Monument SMA Investment Strategy

PORTFOLIO DESCRIPTION, SUITABILITY AND OBJECTIVES

The Monument SMA portfolio is designed for investors with a relatively high tolerance of risk and a longer time horizon. Investor has little need for current income and seeks above-average growth from their investable assets. The primary objective of this model is capital appreciation, and investor should be able to tolerate equity market type fluctuations in the portfolio's value. This strategy utilizes technical indicators to move into and out of the market and may have a high turnover.

Monument SMA Approach to Investing

The Monument SMA utilizes both technical and fundamental analysis as a three tiered approach to investing: Market Direction, Stock Selection and Allocation Optimization.

Market Direction Strategy

The Market Direction component relies on proprietary technical analysis and seeks to determine general and established trends of the equity markets. Specifically, when the technical analysis suggests the market is likely to trend up (or is in the process of doing so), the manager will deliberately pursue a fully invested allocation.

If the indicators identify a likely downward bias, the manager will seek a cash/cash equivalent position with the majority (if not all) of the portfolio and wait for opportunities to emerge to strategically re-enter. If the market is trending laterally in a consolidated fashion (or is already doing so), the manager will pursue an appropriate blend of cash/cash equivalents and equities. The portfolio will be predominately in cash for a period of time if the consolidation is after a sell-off.

Stock Selection Strategy

The Stock Selection component is fundamental in nature and relies on a series of proprietary sorts which include, but are not limited to, valuation ratios, per share ratios, dividend ratios and solvency ratios. The analysis focuses on high quality stocks which exhibit the greatest potential for growth while trading at a discount to their intrinsic value.

Analysis of ratios, which have historically identified stocks with lower volatility than the markets, can also play a prominent role in equity selection. Equity positions are evaluated on a constant basis to determine their appropriateness in the portfolio's allocation.

Allocation Optimization

The Allocation Optimization component is more stylistic in nature. It is engaged when the technical indicators referenced above (Market Direction) determine whether a move in or out of the markets is in order.

Market Direction as a Primary Driver

Market direction is a primary driver in a portfolio manager's critical decision-making process to determine how investments are allocated, either in equities, cash equivalents or a balance of both. When a change of trend is signaled, the manager will begin to scale positions either in or out of the market to optimize investment value.

Markets have a history of randomly defying technical and fundamental analysis and the manager is acutely aware of the ever-present risk this poses to the success of the strategy. Therefore, equity positions will be phased in and out over several weeks to allow the emerging pattern to fully establish itself and subsequently reduce the risk of a “whipsaw” event.

PORTFOLIO MANAGER

Paul W. Davis received his BS from Denison University and has over 25 years of experience in investment management of stocks and commodities. In 2001, his work on capital preservation in volatile markets was published in Active Trader Magazine. Paul is a Chartered Financial Analyst level one candidate.

PORTFOLIO BENCHMARK

Standard & Poor's 500 Index

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