Analysis, Insights and a different perspective
August 2015
The Model Wealth Program
In this issue of Investment Insights, we describe the
benefits of having your investments professionally managed by the Model Wealth Program
Principles—Not Predictions
The Model Wealth Program is a managed fee-based
investment program available through Cornerstone
Wealth Management.
We believe in a chaotic investment world often driven
by short-term thinking, investors benefit from the practiced application of investment principles that have
stood the test of time. This is why we have developed
sophisticated, long-term investment strategies tailored
to manage and mitigate risk as we help our clients pursue their financial objectives.
Key Points

The Model Wealth Program offers professionallymanaged investment portfolios for a broad range
of investor preferences.

Our investment selection process focuses on a
disciplined approach to research. We invest with
managers that have demonstrated superior, riskadjusted performance in good markets and bad.

In our view, an investment portfolio should not be
positioned at the maximum level of risk an investor
can accept, but at the minimum risk level necessary to pursue long-term investment goals.

Successful long-term investing requires discipline,
patience, and the willingness to do your homework
before you invest.
1 Yr
3 Yr
5 Yr
10 Yr
U.S. Large Stocks
7.42
17.31
17.34
7.89
U.S. Small Stocks
U.S. Bonds
10.86
1.81
18.35
1.36
16.64
3.23
7.83
4.49
Intl Markets Stocks
-4.04
9.98
6.97
5.50
Intl Emerging Mkts Stocks
-9.95
2.41
2.12
7.25
U.S. Inflation (CPI)
-0.48
1.11
1.71
2.01
Source: Morningstar. Annualized returns for periods ended July
21, 2015. U.S. large stocks is the S&P 500 Index, U.S. small
stocks is the Russell 2000 Index, U.S. Bonds is the Barclays US
Aggregate Bond Index, Intl Developed Markets is the MSCI All
Country World Index Ex-US, International Emerging Markets is
the MSCI Emerging Markets Index. Returns include dividends
and interest. Past performance is not an indication of future results. All indices are unmanaged and may not be invested into
directly. The Indices mentioned in this report are unmanaged,
may not be invested into directly and do not reflect expenses or
fees.
Professional Investment Management
Managing Risk
The Model Wealth Program offers professionallymanaged investment portfolios for a broad range of
investor preferences. Our program offers a higher level
of research and investment management including:
In our view, an investment portfolio should not be positioned at the maximum level of risk an investor can accept, but at the minimum risk level necessary to pursue
long-term investment goals. While risk cannot be
avoided, it can be managed and mitigated.
Asset Allocation- With oversight provided by our Investment Policy Committee, your portfolio is appropriately
divided among different types of investments in an effort to provide good balance and diversification.
Investment Selection – We invest with managers that
have demonstrated superior risk-adjusted performance
in good markets and bad.
Ongoing Management, Rebalancing and Risk Control –
Model Wealth Portfolios are actively managed, monitored and rebalanced to maintain a risk level consistent
with your long-term goals.
Objectivity – Many managed account programs suffer
from a lack of objectivity due to financial arrangements
with investment companies. Cornerstone Wealth Management has no such agreements which eliminates
conflicts of interest.
Our Cost Advantage – The cost of our program is very
competitive. As with most fee-based programs, you
pay fees based on the value of assets held.
Focused on Meeting Client Needs
Our Model Wealth Program offers theme-based investment portfolios for a broad range of investor prefer-
Focusing on Quality – Research shows higher quality,
lower volatility portfolios can provide greater returns
over time. Source: GMO. Profits for the Long Run: Affirming the Case for Quality. Chuck Joyce & Kimball
Mayer
Diversifying Assets – While not a panacea against loss,
diversification can help manage risk by dampening
wide price swings and minimizing an investor’s exposure to any one security. Of course, there is no guarantee that a diversified portfolio will enhance overall
Municipal bond interest income is federally tax-free but other state and
local taxes may apply, and may be subject to the alternative minimum tax.
They are subject to market and interest rate risk if sold prior to maturity.
Alternative investments are subject to special risks, and may not be suitable for all investors and should be considered as an investment for the risk
capital portion of the investor’s portfolio. The return on a socially responsible investment strategy may be lower than if the advisor or money manager made decisions based solely on investment considerations.
The Model Wealth Program follows a six-step process.
These steps are:
1. Work with your financial advisor to establish your
investment goals.
2. Determine the appropriate investment objective
based upon your need for income and risk tolerance.
3. Choose an investment theme. We have created
portfolios so you can select an option this is suitable for your investment needs.
4. Your portfolio is monitored and professionallymanaged with changes made due to market conditions or investment performance.
5. Your portfolio is rebalanced on a regular basis to
maintain an appropriate risk level.
6. You will meet regularly with your financial advisor
to review your investment portfolio and your progress towards your financial goals.
Successful long-term investing
Successful long-term investing requires discipline, patience, and the willingness to do your homework before
you invest. Having discipline means staying the course
and sticking to your financial plan, especially when
short-term events create large declines in the stock or
bond markets. Discipline requires an understanding
that short-term stock market declines are inevitable,
and a normal part of the investing process.
Important Disclosures:
The information contained in this report is as of July 16,
2015 and was taken from sources believed to be reliable. It is intended only for personal use. To obtain additional information, contact Cornerstone Wealth Management. This report was prepared by Cornerstone
Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for
any individual. To determine which investment(s) may
be appropriate for you, consult your financial advisor
prior to investing. Content in this report is for general
information only and not intended to provide specific
advice or recommendations for any individual.
Investing involves risk including the potential loss of
principal. No strategy can assure success or protection
against loss. Past performance is no guarantee of future results. Municipal bonds are subject to availability
and change in price. They are subject to market and
interest rate risk if sold prior to maturity. Bond values
will decline as interest rates rise. Municipal bond interest income may be subject to alternative minimum tax.
Please note that rebalancing investments may cause
investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events will be created that may increase your tax liability.
Investment advice offered through Cornerstone Wealth
Management, a registered investment advisor and separate entity from LPL Financial. Advisory fees are in
addition to the internal expenses charged by an investment company, and if you hold such a security, these
should be included when evaluating the costs of a fee
based account. Clients should periodically re-evaluate
whether a fee based account continues to be appropriate for their needs compared to other alternatives.
Our Role as Fiduciaries
President Barack Obama’s recent endorsement of fiduciary standards for financial advisors could have significant implications for the entire investment industry. In
simple terms, the president is supporting rules which
require financial advisors to put their client’s needs before their own. As the law currently stands, many brokers, insurance salesman, and advisors operate under
a looser “suitability standard”. The proposed law will
require them to also act in the client’s best interest.
According to the American Institute of CPAs, the following are requirements of a fiduciary:
Know best practices, standards and laws
Diversify assets to a specific risk/return profile
Prepare an investment policy statement
Control and account for investment expenses
Monitor the activities of prudent experts
Avoid conflicts of interest and prohibited transactions
Source: American Institute of CPAs, Reish, Luftman, Reicher
& Cohen, fi360, Tillinghast-Towers Perrin 2003 Fiduciary Liability Survey Report
Registered Investment Advisors who charge a fee for
service are, in the eyes of the law, acting as a fiduciary.
We strongly support the president’s position and believe this higher standard should apply to everyone offering financial services to the public.
Alan F. Skrainka, CFA
Chief Investment Officer
Cornerstone Wealth Management
Securities offered through LPL Financial, Member
FINRA/SIPC.
www.mycwmusa.com
13924 Coalfield Commons Place l Suite 101
Midlothian, VA 23114 l www.bellrogers.com
(O) 804-378-8080 l (TF) 855-378-8080
(Fax) 804-378-8220 l [email protected]