Barbell Bond Portfolio
A barbell bond portfolio invests in securities with short-term and long-term bond maturities generally avoiding intermediate-term maturities. There are basically three types of bond portfolio structures that can be comprised of a barbell, a bullet, or a ladder. Each bond portfolio structure has its advantage or disadvantage given a specific market outlook.

Beta
Beta is a measure of a fund’s sensitivity to market movements measured against a benchmark. Beta’s focus is on the systematic risk also referred to as market related risk. A beta of 1 would reflect the same amount of risk as the benchmark. Betas greater than 1 indicate more volatile movements compared to the benchmark. For example, a beta of 1.25 indicates movements 1.25 times greater than the benchmark in up or down markets. Conversely, a beta lower than 1 indicates less upside and downside movement compared to the benchmark. The validity of the beta statistic is dependent on a high (80%) R-Squared statistic.

Bond Ladders
A laddered bond portfolio invests in bonds with maturities evenly spaced along a continuum. There are basically three types of bond portfolio structures that can be comprised of a barbell, a bullet, or a ladder. Each bond portfolio structure has its advantage or disadvantage given a specific market outlook.

Bullet Bond Portfolio
A bullet bond portfolio invests in securities with concentrated maturities. There are basically three types of bond portfolio structures that can be comprised of a barbell, a bullet, or a ladder. Each bond portfolio structure has its advantage or disadvantage given a specific market outlook.

Consumer Price Index
The Consumer Price Index is a measure of inflation in the economy.

Correlation Coefficient
The correlation coefficient is a statistical measure of the extent to which two variables are associated.

Duration (Macaulay’s)
The weighted term to maturity expressed in years where the weights are the present values of the cash flows occurring in those years.

Duration (Modified)
Measures bond price volatility and provides an estimate of the rate of change in bond price due to a change in yield.

Geometric Mean Return
This is the annualized compound cumulative total return.

Growth Stock
A growth stock typically exhibits a higher earnings growth rate or sales growth rate as measured against a benchmark such as the S&P 500 Index. As a result of their earnings or sales growth, these stocks typically have higher valuations (price to earnings, price to cashflow, price to book value) than value stocks.

Information Ratio
A measure of consistency in excess return which is calculated by taking the annualized excess return over a benchmark and dividing it by the standard deviation of excess return.

R-Squared
R-squared reflects the percentage of a fund’s movements that can be explained by movements in its benchmark index. An R-squared of 100% would suggest a perfect correlation between a manager’s total return and the benchmark. An R-squared of 0% would suggest no correlation between a manager’s total return and the benchmark. When applying statistical measures, higher R-squared numbers provide more validity to the analysis.

Semi-Standard Deviation
This is a characterization of the downside risk of a distribution. The calculation is based on the standard deviation computed only over the observations that are less than the manager’s mean return.

Sharpe Ratio
Nobel Laureate William Sharpe developed this ratio to provide a methodology to look at performance on a risk adjusted basis. The ratio takes into account the amount of excess return a portfolio generates over a riskless standard and divides it by the standard deviation of the portfolio. Higher Sharpe ratios indicate better risk-adjusted performance.

Standard Deviation
Risk is often described by Standard Deviation, which represents the dispersion of returns about a mean return for a significant number of periods. The S&P 500, for example, may have a mean return of 14% with a Standard Deviation of 15%. A Standard Deviation of 15% means that about two thirds of the annualized returns were between –1% and +29% (14% plus or minus 15%). This representation of risk assumes that the returns of the S&P are normally and symmetrically distributed about the mean, which is often, although not always, a valid statistical assumption. A lower standard deviation often is best for the same level of return.

Value Stocks
A value stock typically exhibits a decelerating earnings growth rate, decreasing sales, or hold assets that are discounted to their fair values. As a result of these negative factors, the stocks typically have lower valuations (price to earnings, price to cashflow, price to book value) than growth stocks.

Lehman Brother Aggregate Bond Index (LB Aggregate)
The Lehman Brothers Aggregate Index includes over 5,000 fixed rate debt issues rated investment grade or higher by rating agencies. The index is comprised of government, corporate, and mortgage backed securities. All issues have at least one year to maturity and an outstanding par value of a least $100 million for US Government issues and $50 million for all others. All returns are market value weighted inclusive of accrued interest.

Lehman Brothers Government/Corporate Index (LB Gov/Corp)
The Lehman Brothers Government/Corporate Index includes debt issued by the US Government and agencies thereof, domestic corporations, and foreign debt issues rated investment grade or higher by rating agencies. All issues have at least one year to maturity and an outstanding par value of at least $100 million for US Government issues. All returns are market value weighted inclusive of accrued interest.

Lehman Brothers High Yield Bond Index (LB High Yield)
The High Yield Bond Index includes fixed rate, public nonconvertible, non-investment grade issues registered with the SEC that are rated Ba1 or lower by Moody’s Investor Service.

Morgan Stanley EAFE Index (EAFE)
The EAFE index includes approximately 1,000 companies representing the stocks from 21 stock exchanges in Europe, Australia, New Zealand, and the Far East. The average company in the index has a market capitalization in the mid-capitalization range. The index is a total return index calculated in US dollars.

Russell 1000
An index comprised of the 1000 largest companies within the Russell 3000 index.

Russell 2000
An index comprised of the smallest 2000 companies in the Russell 3000 index that represents approximately 7% of the Russell 3000 total market capitalization.

Russell 3000
An index comprised of the 3000 largest U.S. companies by market capitalization and represents approximately 98% of the investable U.S. equity market.

Salomon Brothers 90 Day T-Bill Index
The 90-Day Treasury Bill Index is a total return index that comes from the average yield of three month Treasury bills acquired by Salomon Brothers.

Schwab 1000
The Schwab 1000 Index is composed of the 1,000 largest publicly traded companies in the U.S. measured by market capitalization.

Standard and Poor’s Composite Index of 500 Stocks (S&P 500)
The S&P500 index includes stocks based on industry representation, liquidity, and stability and is not just the 500 largest US equities. Historically the index has been composed of 400 industrial stocks, 40 financial stocks, 40 public utility stocks and 20 transportation stocks. It is a total return index calculated on market value weightings with each stock affecting the Index in proportion to its market value.

Standard and Poor’s 400 MidCap Index (S&P MidCap)
The S&P MidCap 400 Index includes stocks of 400 domestic companies chosen by industry representation, market size, and liquidity. It is a total return index calculated on market value weightings.

Standard and Poor’s Small Cap 600
The S&P Small Cap 600 Index consists of 600 domestic stocks chosen by industry representation, market size, and liquidity. It is a total return index calculated on market value weightings.

Value Line Composite Index
A market index composed of 1,700 exchange and over-the-counter stocks.

Whilshire 4500 Equity Index
The Wilshire 4500 Index is comprised of the Wilshire 5000 minus the companies in the S&P 500 index. The index currently has approximately 6,500 stocks with about two-thirds of those stocks being mid-capitalization companies.

Wilshire 5000 Equity Index
The Wilshire 5000 Index is comprised of approximately 7,000 actively traded stocks (when introduced its composition included 5,000 stocks). The index includes the equities on the New York Stock Exchange and the American Stock Exchange, and active over-the-counter stocks. It is a total return market value-weighted index.

Manager Style Graph
The manager style graph is a visual representation of the historical asset allocation plotted against style benchmarks. The symbols grow larger as time elapses.

Risk Return Graphs
The scatter-gram graph represents a manager’s risk-return profile. The horizontal axis indicates risk in terms of standard deviation. Higher standard deviation to the right on the chart indicates higher risk. The vertical axis represents total return. Positions on the chart toward the upper left are often preferred because such profiles represent higher return with lower risk. The cross hairs represent performance of the benchmark or market index against which performance is measured. A risk-return scatter-gram, represents performance of funds over one period. Other periods can convey results significantly different from this profile. As with most statistical methodology, this graph should be used as one of many tools to make a judgment about investment managers’ performance. Past returns do not imply future performance.