WELCOMES

Telephone 0121 502 8800Facsimile 0121 502 8801Email info@indexwm.co.ukWeb www.indexwealthmanagement.co.uk

Index Wealth Management is Authorised and Regulated by the Financial Services Authority

Noel Farrelly Director

Chartered Financial Planner FIFP CFP FPFS ACIB DMS IMC

Concepts of Successful Investing

Over the past 20 years the private investor has been encouraged to buy a wide range of financial products, from the privatisation stocks of the 1980's via tax free wrappers,

tracker funds, cash funds and many others on top of the traditional retail savings products they already owned. The

result is that many of the mass affluent have diverse portfolios spread across a number of Financial Services Institutions with

no coordinated objective or consideration of risk levels. Source: KPMG Consulting

Is it possible to be a successful investor?

“Forecasts are difficult to make – particularly those

about the future”

Sam Goldwyn

What’s important about money to you?

Risk

Fund selection - the reality

Source: Morningstar Workstation. All UK Registered Investment Funds, oldest share class only. Performance over 5 years from 01/01/1999 to 31/12/2003 versus all funds over 5 years from 01/01/2004 to 31/12/2008. Offer to offer price in GBP

Of the top 50 funds 5 years ago where are they now?

In the top 50

In the top 100

In the top 250

In the top 500 Nineteen

Sixteen

Eight

Five

“There are two kinds of investors, be they large or small: those who don’t know where the

market is headed, and those who don’t know that they don’t

know.

Then again, there is a third type of investor – the investment

professional, who indeed knows that he or she doesn’t know, but whose livelihood depends upon appearing

to know”.

William Bernstein, The Intelligent Asset Allocator

Core Capital!

Modern Portfolio Theory

Concept 1

Utilise diversification effectively to reduce risk

The emotional roller coaster of investing

Concept 2

Dissimilar Price Movement Diversification Enhances Returns

Consistency Beats Volatility

Volatile Investment Year

1

2

3

4

5

Rate of Return

8%

8%

8%

8%

8%

Ending Value

£108,000

£116,640

£125,971

£136,049

£146,933

Rate of Return

30%

-20%

25%

-20%

25%

Ending Value

£130,000

£104,000

£130,000

£104,000

£130,000

Arithmetic return 8% 8%

Compound return 8% 5.39%

Source: CEG Worldwide Analysis: Index Fund Advisors

Concept 3

Employ Asset Class Investing

Determinants of Investment Portfolio Profitability 

Stock Selection Asset Class Selection Market Timing0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

In 1986 a study of 91 pension funds ranging in size from $100m to more than $3bn, demonstrated that the right choice of assets contributes around 94% to long-term performance, compared with just 4% for stock selection and only 2% for timing.

Source: “Derterminants of Portfolio Performance”, Financial Analysts Journal, July/August 1986 –

Gary P. Brinson, L. Randolph Hood, Gilbert Beebower.

Step 4 - Time PickersMarket Timing – It’s too easy to miss the gains

-3.2

-1.4

-2.9

0.4

2.0

Best 40 Days

missed

6.8

6.8

6.1

7.2

7.9

Best 10 Days

missed

13.4Hang SengHong Kong

11.2CAC 40France

10.9DAXGermany

10.7S& P500USA

10.9All-shareUK

FullyInvested

IndexMarket

Annualised total returns 31.07.92 - 31.07.07 Source: Fidelity Investments

Concept 4Global diversification reduces risk

WHICH ECONOMY SHOULD I PICK?

2001 2002 2003 2004 2005 2006 2007 2008 YTD

UK 3 3 4 3 4 2 3 4

EUROPE 4 4 2 2 3 1 2 3

FAR EAST EX JAPAN 1 1 1 1 2 3 1 5

JAPAN 5 2 3 4 1 5 5 1

US 2 5 5 5 5 4 4 2

1 = Best Performer 5 = Worst Performer

Source: Data provided by Dimensional's Returns Program. FTSE data published with the permission of FTSE. MSCI data copyright MSCI 2009, all rights reserved. The S&P data are provided by Standard & Poor's Index Services Group. Figures are FTSE All Share, MSCI Europe ex UK, MSCI Pacific ex Japan, MSCI Japan, S&P 500 in sterling - as at 31/12/2008

Concept 5

Design Efficient Portfolios

Risk

The Efficient Frontier

0%

0%

Expected

annual

rate of

return

●FTSE 100

Treasury Bills•

Investing versus Speculating

Noise

Financial JournalistsInvesting Public

Conventional Wisdom

Fund ManagersStockbrokers

Pure Market TimersAsset Allocation Funds

Tactical Allocation

AcademicsInstitutional Investors

Information

MARKET TIMING

STOCK

SELECTION

YES

YES NO

NO

The Informed Investor

What the experts say

“The best way to own common stocks is through an index fund…”

Warren Buffett, Berkshire Hathaway, inc. 1996 Shareholder letter

Active Investors

“Most of the mutual funds investments I have are index funds,

approximately 75%.”

Charles R. Schwab, Author, Guide to financial

Independence.

(Most investors would) be better off in an index fund.”

Peter Lynch, famous stock picker, Barron’s April 2 1990.

Description Annual value £

Increasing by

Start date Age Age

Boat (projected) 500,000 single 11/11/2016 55-55 51-51

Boat Service/Dep/Fuel (projected) 35,000 level 06/04/2017 55-104 51-100

Car/Service/Petrol/Dep (projected) 34,606 3.00% PA 08/03/2017 55-104 51-100

Charitable Donations (projected) 11,074 3.00% PA 08/03/2017 55-104 51-100

Christmas (projected) 6,921 3.00% PA 08/03/2017 55-104 51-100

Clothing (projected) 6,921 3.00% PA 08/03/2017 55-104 51-100

Contingencies (projected) 6,921 3.00% PA 08/03/2017 55-104 51-100

Council Tax (projected) 3,461 3.00% PA 08/03/2017 55-104 51-100

Eating Out (projected) 6,921 3.00% PA 08/03/2017 55-104 51-100

Food (projected) 13,842 3.00% PA 08/03/2017 55-104 51-100

Holidays (projected) 41,527 3.00% PA 08/03/2017 55-104 51-100

Laundry (projected) 4,153 3.00% PA 08/03/2017 55-104 51-100

Mortgage (projected) 130,000 single 11/11/2016 55-55 51-51

Other/ Pocket Money (projected) 27,685 3.00% PA 08/03/2017 55-104 51-100

Sports & Hobbies (projected) 3,461 3.00% PA 08/03/2017 55-104 51-100

Subscriptions (projected) 6,921 3.00% PA 08/03/2017 55-104 51-100

Utilities (projected) 19,352 3.00% PA 08/12/2016 55-104 51-100

Wine/Spirits (projected) 4,153 3.00% PA 08/03/2017 55-104 51-100

Cash Outflows : Personal Expenses

Cash Inflows : Employed Income

DescriptionAnnual value £

Increasing by

Start date Age Age

ITNET Pension 7,216 3.00% PA 06/04/2026 64-95 60-91

Red Pension 2,024 level 08/03/2026 64-95 60-91

Salaries 2,500 level 08/03/2006 44-55 40-51

Salary 69,212 3.00% PA 08/03/2017 55-59 51-55

SSAS Pension 28,500 3.00% PA 11/11/2016 55-95 51-91

Standard Life Protected Rights Pension 919 level 01/09/2025 63-95 60-92

Standard Life Protected Rights Pension 9,422 level 11/11/2026 65-95 61-91

State Pension 7,971 3.00% PA 06/04/2027 65-95 61-91

State Pension 8,971 3.00% PA 06/04/2031 69-95 65-91

DescriptionAnnual value £

Increasing by

Start date Age Age

Sale of Business 3,651,051 single 06/04/2017 55-55 51-51

SSAS Tax Free Cash 312,500 single 11/11/2016 55-55 51-51

Tax Free Cash 13,500 single 06/04/2026 64-64 60-60

Tax Free Income / Capital Receipts

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

2000000

2200000

2400000

2600000

2800000

3000000

3200000

45 50 55 60 65 70 75 80 85 90 95

Toda

y's

Poun

ds

Age

Chart: Value of Readily Realisable Assets