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Investment Policy Statement

 

Introduction

 

The Investment Policy Statement (IPS) provides information about the managing of your investments by Klauenberg Retirement Solutions (KRS). It is a guide to understanding your portfolio and investment style. Your investment portfolios are constructed based on your investment time horizon, risk tolerance, investing objective, and personal financial profile. The IPS summarizes your investment goals and describes how KRS will professionally, actively manage your portfolios to assist you in achieving your goals.

The investment process is a part of your overall Comprehensive Financial Plan and as such is ongoing and should reflect changes in your financial situation. Descriptions in the IPS should reflect your current philosophy regarding the investments in your portfolio. As with your comprehensive plan, your objectives should be reviewed periodically in order to ensure that the portfolio adequately reflects any changes which may have occurred in your preferences, financial capability, and/or risk preference.

It is extremely important to understand that the IPS is simply a guide to follow in order to help ensure you and KRS are in agreement about your financial future.

Asset Allocation Defined

Traditional asset allocation, called “static asset allocation,” focuses on the diverse allocation of asset classes in an effort to mitigate market volatility. Due to its “static” nature, it is less able to adapt to changing market conditions.

“Tactical asset allocation” attempts to identify rising, falling, and sideways market trends and to reallocate portfolios to deal with those changing market conditions. While some managers focus on short-term market differences, KRS takes a long-term view and adjusts portfolios in response to changes in long-term market directions.

Time Horizon

Knowing one’s time horizon helps investors to determine their ability to absorb risk. It identifies the length of time to a goal and within a goal. The hierarchy and time horizon of goals, income needs, and estate planning desires are developed through the Comprehensive Financial Plan.

Risk Tolerance

Risk tolerance is a measure of the investor’s attitudes and perceptions toward the uncertainties associated with investing. It is how an investor deals with the desire for growth and the fear of loss. Our risk tolerance questionnaire establishes a “risk numbertm” by asking the client “how much of a loss are you willing to accept for how much gain,” The portfolios are then managed to maintain that level of risk throughout positive and negative market cycles.

Investment Objectives (Models)

The following models are designed to provide the highest return for a given level of risk, while taking into consideration the investor’s long-term needs and comfort level with risk as defined by their Comprehensive Financial Plan and Risk Numbertm. KRS will typically allocate your portfolio among 6 to 10 global ETFs that allow for diversification and keep your portfolio in line with your specific Risk Numbertm. Overall, models focus on growth and adjust for risk.

Income

This model is designed to provide consistent, reliable distributions from a variety of traditional and non-traditional income-producing assets.

Conservative

This model is designed for low risk and/or a short time horizon, such as 0-3 years. It is targeted toward investors with a primary goal of preservation of capital. The model strives for investment stability, liquidity, and income. Historically, fluctuations in similar portfolios have been minor under ordinary market conditions; however, abnormal fluctuations can happen.

Moderate

This model is designed for medium risk tolerance and/or a medium time horizon of 6-10 years. It seeks relatively stable growth with a low level of income return. The main objective is steady growth while limiting fluctuations to less than those of the overall stock market.

Aggressive

This model is designed for a relatively high tolerance for risk and/or a long time horizon of over 10 years. The model seeks no income and above average growth. The main objective is capital appreciation.

Very Aggressive

This model is designed for investors with both a high tolerance for risk and a long investment time horizon. The main objective is high growth potential. This portfolio may experience substantial fluctuations in value making this model suitable only for an investor who has an extended investment horizon and the ability to withstand volatility.