Equity Investment Selection

G.W. Henssler & Associates, Ltd., follows strict criteria when selecting equity investments. Our philosophy, The Ten Year Rule, states that any money a client will not need within 10 years should be invested in high quality, individual common stocks or mutual funds that invest in common stocks. GWH estimates the portion of the client's portfolio that will not be needed within 10 years by running cash flow projections.

GWH recommends dollar-cost-averaging (DCA) as the most appropriate approach to adding funds to equities, and believe this approach affords most clients the best opportunity to achieve long-term gains in the equity market. We do not believe in trying to "time the market."

GWH normally recommends using a 12-15 month time period to DCA funds from cash into equities. This may mean either buying additional shares of one or two mutual funds each month, or adding a few new stock positions each month until a portfolio is built.

Clients with more than $50,000 to be invested in equity investments should consider high quality, individual common stocks, or tax-sensitive equity mutual funds. To be properly diversified, a client should own at least 10 to 16 different stocks in at least six different industries. In taxable accounts, stocks give the investor more control over when to realize capital gains. In all accounts, holding stocks gives the investor more control over which industries to invest heavily in, and which industries to avoid. Tax-sensitive equity mutual funds are funds that attempt to minimize capital gains whenever possible. These funds can simplify the task of choosing equity investments by allowing funds to be managed by a professional money manager.

GWH only recommends purchasing stock in companies that are at least rated "A" by Value Line for financial strength, at least "2" by Value Line for safety, or at least "A-" by Standard & Poor's for quality. We recommend stocks with the intent of holding them for a long period of time. However, if changes occur in companies' situations, or if the firm's general feeling on economic trends changes, the appropriate adjustments will be made to a client's portfolio. Low turnover in the portfolio should be the goal, but should not prevent GWH from making necessary changes to a client's portfolio when economic forces or news about the company may change our thoughts concerning the company's prospects.

GWH recommends mutual funds that invest in common stocks to those individuals with less than $50,000 to invest in equities. Mutual funds provide instant diversification, and are more cost-effective for these investors, as the commission costs of building a diversified stock portfolio can be prohibitive when less than $50,000 is invested. Mutual fund selections should be reviewed regularly to insure the funds still meet a client's goals, management and objectives have not changed, and the performance is still adequate. We generally recommend only no-load mutual funds.

If a client wishes to purchase mutual funds that invest in common stocks, typically, GWH recommends only funds that are rated four and five star by Morningstar, or funds that employ a strategy and a philosophy that we anticipate leading to better returns than already realized.