Signal Point™ Asset Management Advisors

• Overview

• SignalPoint Q&A

• Market Assessment Model

So What Is The SignalPoint™ Portfolio Strategy?

Investors and investment professionals alike are faced with many other questions on a constant basis. The SignalPoint™ Portfolio Strategy provides an answer…discipline, structure, and transparency.

Objectives of SignalPoint™ Portfolio Strategy:

• Steadily and methodically capture profits when sectors appreciate.
• Systematically add to positions during periods of weakness.
• Maintain ample cash reserves for liquidity and portfolio cushioning.
• Exploit the volatility in the market.

Our equity portfolios taps into the power of Exchange Traded Funds, or ETFs, in lieu of individual stock. In combination with our proprietary algorithm, which seeks to produce above-market performance while reducing normal market risk, we provide our clients with an “emotion free” investment model.

For example, in our all-domestic equity ETF portfolio, DomesticSignal, stocks in all 10 sectors of the Dow Jones Major Market Index represent 50 percent of invested assets. The other 50 percent of invested assets are represented by three ETFs representing about 1,600 stocks held in the S&P Mid-Cap 400 Value Index, the S&P 600 Small-Cap Growth Index and the S&P 600 Small-Cap Value Index. In addition to the 10 sectors representing the Dow Jones Major Market Index and the three ETFs representing 1,600 small- and mid-cap shares, cash represents a very important 14th position in the portfolio. All 14 holdings are coordinated with our proprietary risk assessment model. This concept allows us to manage well-diversified equity portfolios in a tax-efficient manner.

The discipline we apply to the SignalPoint™ Portfolio Strategy allows us the opportunity to harvest the volatility intrinsic to each ETF index. Market events generally affect each market sector differently. We attempt to limit exposure in rising sectors without disturbing the other ETF components, and increase exposure in declining sectors without disturbing other ETF components. Adding or subtracting dollars from each component is done in increments of approximately 5 percent in any one month, which results in dollar cost averaging in the affected components. Each of the Dow Jones Major Market Index components has a weighting that ranges around 4 percent of invested capital. Weighting for the three S&P small and mid-cap components ranges around 12 percent. Our all-important 14th position, cash, carries a weighting ranging from 20 to 35 percent, on average.

Our ETF strategies strive to provide a widely diversified portfolio married with a procedure for assessing and managing risk that is not influenced by emotions.

Our risk assessment process is composed of four variables, which the algorithm uses to produce a given figure for how much cash should be on hand given the market risk:

• Relative Valuation–This is the sum of the Value Line P/E ratio and the 13-week Treasury rate. The sum usually adds up to about 20.
• Speculation–This is derived from Value Line’s Best/Worst Performers list. It looks at the 41 best and worst stocks over the last 13 weeks and compares the percent change in the two lists to determine speculative activity.
• Divergence–This is a measure of divergent thinking on the part of investors. It’s Norman Fosback’s “High/Low Logic Index” except applied to the NYSE and the NASDAQ Composite. When the Index is high, we consider the market to be in a period of great divergence, with many new highs along with many new lows. We feel this is not conducive to higher stock prices.
• IPO Zeal–This looks at the total number of issues available on the NASDAQ and NYSE traded each week. It peaked at more than 9,000 and is now down to about 7,000. We have found this component seems to only show significant bearishness about once a decade.