Investment Performance Disclosures

General Disclosures

Statements within this website are the opinions of Asset Allocation Advisors, Inc. and are not to be construed as guarantees, warranties or predictions of future events, portfolio allocations, portfolio results, investment returns, or other outcomes.  None of the material contained in this website is intended as a solicitation or offer to purchase or sell a specific mutual fund or any other investment.  Viewers of this website should not assume that all recommendations will be profitable or that future investment and/or portfolio performance will be profitable or favorable.

Past Performance Does Not Guarantee Future Performance

Past performance of benchmark indexes, mutual funds, actual portfolios, or composites of actual portfolios does not guarantee future results.  No assurances or guarantees can be given or implied concerning future investment results for Asset Allocation Advisors or any investment index.  Future returns may differ significantly from the past due to materially different economic and market conditions and other factors.  Investments within portfolios, and therefore, portfolios, involve risk and the possibility of loss, including a permanent loss of principal.

Investment Return Methodology

Actual returns for individual client portfolios managed by Asset Allocation Advisors, Inc. may vary and do not necessarily coincide exactly with the returns for the performance group composite.  Asset Allocation Advisors’ returns shown are a composite of the fully managed portions (i.e., discretionary assets vs. non-discretionary supervised assets) of all client accounts that have substantially the same investment objectives, dividends, interest, mutual fund capital gains distributions and other earnings reinvested, with all management fees and expenses deducted directly from account balances.  Non-discretionary supervised assets held in clients’ account are excluded from the calculation.  All client accounts that met the composite criteria during the reporting period are included.  This composite represents more than 65% of all Asset Allocation Advisors, Inc. managed accounts.

For the purposes of calculating investment returns, the “performance group,” also referred to as a "typical portfolio," is defined as a portfolio size weighted average, not a mean average of all portfolios included in the calculation.  Returns are calculated as “time-weighted returns” by which the impact of capital flows into and out of an account are neutralized.   This calculation is made by PortfolioCenter™ using the exact method of calculation recommended by the Bank Administration Institute (Measuring Investment Performance of Pension Funds, Bank Administration Institute, 1968).

Investment Policies and Objectives

Each client in the composite of Asset Allocation Advisors’ returns has a written Investment Policy Statement that cites the client’s investment objectives, types of investments and allowable asset category ranges within the portfolio, performance objectives, and other considerations.  The Investment Policy Statement of each client in the Asset Allocation Advisors composite uses the Morningstar Moderate Allocation Category© as the benchmark by which clients’ actual performance is compared and evaluated.  Investment Policy Statements with Asset Allocation Advisors, Inc. were first executed by clients at various times in 2004 and have subsequently been a requirement of all accounts.

Portfolio Allocation Comparison and Performance Disclosures

Figures for individual mutual fund allocations and the Morningstar Moderate Allocation Category© benchmark are as published by Morningstar Principia© for the most recent quarter-end.  The Morningstar© portfolio allocation information shown is based on the most recently filed annual and semi-annual reports submitted by each mutual fund to the U.S. Securities and Exchange Commission, and/or the most recent available information provided by each fund.  As such, this information is not necessarily an accurate summary of actual portfolio allocations at the most recent quarter-end, and can be expected to change in the future. Past performance and portfolio allocations of benchmark indexes, mutual funds, hypothetical portfolios, or actual portfolios do not guarantee similar future performance or portfolio allocations.

Use of Indexes

Investment Return comparisons may employ a variety of popular indexes.  All of the indexes, with the exception of the Moderate Allocation Category© and Asset Allocation Advisors, entail completely different investment strategies from Asset Allocation Advisors, Inc. performance group composite and are gross returns without management fees or costs subtracted.  The Moderate Allocation Category© is a benchmark created and published by Morningstar Principia® and defined as “Moderate-allocation portfolios (that) seek to provide both capital appreciation and income by investing in three major areas: stocks, bonds, and cash. These portfolios tend to hold larger positions in stocks than conservative-allocation portfolios. These portfolios typically have 50% to 70% of assets in equities and the remainder in fixed income and cash.” Prior to the June 2003 release, the Moderate Allocation Category did not exist.  The Domestic Hybrid Category was used for funds with stock holdings of greater than 20% but less than 70% of the portfolio.

The Morningstar Moderate Allocation Category© (“MMAC”) benchmark is published by Morningstar Principia®.  The mutual funds comprising the index can be changed retroactively by Morningstar and, therefore, retroactively change published returns for a specific historical period.  The MMAC benchmark returns shown on this Site are neutralized of these possible distortions by using unrevised quarterly return figures published by Morningstar Principia® in each quarter-end publication.  We do not use retroactively revised figures.  For example, the third quarter 2005 MMAC return published by Morningstar Principia® in their September 30, 2005 release was 3.10% and we continue to use that return figure regardless of subsequent retroactive revisions published by Morningstar in later releases.
 
The Dow Jones Industrial Average is an unmanaged, price-weighted index of 30 large capitalization stocks with dividends reinvested. The Standard & Poor’s 500 Index (“S&P 500”) is an unmanaged, market capitalization weighted index of 500 widely held stocks, with dividends reinvested, and is often used as a proxy for the U.S. stock market.  The Nasdaq Composite is an unmanaged, market capitalization weighted index of stocks listed on the Nasdaq Stock Exchange, reported as price return without reinvestment of dividends.  The Dow Jones Wilshire 5000 Index is an unmanaged, market-cap weighted index of approximately 6,500 common stocks and serves as the index of all stocks trading in the U.S. stock market. The Russell 2000 Index is an unmanaged, market capitalization weighted index of small-capitalization stocks that includes the smallest 2,000 stocks of the Russell 3000 index with reinvestment of dividends.  None of these indices can be invested in directly.  They are constructed without management fees, trading costs, or other expenses subtracted from the returns, and are shown on a total return basis that assumes reinvestment of dividends, except for the Nasdaq Composite.

Fixed Income is represented by the Barcap Aggregate Bond Index (formerly known as the Lehman Brothers Aggregate Bond Index), an unmanaged, market capitalization weighted index of government and corporate bonds, mortgage-backed securities, and other asset-backed securities, with interest reinvested.  This index commonly serves as a proxy for the U.S. bond market.

Three month Treasury bills are United States Treasury obligations with three month maturities and are backed by the full faith and credit of the United States Treasury.   Three month Treasury bill returns are commonly considered the ultra-safe, “risk-free” investment return, and are also utilized as the set point for evaluating “risk-adjusted” returns such as Sharpe ratios.