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Portfolios

Tandem’s approach to portfolio management generally involves a balanced portfolio that blends equities and fixed income for clients seeking a traditional, moderate risk investment approach. The investment objective is total return consisting of capital appreciation and current income. Stock and bond allocations are adjusted based on each individual’s risk tolerance, based on a proprietary risk assessment profile.

The majority of clients hold a classic 60% stock and 40% bond/cash portfolio. If more or less risk is necessary and warranted, percentages are adjusted to match a suitable asset allocation parameter aligned to the needs and goals of the client. Portfolios are monitored to determine when rebalancing between asset classes is required.

In larger portfolios, individual bonds rated “A” or better are used to build a portfolio of stable income returns with minimal volatility. In smaller portfolios, exchange-traded funds (ETFs) or a basket of bonds are used in the fixed income category rather than individual bonds.

The investment objective of the balanced portfolio is to outperform a comparable (stock/bond allocation) benchmark over rolling three-year periods, and to do so with low volatility and less risk.

Exchange-Traded Fund Portfolio

Tandem Exchange-Traded Fund Portfolios use an allocation strategy to build a diversified core portfolio to capture market returns at a low cost. The first objective is to provide clients with broad market exposure and risk control. This is the foundation or core of the portfolio, which is considered long-term. A smaller portion of the portfolio is used to take advantage of short-term opportunities to generate additional return beyond the core.

The investment objective is “total return,” consisting of both capital appreciation and income. Stock and bond allocations are adjusted based on a client’s risk tolerance. The majority of clients hold a traditional 60% stock and 40% bond/cash portfolio. If more or less risk is necessary and warranted, percentages are adjusted to match a suitable asset allocation parameter based on the needs and goals of the client. Portfolios are monitored to determine when rebalancing between asset classes is required. The portfolios hold a necessary amount of positions for broad diversification and very low turnover. In addition, portfolios contain appropriate percentages of US and non-US (international) holdings for both diversification and dividends.

In most cases, bonds are concentrated in rated “A” or better fixed income positions to contribute stable income returns with minimal volatility. The investment objective of the portfolio is to outperform a comparable benchmark such as the Morningstar Moderate Target Risk Composite over rolling three-year periods, and to do so with low volatility and less risk.

ETFs provide investors with several advantages over mutual funds: low-cost, index-based performance, asset-class consistency, no minimum investment requirements, trading flexibility, transparency (clients know exactly what they hold), and tax efficiency. Portfolios are monitored to determine when rebalancing between asset classes is required.

Core Equity Portfolio

The Tandem Core Equity Portfolio utilizes a risk-controlled strategy that seeks long-term capital appreciation through a broadly diversified portfolio of 40-50 stock positions. The goal of the portfolio is to secure healthy returns without unnecessary levels of risk.

Tandem’s fundamental analysis combines top-down macroeconomic strategy with bottom-up security selection. Tandem utilizes a time-tested, rigorous screening process for security selection. The resulting portfolio holds well-established companies with stable earnings, strong management teams, and healthy balance sheets. Tandem buys stocks across economic sectors to achieve proper diversification and avoid excessive correlation. By strategically diversifying individual holdings across economic sectors, client portfolios are exposed to far less company-specific risk.

The Core Equity Portfolio holds a blend of growth, value, and growth-at-a-reasonable-price (GARP) stocks, with the proportions based on the business and economic cycles. For additional diversification by capitalization (e.g., mid and small cap stocks) and geography (e.g., US and Non-US stocks), ETFs are then used to complement the individual stocks. Both individual bonds and/or ETFs are used in the fixed-income category (based on the size of the portfolio) to create a balanced portfolio. If more or less risk is necessary and warranted, percentages are adjusted to match a suitable asset allocation parameter based on the needs and goals of the client. Portfolios are monitored to determine when rebalancing between asset classes is required.

Tandem modifies each investment strategy based on an individual client’s financial situation, risk tolerance, investment experience and objectives.

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