– Client

Variable Annuity• Steep redemption fee (commission)

• M&E of over 2% per year• 1% advisory fee – deducted from account

• Automatic trading system – multiple trades monthly

• .75% advisory fee billed in addition to above.

• Market in uptrend – account losing money (years)

Common ElementAmong Clients

• We share a general distrust of the investment industry.

Evolution

• A shares

• B shares

• C shares

• Fee based “boilerplate plans” sell the abc’s

• Wrap and managed accounts (many use etfs)

• Very little has changed!

History• Crash of October 1987• Meltdown of Japan

– Highest Mstar Rating in 1990 - high exposure to Japan

• Junk Bond Meltdown – Milken - DBL• Savings and loan scandal • Real Estate Partnership Meltdown early 90’s

– Colonial Realty ( S&L Crisis)

• Oil – T. Boone Pickens– Tech – Dotcom Bust (ditto – morningstar) – 9-11– Financial Meltdown of 2008, MM Freeze– Bernie Madoff and Mini Crash May of 2010

Investment Background• General Sales Background

– Learned rapidly, sales driven business.– Fee structure seemed very high– Investment advice - secondary

My objective

• Simple – straight forward way for average person to invest a clients money.

• --- and get paid a reasonable fee to do it.

Learned from History – 80’s

Nobody Knows Anything!

Early Years (1980’s)

• Created portfolios using “No Load” funds for individual clients.

– High liquidity– Low fees– Good performance– Good diversification ( minimal trading) – Fees about 1% or less– Way ahead of the crowd

Note: Fidelity was the first to create multiple “sector funds”.

ETF’s

• Natural Transition Extension for:– Sector Exposure– Liquidity– Transparency– Easy to isolate risk (offset / balance risk)

– Easy to create portfolios for clients combining funds and ETF’s

I- Shares and others

• Opens the door to many markets and sectors.

• Bonds

• Country specific, regional, Int’l

ETF - Ideal for Client Profile

• Business owners, professionals with 200k to 2 million or so in investable assets. Growing.

• Small pensions, SEP’s, DB plans, IRA’s Trust accounts.

Common Sense

• People lose tons of money because they deviate from common sense

• They look for high returns– viaticals

Stick With Basics

•Mainstream Investments•Highly Liquid•Transparent: Easy to understand•Solid Management (Reputable Management)•As close to Vanilla as possible

Avoid Losses

• What is the Risk?

• How can we lose money?

• How much can we lose?

• Can we offset the loss with something else?

ETF Advantages

• Transparent

• Low cost of holding – low transaction fee via discount broker.

• Very easy to purchase

• Easy to isolate risk– Since Set of Homogeneous stocks

• Very Liquid • Controls via stop and limits etc• Ideal as building blocks for a portfolio

Favorites

• Select sector “SPYDERS”

• Bond ETF’s – Junk, Treasury – long/short duration

• International – Broad – and country specific, Emerging Markets– Metals: Gold, silver, Commodities oil – Usually use large more liquid etfs….with mainstream

underlying securities.

Use ETF’s as Tools

• Build portfolios

• Easily adjust them

• Penetrate many markets

• Shorts, bonds, futures, commodities

• Low cost, highly liquid portoflios.