Investment Strategist February 2014

Stifel

Conservative, Aggressive, or Somewhere In Between

How aggressive should you be when it comes to the

investments in your portfolio. Is a mix of conservative

investments su cient, or will your goals require you to

take on a greater degree of risk.

If you’re looking for answers to the questions posed

above, developing a better understanding of the

concepts of risk tolerance and asset allocation can

help you determine whether you should approach

investing in a conservative style, an aggressive style, or

somewhere in between.

Understanding Risk

There are many forms of risk as it applies to investing, but the most common de nition of risk is

the possibility of one’s investments losing value. In general, the greater the risk, the greater the price

fluctuation. When determining your tolerance for risk, you must consider your age, investment time

horizon, present and future nancial condition, and your long-term investment goals.

Asset allocation, which is the process of deciding what percentage of your money to put into three

major asset classes: stocks, bonds, and cash, is a popular way to reduce your exposure to risk. The three

classes can be further broken down into terms of market capitalization (small cap, mid cap, and large

cap), style (such as value or growth investing), and international or domestic securities.

Determining Your Asset Allocation Mix

Since studies have shown that asset allocation may account for over % of the variance in

performance of various investment portfolios, it is important to choose an allocation mix that is right for

you. At Stifel, we have two tools that can help you determine your tolerance for risk and better understand

how your assets can be allocated among various classes and investing styles. Your Financial Advisor

can provide you with a risk assessment questionnaire, the answers to which will determine which of the

following categories generally ts your investment pro le.

. Conservative:

A Conservative investor values protecting principal over seeking appreciation. This

investor is comfortable accepting lower returns for a higher degree of liquidity and/or stability.

Typically, a Conservative investor primarily seeks to minimize risk and loss of principal.

. Moderately Conservative:

A Moderately Conservative investor values principal preservation, but is

comfortable accepting a small degree of risk and volatility to seek some degree of appreciation. This

investor desires greater liquidity, is willing to accept lower returns, and is willing to accept minimal

losses.

. Moderate:

A Moderate investor values reducing risks and enhancing returns equally.

This investor

is willing to accept modest risks to seek higher long-term returns. A Moderate investor may endure a

short-term loss of principal and lower degree of liquidity in exchange for long-term appreciation.

February 2014

Investment Strategist

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. Moderate Growth:

A Moderate Growth investor values higher long-term returns and is willing to

accept considerable risk. This investor is comfortable with short-term fluctuations in exchange for

seeking long-term appreciation. The Moderate Growth investor is willing to endure larger short-

term losses of principal in exchange for the potential of higher long-term returns. Liquidity is a

secondary concern to a Moderate Growth investor.

. Moderately Aggressive:

A Moderately Aggressive investor primarily values higher long-term

returns and is willing to accept signi cant risk. This investor believes higher long-term returns

are more important than protecting principal. A Moderately Aggressive investor may endure

large losses in favor of potentially higher long-term returns. Liquidity may not be a concern to a

Moderately Aggressive investor.

. Aggressive:

An Aggressive investor values maximizing returns and is willing to accept substantial

risk. This investor believes maximizing long-term returns is more important than protecting

principal. An Aggressive investor may endure extensive volatility and signi cant losses. Liquidity

is generally not a concern to an Aggressive investor.

There are no guarantees that the objectives within each risk classi cation will be met.

Based on these categories, the allocation of your total assets can be decided in accordance with

model portfolios or to create customized, optimized portfolios to suit your individual needs.

While asset allocation does not ensure a pro t and may not protect against loss, it can play a key role

in establishing a sound investment strategy and reducing risk. Selecting the asset allocation mix that

is best geared towards your needs may be one of the most important factors in pursuing your long-term

goals.

The Stifel PACT

Program

With the use of a detailed asset allocation analysis, the Stifel PACT

Program uses a four-step process

that can help you develop a systematic approach to investing.

Step One: Assess Your Financial Situation

— By reviewing your nancial goals, resources, savings,

and tolerance for risk, you’ll have a better understanding of what your next investment planning

move should be.

Step Two: De ne Your Asset Allocation

— Based upon the assessment of your nancial situation, an

asset allocation strategy will be developed for your speci c needs.

Step Three: Develop Your Investment Strategies

— There are a wide variety of investments from

which to choose as you pursue your nancial goals. With the PACT

program, your Financial Advisor

can help you determine which strategy and vehicles best suit your investment objectives.

Step Four: Monitor Your Progress

— Changes in your lifestyle, nancial goals and circumstances,

and timeframe can all have an impact on your asset allocation plan. With the PACT

program, your

Financial Advisor will meet with you periodically to help you evaluate the progress of your plan in

order to assure you’re on the right path to your goals.

If you nd that a more comprehensive tool is required for your nancial planning needs, then you may

want to consider the Stifel Wealth Strategist Report

The Stifel Wealth Strategist Report

is a comprehensive, individualized report that can help analyze

your nancial situation and then show you strategies to help you pursue your goals. With the help of

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your Financial Advisor, your current nancial

position and investment objectives are

assessed. A er all of the necessary information

has been compiled, a Wealth Strategist Report

is provided. Each report may consist of the

following:

Net Worth Statement –

Your personal net

worth statement serves as the starting point

for your nancial journey. By examining

your liquid, investment, and personal

assets, as well as your current liabilities,

we’ll be able to determine an appropriate

strategy for pursuing your nancial objectives.

Risk Management –

Your Stifel Wealth Strategist Report

will help you put a plan in place to help

ensure that your family’s needs are met in the event of the loss of a wage earner’s income due to

injury, illness, long-term care need, or death. It will examine whether or not your existing disability,

life, and long-term care insurance coverage will be adequate in the event of a need and o er

suggestions as to how much coverage you may need to preserve your income and assets.

Your Portfolio –

In this section, your investment objectives will be discussed and asset allocation

alternatives will be presented. You personal asset allocation – the percentage of investable assets

distributed in stocks, bonds, and cash – will be based on your nancial goals, age, current and

future income, and tolerance for risk.

Education Planning –

The next section of your Stifel Wealth Strategist Report

will help you de ne

your education goals, analyze your current situation, and identify a savings program designed to

help you accumulate the funds needed to achieve your goals. For example, the report will detail

projected tuition and related expenses and o er a look at various savings vehicles that may help

you reach your education savings goal.

Retirement Funding –

This section examines all of your retirement income, including pension or

other sources of income, personal savings, quali ed plans, and anticipated Social Security bene ts.

Based on this information and your retirement spending goals, an individualized nancial picture

will be created to assist you in preparing for and working toward enjoying your retirement years. By

showing how inflation can a ect your goals, you’ll have an idea of how much your accounts may be

worth in your senior years and how your assets will be used.

Estate Analysis –

Your Stifel Wealth Strategist Report

will explore the projected growth of your

estate and will examine your estimated estate settlement costs. A discussion of wills, revocable

living trusts, credit shelter trusts, marital trusts, and other estate planning documents will also be

o ered.

Stifel does not provide legal or tax advice. You should consult with your legal and tax advisors regarding your

particular situation.

Addressing Your Speci c Needs

For more information on asset allocation analysis through the Stifel PACT

Program or more

comprehensive nancial planning utilizing the Stifel Wealth Strategist Report

, contact your Financial

Advisor today.

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