1. Structured InveStIng’S FIve Key conceptS
The STrucTured InveSTIng ApproAch II. TAke 3 rISkS WorTh TAkIng Iv. cuSToMIze your porTfolIo
Structured Investing is a deliberate and thoughtful investment process designed Markets can be chaotic, but over time they have shown a strong relationship be- There are 270 Structured Investing portfolios, covering a wide range of investor
to help you achieve your lifetime financial goals. tween risk and reward. This means that the compensation for taking on increased goals and risk tolerances. Based on your answers to our Investor Profile
We believe there are five key concepts that play a vital role in the construction levels of risk is the potential to earn greater returns. According to academic research Questionnaire, we will identify a portfolio that suits you and your investment
of a Structured Investing portfolio tailored specifically to your goals and needs: by Professors Eugene Fama and Ken French,* there are three “factors” or sources objectives, comfort with risk and time horizon.
of potentially higher returns with higher corresponding risks. Structured Investing portfolios vary in terms of composition and asset class
Accept Take 3 Customize Exercise 1. Invest in Stocks weighting, but they all share the goal of capturing market returns while mini-
Effectively
Market Risks Worth Your Patience &
Taking
Diversify
Discipline
2. Emphasize Small Companies mizing volatility for the selected level of risk.
Efficiency Portfolio
3. Emphasize Value Companies Your Custom Portfolio (For illustrative purposes only)
Structured Investing portfolios are built using institutional asset classes designed to Fama and French found that this “three-factor model” explains the majority of
capture market rates of return and provide diversification. Institutional asset classes stock returns. The risks associated with investing in stocks and overweighting small Fixed Income 32%
offer lower trading costs, lower turnover and minimal style drift. While we don’t company and value stocks potentially include increased volatility (up and down Cash 2%
believe in active management, we don’t attempt to track indexes either, as this can movement in the value of your assets) and loss of principal. Small-cap stocks may REITs 4%
result in significant trading costs. In addition, our portfolio managers have flexibility be less liquid than large-cap stocks. Investors with time horizons of less than Emerging Markets 3%
on when to add or remove individual stocks from asset classes. They also exclude International Small 7%
five years, should consider minimizing or avoiding investing in common stocks.
certain groups of stocks, such as (IPOs) and financially distressed securities with
*Cross Section of Expected Stock Returns, Eugene F. Fama and Kenneth R. French,
heightened risk or inefficiencies. Journal of Finance 47 (1992) International Large Value 16%
With Structured Investing, the noise and confusion of the markets can be subdued
by simplicity, prudence and confidence as you build a strong investment foundation III. effecTIvely dIverSIfy
U.S. Small 10%
for your future.
We believe there are four primary ways to diversify your portfolio to decrease volatility:
1. combine Multiple Asset classes that have historically experienced dissimilar
I. AccepT MArkeT effIcIency U.S. Value 12%
return patterns across various financial and economic environments.
In 1965, University of Chicago economics professor, Eugene Fama, developed The
2. diversify globally — more than 50% of global stock market value is non-
Efficient Markets Hypothesis which states that current securities prices rapidly U.S. Market 14%
U.S., and international stock markets as a whole have historically experienced
reflect all available information and expectations. This means active investment
dissimilar return patterns to the U.S.
management cannot consistently add value through security selection and
market timing. Even highly-experienced mutual fund managers have a hard 3. Invest in Thousands of Securities to limit portfolio losses by reducing v. exercISe pATIence And dIScIplIne
time beating the market. company-specific risk.
Most successful investors stay focused on the long term. Trying to time the market
Mutual Fund Manager Underperformance from 2003 – 2008 4. Invest in high-Quality, Short-Term fixed Income. Consider shorter can affect your long-term investing success. Review your portfolio regularly and
maturities that have low correlations historically with stocks. Lower default make adjustments depending on changes in your life. You should also rebalance
69% 78% 87% 82%
of large-cap managers of small-cap managers of international managers of intermediate fixed risk with high-quality instruments. periodically to keep it aligned with your goals.
underperformed underperformed underperformed income managers
S&P 500 Index S&P SmallCap 600 Index S&P 700 Index underperformed Note: Diversification does not guarantee a profit or protect against a loss. Foreign securities
Lehman Intermediate involve additional risks including foreign currency changes, taxes and different accounting Above all, don’t go it alone. We can help you stay on track and focused on
Government/Credit and financial reporting methods.
Bond Index your long-term goals.
Source: Standard and Poor’s Index Versus Active Group, 11/08 (For the period 6/03 – 6/08)

2. groWTh, IncoMe And loWer volATIlITy
Whether you are investing for growth or income, Structured Investing’s emphasis Lower volatility is particularly important when it comes to retirement income. As
on lowering volatility can make a substantial difference. the chart below shows, a structurally-diversified portfolio has allowed, historically, Structured
As the chart below shows, since the early 1970s, structural diversification for greater annual withdrawals without drawing down principle. Investing
including global, small and value equities, improved the portfolio’s stability Annual Distribution Percentages — Using Historical Data — 1972-2008
In An Unstructured World
of returns (decreasing volatility significantly) AND its long-term growth.
6%
5.26%
Growth of Wealth — 1972-2008 5%
4.92%
$80 4.27%
4%
3.47%
$60 3% 2.78%
Structured Investing’s
$50 2%
Structurally-Diversified: 40%
Bonds/60% Stocks (equally 1%
Five Key Concepts
$40 weighted U.S. Value & Small,
International Value & Small)
0%
$30 100% Fixed
100% Fixed 40%/60%
40%/60% Add Global
Add Global Add Small
Add Small Add Value
Add Value
S&P 500 Index Income1 U.S. Stocks 2 Diversification3 Stocks4
Income U.S. Stocks Diversification Stocks Stocks5
Stocks
40% Bonds/60% US Stocks
$20
Five-Year U.S. Treasury Notes For example, using this data, a $1 million portfolio invested 100% in fixed income
$10
could have only sustained inflation-adjusted annual withdrawals of $28,009 Based on:
$0 $1.00
1972 1976 1980 1984 1988 1992 1996 2000 2004 2008
between 1972 and 2008 — versus $53,032 for the structurally-diversified portfolio.
Annualized No matter how diversified your portfolio, risk can never be eliminated completely.
• 80+ years of financial market data
Annualized Standard
Return Deviation The key is to find a medium between risk and return; this helps increase the likelihood • Nobel Prize-winning economic research
Five-Year U.S. Treasury Notes 8.07% 5.64% of achieving your financial goals without taking any more risk than necessary.
S&P 500 Index 9.49% 15.36% • In-depth studies of investor psychology
40% Bonds/ 60% U.S. Stocks 9.32% 9.82% Source: Center for Research in Security Prices (CRSP). For illustrative purposes only and not indicative of any
investment or actual or model portfolio. An investment cannot be made directly in an index. Indexes are unman- and behavior
Structurally-Diversified: 11.27% 9.78% aged baskets of securities that investors cannot directly invest in. Past performance is no guarantee of future
40% Bonds/60% Stocks (equally weighted results. Hypothetical value of $1 invested at the beginning of 1972 and kept invested through 12/31/08. Assumes
U.S. Value & Small, Int’l Value & Small) reinvestment of income and no transaction costs or taxes. “100% Fixed Income” represents the Five-Year Treasury
Index. “40% /60% U.S. stocks” represents a weighted combination of the Five-Year Treasury Index and the CRSP
Source: Center for Research in Security Prices (CRSP). For illustrative purposes only and not indicative of any 1-10 Index. “Add Global Diversification” represents a weighted combination of 40% Five-Year Treasury Index, 30%
investment or any actual or model portfolio. An investment cannot be made directly in an index. Indexes are CRSP 1-10 Index, and 30% Dimensional International Large Company Index. The “Add Small Stocks” represents
unmanaged baskets of securities that investors cannot directly invest in. Past performance is no guarantee of a weighted combination of 40% Five-Year Treasury Index, 15% CRSP 1-5 Index, 15% CRSP 6-10 Index (small
future results. Hypothetical value of $1 invested at the beginning of 1972 and kept invested through 12/31/08. cap),15% Dimensional International Large Company Index, and 15% Dimensional International Small Cap Index.
Assumes reinvestment of income and no transaction costs or taxes. “40% Bonds/60% U.S. stocks” represents “Add Value Stocks” represents a weighted combination of 40% Five-Year Treasury Index, 15% Fama-French U.S.
a weighted combination of the Five-Year Treasury Index and the CRSP 1-5 Index. “Structurally-Diversified” Large Value Index, 15% CRSP 6-10 Index (small cap), 15% Fama-French International Value Index (1975-2008)
represents a weighted combination of 40% Five-Year Treasury Index, 15% Fama-French U.S. Large Value with Dimensional International Large Company Index (1972 to 1974), and 15% Dimensional International Small
Index, 15% CRSP 6-10 Index (small cap), 15% Fama-French International Value Index (1975-2008) and Di- Cap Index. Annual distributions are inflation-adjusted using actual CPI periods for each year. Hypothetical portfolios
mensional International Large Company Index (1972 to 1974), and 15% Dimensional International Small Cap may not reflect the impact material economic and market factors might have had on Loring Ward’s decision making
Index. CRSP ranks all NYSE companies by market capitalization and divides them into 10 equally-populated if it was actually managing clients’ money at that time. Performance results do not represent actual trading, but were
portfolios. AMEX and NASDAQ National Market stocks are then placed into deciles according to their respective achieved using backtesting with the benefit of hindsight; actual results may vary. Assumes dividend and capital gain
capitalizations, determined by the NYSE breakpoints. Hypothetical portfolios may not reflect the impact material reinvestment. All investments involve risk, including loss of principal. The risks associated with investing in stocks
economic and market factors might have had on Loring Ward’s decision making if Loring Ward was actually and overweighting small company and value stocks potentially include increased volatility (up and down move-
managing clients’ money at that time. Performance results do not represent actual trading, but were achieved ment in the value of your assets) and loss of principal. Small-cap stocks may be less liquid than large-cap stocks.
using backtesting with the benefit of hindsight; actual results may vary. The risks associated with investing in Foreign securities involve additional risks including foreign currency changes, taxes and different accounting and
stocks and overweighting small company and value stocks potentially include increased volatility (up and down financial reporting methods
movement in the value of your assets) and loss of principal. Small-cap stocks may be less liquid than large-cap
stocks. Foreign securities involve additional risks including foreign currency changes, taxes and different ac- LWI Financial, Inc. (“Loring Ward”). Securities offered through Loring Ward Securities, Inc.
counting and financial reporting methods All investments involve risk, including loss of principal. (or your advisor’s affiliates), member FINRA/SIPC 08-076 (04/09)