Investment Objective

Policy Statement

Investment Objective

We are young entrepreneurs, seeking quick extra income on top of our salaries.

Main Objective: To create a well-balanced and diversified portfolio of securities in route to a successful investment career.

* Analyze the various aspects of numerous types of securities

* Explore the potentials of foreign securities (China)

* Develop the portfolio for purely income purpose, in doing so

o Maximize on net returns and profit

o Minimize tax liabilities

o Portfolio net returns, and net growths surpass the yearly inflation

Risk Tolerance

We have very high risk tolerance, as we are young already equip with annual stabilize incomes. Furthermore, we have adequate knowledge on various securities and possess past investing experiences. Hence, we are seeking gain/loss of portfolio net return in the range of 25%-30%. If at any time, we have a loss of more than 25%, then the entire portfolio will be analyzed and re-evaluated.

Liquidity

Liquidity is not a major concern, though a portion of the portfolio should cover any unforeseen circumstances. Thus, at least 50% of the portfolio should be invested in short-term, easily convertible securities such as stocks, and short-term bonds.

Holding Limits

Holding limitations are presented as a draft outline to our portfolio. Under various economic environments, the percentages of each asset class can be varied to weather the market fluctuations.

* Large Cap U.S. Equities (10-25%)

* Mid Cap U.S. Equities (10-25%)

* Small Cap U.S. Equities (20-35%)

* Foreign Equities (15-25%)

* Mutual Funds (10-15%)

* Corporate Bonds (10-15%)

* Government Bonds (2 to 10 yrs term) (5-10%)

Target Allocation

With our current financial stability and the desired high risk tolerance factor in mind, as well as expected level of foreign investments. Below would be the ideal portfolio, in which it balances the high risks with the potential high values of rewards.

* Large Cap U.S. Equities (15%)

* Mid Cap U.S. Equities (15%)

* Small Cap U.S. Equities (25%)

* Foreign Equities (20%)

* Mutual Funds (10%)

* Corporate Bonds (10%)

* Government Bonds (2 to 10 yrs term) (5%)

Selection Process

Criteria for securities are short to mid-long term, with exception to the Government Bonds and possibly Corporate Bonds. Diversification amongst short-term securities is a must, hence inter-security correlation, Beta value and portfolio standard deviation are some values to keep track of.

Review and Re-evaluate

The portfolio has to be maintained and review on a weekly basis, especially with the large group of short-term securities. Buy/sell of securities will be taken place on a daily basis. During any week, if the weekly performance drops more than 25%, the entire portfolio will be re-evaluated. Various U.S. benchmarks, as well as international benchmarks will be utilized.

Economic Conditions

For most of us, the events that went down in 2008 would consider being the biggest economic downturn of this century and the previous century. Now for those who have lived through the American's great depression may disagree with this, though one thing for sure is that this current period of financial hardship will forever be remember in the American history. For years to come, this turn of tides in the financial world will be the main topic of discussion amongst historians, economists, and financial enthusiasts.

There are many documentations and analysis already published on the turn of events in 2008 that shook the financial world, first in US, and then globally. It started out as booming fairytale, ended in a state of emergency. The United States economy was considered strong with improving growth all around heading into 2008, though no one would ever foresee that two years later, in 2010, now we would be in a state of desperate recovery from what considered as the "greatest financial crisis" in our lifetime.

Now looking back on the events, it seemed that America was diving headstrong into the inevitable housing market collapse, the bubble bursted similarly with the tech dot com market collapse back in early 2000s. Many contribution factors can attribute to the following string of events. The collapse "coincidentally" co-juncture with the events of many mortgage defaults. Ultimately, it led to the current state of recovery from the ensued period of "credit crunch", whereas the entire credit market simply froze. It froze up the line of credits, reducing the credit market to non-existent overnight. Companies collapsed in the wake of stockpiling huge amount of debt, and many companies soon to follow in bankruptcy as the government eventually took over the emergency recovery.

It first started out in the U.S with its financial sector in turmoil within weeks, passed it onto other businesses, and soon turned it into a global-wide event. Though it is not on the same scale of effect as the great depression has on the country, where the entire country was devastated; all of the industry sectors were affected just as great as any other. In this case, the financial sector head-dived, bringing along many other industries, though those industries didn't sulk in the downturn as it was with the great depression. Nevertheless, this event may have a bigger impact on the global scale, since United States is involved in the center of the world economy, with its world recognized currency and its influence on the world economy, many countries are also in similar economic condition as United States.

Now this brings us up to date, where our current economy is still in a state of mass recovery, especially the financial sector. During the past two years, we grew accustomed to the terms