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The WISE Mutual FundSelection Process
Nature is ruthless in the applicationof its laws. It is completely indifferent asto which individual or species survives.To Nature there are no favourites. Everyspecies must continuously improve itselfso that it is better equipped to meetthe competition in the fierce battle forsurvival. This competition can seem verycruel and unfair, but it is necessary for a
healthy ecosystem.Survival of the fittest, the law of naturethat says, Only the strongest survive,is a principle that WISE applies toqualifying our mutual fund candidates.Rather than considering the merits ofeach mutual fund in isolation, we startour analysis with over 1000 candidates,giving us the luxury of weeding out theweakest contenders and utilizing fundswith the best performance.It is a case of relative strength the onlyway to achieve outstanding long-terminvestment returns is to consistentlypick top performing mutual funds. Just
as predators contribute to the healthof their prey by attacking the weakermembers of a herd, our rigorousscreening criteria eliminates the poorperforming funds thereby significantlyenhancing your portfolios ability tothrive.But investment isnt only aboutgenerating a return. It is aboutgenerating reliable returns overtime at a risk compatible with yourown risk appetite. Our mutual fundselections must continuously prove theiradaptability by consistently deliveringmarket beating historical returns withminimal risk.
Survival of the FittestPAGE ONEWhy Mutual Funds? Investment ExpertiseMutual funds are managed
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by experienced investmentprofessionals with the soundjudgement and knowledgerequired to participate effectivelyin today's financial markets. Theseprofessionals constantly monitor theactivity of these markets and are
capable of effectively pursuingtheir fund's objectives.
DiversificationMutual funds invest in a wide rangeof stocks, bonds or a combinationof the two. This helps diversify yourportfolio and, in turn, reduces therisks associated with any one stockthat may cause a decline in theportfolio's value.Mutual funds invest in manydifferent securities; they canprovide a greater degree ofprotection against loss of principal
than an investment in one specificissue. Within a well-diversifiedportfolio, the overall value of theportfolio should not be dramaticallyaffected by any one stock.
Easy Access toYour MoneyMutual funds provide a greaterdegree of liquidity than mosttypes of investments. In mostcases, investors may redeem theirshares on any business day at thecurrent Net Asset Value (which canbe more or less than the originalpurchase price).
Option for AutomaticReinvestmentShareholders typically have theoption to reinvest fund dividendsand capital gains distributionsallowing the fund to purchaseadditional shares without any salescharges.
AffordabilityYou can invest in mutual fundswith a modest initial investment.A mutual fund portfolio costs afraction of what it would cost todevelop a diversified portfolio ofstocks or bonds on your own.
Mutual funds, which pool themoney of many investors pursuing acommon investment objective, canprovide an affordable solution topursuing a broad range of investment
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goals.Professional investment management,diversification and convenience are thekey reasons to invest in mutual funds.PAGE TWO
more volatile and less correlatedwith the other asset classes and
can actually reduce the volatility inyour overall portfolio.
InternationalStock FundsInvesting internationally can helpreduce fluctuations in a portfoliosvalue because of the differencesin economic and market cyclesbetween countries around theglobe. Foreign investments allowaccess to high-potential sectorsnot well represented in the localstock market, such as technologyand industrials. Holding assets
denominated in US Dollars alsoreduces the currency risk of aportfolio.Foreign investments should coverestablished firms in industrialisedcountries and stocks of countriesthat would be considered emergingmarkets. Representation in NorthAmerica, Europe and Japan fordeveloped markets mutual fundsis important, and investments inLatin America, Eastern Europe andthe Pacific Rim are crucial whenconsidering emerging stock mutual
funds. Fixed Income FundsBonds tend to be less volatile thanstocks and can therefore stabilisethe value of a portfolio, especiallyduring periods of market volatility.Bond funds also have the potentialto generate a steady stream ofdividends to supplement otherincome sources. High yield bondfunds typically pay the highestdividends because they carrygreater risks. High yield bonds canplay an important role in a portfolio,
enhancing return potential whileimproving the diversification of abroad allocation to fixed income.
Balanced FundsBalanced funds provide investorswith a single mutual fund thatcombines growth and incomeobjectives by investing in bothstocks and bonds. Also known asasset allocation funds, they can
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be an effective way of simplifyingdiversification in an investmentportfolio. Since most investors shouldhave a combination of stocks andbonds in their portfolio, investing ina balanced fund ensures that anappropriate mix is automatically
achieved and sustained.
Mutual funds make it easy and lesscostly for investors to meet their goals forcapital growth, income and/or incomepreservation. These funds bring thebenefits of diversification and moneymanagement to the individual investorby providing many different types ofgrowth potential, furthering chances todiversify for different objectives.In order to be well-diversified, yourmutual fund portfolio should be invested
in domestic and foreign stock mutualfunds and in fixed-income mutual fundsor income fund equivalents.
Domestic Stock FundsDomestic equity funds investprimarily in stocks of local andregional companies basedthroughout the Caribbean.By pooling money from manyinvestors, domestic equity fundsgive small investors access to awell-diversified portfolio of stocks.Domestic stocks offer appealingpotential growth opportunity
and are a good source of assetdiversification. They are inherently
Building an Investment Portfolio with
Mutual FundsPAGE THREE
WISE has developed a disciplinedselection strategy to identify its SelectList of recommended mutual funds ineach asset category.In the case of international assets, weapply the WISE selection criteria to themutual fund universe of thousands ofinternational funds. The list of availablesecurities is restricted to mutual fundsregistered outside of the U.S. since themajority of domestic funds are onlypermitted for distribution to citizens orresidents of the United States.Offshore mutual funds offer eligibleinvestors significant tax benefits not
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available with U.S. registered funds,including the immunity to Withholdingand Estate Tax. Offshore funds cannot1) Fund priced in U.S. Dollars makesbuying foreign currency for yourinternational investments easierand eradicates the currency risk of
your assets to the U.S. Dollar.2) Age of fund greater than or equalto 5 years only considers fundswith a track record of at least fiveyears.3) Minimum Initial Investment less thanor equal to US$5,000 ensures thatthe fund is accessible to a broadspectrum of clients.4) 3-year annualised standarddeviation of returns is less thanor equal to category average isolates funds with average orbelow average risk based on allfunds within the same investment
category.5) 3-year and 5-year annualisedreturns greater than or equal tobenchmark index isolates fundswith consistently superior historicalreturns.
WISE Screening Criteria for
International Mutual Fundsbe sold ordistributed withinthe United States or
to any citizen of theUnited States.The international mutualfund selection criteriaconsist of a number ofscreening factors includingage, risk and return. Thosefunds that best fit WISEscriteria become part of ourrecommended list of securities.PAGE FOUR
WISE Screening Criteria for
Domestic Mutual FundsWith the industry still in its infancy,a lack of reporting and disclosurestandards for domestic mutual fundsmake it difficult to unify criteriaand effectively compare fundperformance.
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In the interest of consistency, WISE hasapplied international classificationstandards to the universe of domesticmutual funds to identify its Select Listof recommended funds in each assetcategory.
Domestic EquityAccording to internationalstandards, an equity fund typicallywont invest in any bonds or notesand usually has a minimum weightin equities of 80-90%. Given thisdefinition, there is currently notruly domestic equity mutual fundavailable since they may all holdsignificant fixed-income positions.Investors can gain domestic equityexposure by purchasing units ina domestic balanced fund or bydirect investment in the local stockmarket.
Domestic BalancedOur selection process for domesticbalanced funds consists of anumber of screening factorsincluding age, return, managementcredibility and disclosure/reporting.Those funds that best fit WISEscriteria become part of ourrecommended list of securities.1) Fund priced in TT Dollars2) Age of fund greater than orequal to 5 years3) Fund managed by a team ofhighly skilled professionals with
extensive experience4) Minimum initial investment lessthan or equal to TT$10,0005) 3-year and 5-year annualisedreturns greater than traditionaldeposits and inflation
DomesticFixed IncomeIn the absence of a pure domesticfixed income fund with a trackrecord of at least five years, thiscategory will be represented by ourrecommended emerging marketfixed income funds.DisclaimerThe criteria and screening process for the Select Listfunds was developed by West Indies StockbrokersLimited. The availability of the Select List fundsshould not be construed as personalized investmentadvice. Investment decisions should be based on anindividuals unique situation, tolerance for risk, timehorizon, investment objectives, and other factors. Aninvestment in a Select List fund does not assure a profitor protect against losses. There is no assurance the SelectList funds will outperform other funds that did not meet
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the criteria selected by West Indies Stockbrokers Limited.Investing in mutual funds involves risk, including thepossible loss of principal.PAGE FIVE
1st Floor, Albion Plaza, 22-24 Victoria Avenue, P.O. Box 259, Port of Spain, Trinidad andTobago, W.I.
Mutual Fund Basics
For someone new to mutual funds, trying to find the right one to invest in can seemoverwhelming. There are thousands of mutual funds. Actually, the process of
selecting mutual funds is one of the most straightforward for investors. That's
because there are excellent screening tools available for free on the Internet. Plus,
all mutual funds must publish a prospectus annually that discloses most of the basicinformation an investor needs. If you are interested in mutual funds as an
investment you'll need a general knowledge of the structure and types of mutual
funds and a clear idea of what your investment goals are before you start yourselection process.
A mutual fund is a large pool of capital formed by the contributions of many
investors. The money is used to create a portfolio of securities chosen by a
professional fund manager in accordance with the goals of the fund. Growth fundsinvest mainly in stocks and seek to increase the equity of your investment. Income
funds typically invest in bonds or stocks that pay high dividends with the objective
of producing income with low risk. Not all mutual funds fit neatly into these twocategories. Some "aggressive" funds attempt to generate high rates of return by
selecting fairly risky stocks. At the other extreme are very conservative bond funds
that produce modest income with extremely low risk by focusing on "blue chip"corporate bonds, CDs and government securities.
Strategy
Before you begin your search for the right fund, identify your investment goals. If
you are young and wish to increase your wealth, you'll probably choose a growthfund. If you're retired it's likely you need a fund that produces income with little
risk.
You'll hear a lot of advice about "load" versus "no-load" funds. A load fund deducts
a sales commission from the money you invest in addition to other fees, while a no-
load fund does not. Proponents of load funds argue that you get better long-termresults. However, Craig Israelsen, writing in "Financial Planning" (May 2003)
reported on a study that found no-load funds performed better, a view shared by
most financial analysts (see "The Lowdown on No-Load Funds," in References).
Find the Right Fund
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Mutual fund screening tools are readily available online and are the best way to
start your selection process. Some of these tools are quite simple. T. Rowe Price's
Mutual Fund Compare allows you to input the symbols for up to five funds and getback a "snapshot" report on the funds' performance and fees (see Resources). The
Morningstar Mutual Fund Comparison Tool is an example of a sophisticated
software package you can use to create your own listings based on the criteria thatare important to you (see Resources).
Screening tools are invaluable for narrowing your choices to a manageable number,
and they provide current information, but they are not a substitute for in-depth
research. For that, you should order or download copies of mutual fundprospectuses. The prospectus includes a detailed history of the fund's performance
for the past 10 years, a disclosure of all fees and the terms and conditions of the
fund. A prospectus also includes information about the fund's management andinvestment strategy. Check different funds during the same time period. Almost any
fund looks great during good economic times. Often the real test is how well a fund
performs when market conditions are negative. As a final step, read independentanalysis reports in publications like "Forbes" (see Resources
Read more:Process of Selecting Mutual Funds | eHow.comhttp://www.ehow.com/how-
does_5422607_process-selecting-mutual-funds.html#ixzz1ymTZYRCDTel: (868) 625-WISE (9473) Fax: (868) 627-5002 E-mail: [email protected] www.wisett.comA Member of the RBTT Finan
Monday, June 25, 2012
Our Investment Process
A Sophisticated Process Drives Results
The key to the success ofFidelity Insight's portfolios is an intensive and
disciplined research process. We begin at the macro level, evaluating the economic
and market environment looking out 6-18 months. We continue the process down to
the micro level, evaluating the qualities and skills of individual mutual fundmanagers. Though the actual process is quite involved, it can be summarized as
three steps.
Step 1:
Determining the Right Asset Mix for the Current Market
Our investment process begins with a fundamental investment analysis of the
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economy and the investment markets in the United States and in foreign countries.
Major factors include:
Economic factors such as inflation, employment and interest rates
The outlook for corporate earnings Current stock valuations (price to earnings, price to book, etc.)
Supply and demand for various asset classes
Given our view of the overall investment environment, we determine for each of our
Fidelity portfolios the percentage that should be invested in U.S. stocks, foreignstocks, U.S. bonds, and money markets or other cash equivalents. While all of our
portfolios are actively managed, we don't normally shift significant amounts of a
portfolio from equity funds to money market funds over a short-term period.However, we may invest in money markets or short-term debt instruments as a
defensive measure even in our more aggressive portfolios.
Step 2:
Choosing the Best Mix of Investment Styles
Once our asset allocation decisions are made, the next step in the process is to
determine the percentage allocated to each of the following seven global equity
styles:
U.S. Growth - Large Capitalization
U.S. Growth - Mid/Small Capitalization
U.S. Value - Large Capitalization
U.S. Value - Mid/Small Capitalization
Diversified International Equity Specialized International Equity
Alternative Investments (such as commodities and real estate)
We first review the broad-based economic factors that will influence the earningsprospects for each style. The resulting earnings outlook for each style is compared
to its current valuation, both relative to historical norms and to other styles, to
determine its overall attractiveness.
Step 3:
Selecting the Best Mutual Funds for Each Style
The last step in our process is to select the Fidelity funds that we believe offer thehighest risk-adjusted return potential for their investment style. We use an internallydeveloped screening process which includes a risk-adjusted performance analysis as
well as an evaluation of each fund relative to its peers. But this screening process is
just a preliminary refinement before a more in depth quantitative and qualitative
evaluation takes place. Key factors we examine include each Fidelity fund's:
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Asset Allocation
Individual Holdings
Sector Weightings
Risk Characteristics
Another vitally important factor in fund selection is the fund managers themselves.
In our face-to-face meetings, we look for Fidelity managers who display what we
consider are five critical characteristics of success:
A passion for investing
A well-defined investment discipline
Superior knowledge of their holdings
Strong conviction of their investment ideas
A substantial amount of their own money invested in the fund
A Demonstrated Record of Success
This combination of sophisticated quantitative research and in-depth one-on-one
manager interviews gives us a unique advantage in building and continuouslymanaging Fidelity Insight'sportfolios. And it shows in our results.
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