Key Concepts for Successful Investing

Knowing What Not to Do is Half the Battle

• Market timing does not work

Double equal probability (50% sell x 50% rebuy = 25% success rate)

• Great stock trader is a “Great Oz” myth (See: expert quotes)

Maintain Long-Term View

• Think in terms of bond market terminology

< 5 yrs. = short term

5– 10 yrs. = intermediate term

>10 yrs. = long term

• We are all long term investors and must maintain discipline through inevitable downturns (see: Stock Market Downturns)

Capturing the Equity Premium is Significant

20 yrs., $1.00, 3% compounding = $1.81

20 yrs., $1.00, 8% compounding = $4.66

Take Advantage of the Best and Current Scientific/Academic Research

Fama/French 3 factor model (now 4) adds value/diversification

Best Risk Reduction is through Diversified Conservative Bond Position

• 9/30/2008 – 3/31/2009

DFA Intermediate U.S. Govt. Fixed Income (DFIGX) +8.91%

DFA Five Year Global Fixed Income (DFGBX) +3.86%

S&P 500 Stock Index -31.59%