Thank you for purchasing the Ramcap software offered by Wilson Associates. Ramcap is a sophisticated asset allocation program for investment professionals. This software helps analyze, construct and compare investment portfolios using Modern Portfolio Theory. The innovator of Modern Portfolio theory, Harry Markowitz, received a Nobel Prize in Economics for his efforts and Ramcap uses this theory in its analysis.

This training is provided as an introduction to the software. This lesson does not get into the details of how Modern Portfolio Theory works. For more information on this topic, please check with your local library or try the Internet and search on Modern Portfolio Theory or Harry Markowitz.

Also, this training assumes the user of the software is familiar with the operating systems of either Microsoft Windows 3.1, Windows 95, Windows 98 and Windows NT. All references used in this training tape will be from Windows 95 or 98. The user must be familiar with conventions such as single CLICKing, double CLICKing, dragging, using the tab button and resizing. All versions of Windows have tutorials that will help you get started in understanding how to use your computer.

To begin our training, please ensure that the software has been properly loaded. Start the software by double CLICKing on the program icon, Ramcap. If you have trouble starting the software, please stop and call Wilson technical support at 818-999-0015.

The main screen should be showing. From this main screen, you can create a new client, select an existing client or start other programs such as the Slide Show and the Client Center.

To begin, we will explore the Options menu. CLICK on the Hide Screen Button at the bottom of the screen. Now, CLICK on the word "Options" at the top of your screen on the menu.

For purposes of this introductory training, we will begin our discussion by CLICKing on System Defaults.

System Defaults are defaults that appear every time you create a client account. When an account is created, these are the items that will populate the account. Please remember that these items can be changed on the account for the actual client. System defaults allow you to minimize your data input.

The first item, Income Tax Rate is simply that. When this item is activated, the software will net the portfolio’s ordinary income tax portion of the return from the gross return. It is not necessary to CLICK on the YES box unless you want to automatically tax effect all accounts and portfolios you create. I would recommend leaving all the YES boxes uncheck here since you can very easily turn these items on and off with the toolbar.

The next item is the Capital Gains rate, which has been lowered by Congress to 20%. The Management Fee is the fee you or another manager might charge to manage the portfolio. If you are charging asset management fees, enter in the most popular fee you use with your clients. Inflation Rate and Risk Free Rate should be entered in also. The Risk Free rate is normally the rate of return that an investor can receive with no risk taken. Normally we use the 90-day T-Bill rate here but any other risk free rate can be used.

The Probability Range determines the percentage of the expected returns that will be taken into account in the analysis. This "RANGE" will be used to determine the optimal mix of assets. For example, Portfolio A may have an average return of 10%, but the range of returns at 90% Confidence may be between –3% and 20%. The same portfolio may have a Range of returns at 99% confidence between –10 and 30%. For purposes of this introduction, I would recommend using 95%.

The "Optimize Using Target Rate of Return" option allows you to define a targeted return on the Efficient Frontier. "Use User Asset Estimates" tells the software to use any estimated return you have created instead of the historic return by default. If you want the software to calculate a portfolio that includes a small percentage in all the assets chosen, CLICK on the box next to "Include 1 Portfolio with Old Optimization." This portfolio will not be on the Efficient Frontier but it will include all assets.

When you are finished here, CLICK on the OK button.

Now, CLICK on the Options at the top again.

Select Firm and Planner name. Type in this information, as you want it to appear on the reports. CLICK on the OK button when you are finished.

Now, CLICK on the Options at the top again.

The Report Layout choice allows the user to CUSTOMIZE the report’s headers, footers, fonts and effects. For example, if you want your company’s name to show up on the footer of the report and the date to show at the top, here is where you would customize it. If you are on the Report Layout screen, please CLICK the OK button to save your changes and exit. Otherwise, CLICK on the Cancel button.

I will discuss briefly the remaining items on the Options menu to tell you their function. If you decide to explore these items during this training, you may want to stop or pause the recording and start it up again when you are finished.

Now, CLICK on the options at the top once again and leave it open.

The item, Edit Estimates, allows the user or a participating firm to create estimated returns that can be used in place of historic returns. For example, the historic average return on the Donahue Money Market index is over 7% for the last 30 years. If you would not expect this same return over the next 12 months, you might create an estimate for the next 12 months. Estimating returns is easier for some asset than others but this is a great feature for those that believe the past will not duplicate itself in the next 12 months.

The next item is the Predefined Portfolio. Predefined Portfolios are model portfolios that can be created and saved in the software so that the user doesn’t have to recreate them each time. For example, an advisor may have 5 "Model" or Predefined Portfolios. These portfolios may have different objectives and risk parameters. If the advisor wants to SAVE these portfolios to use with any new client, he would enter them here and save time from recreating portfolios for everyone.

The next item under Options is the User Defined Assets. This option allows the user to input data on any security or portfolio that is not already in the software. To enter in data, you must enter the annualized return and the standard deviation of the asset or portfolio and assign a correlated asset. Typically you would want at least a 10 year return or more and a standard deviation to match this chosen time frame.

The next two options are self explanatory, but one, Restore Graph Defaults, is one that deserves some explanation. Since the graphs in the software are customizable, a user could end up with a graph that isn’t quite appealing. If you make unwanted modifications to a graph, simply close the graph window and select this option to reestablish the graph’s original settings.

The Wizard option is useful to those that are new to the investment business and have limited knowledge of computer software. For our purposes here, we will not discuss the Wizard. Be sure a check mark is NOT visible next to Wizard On. If a check mark is visible, CLICK on it to remove it.

The Import/Export feature allows the user to import from many third party portfolio management software packages. If you are using Dbcams, Centerpiece, Total Resource or are an LPL rep, you can use this option. Contact your software provider for directions on exporting to this software package.

Now, please CLICK on options at the top and select, Restore Front Screen.

CLICK the New Client button

We are now on the Client Info screen. This screen requires certain fields to be entered. The LAST NAME and SOCIAL SECURITY NUMBER are required field.

For training purposes, enter your last name then enter any number for Social Security.

The Birthdate, Retirement Age and Ret. Income are necessary for the retirement reports named Portfolio Analysis, but they are not required for any other reports. We will skip the remainder of this screen since it is not required.

This is the section of the account where you define the investment objective for this pool of money. You can either select the type of investor objective or you can CLICK on the Questionnaire button at the bottom, and answer the questions while letting the software determine the objective.

You will note there are Risk Tolerance ranges for each objective. These Minimum Rates of Return were figured based on 90% confidence. If you are going to use a different confidence level such as 95%, you will need to note it for our discussion on the next screen.

CLICK on Growth and Income for this example.

Now, CLICK on the Next button OR CLICK on the Defaults Tab.

The Defaults tab section is for creating the Client Account Defaults. Some of the information presented here was brought over from the System Defaults we previously discussed under the Options Menu. The main area of interest is the holding period and "Minimum Rate of Return" for a one year holding period.

If the client could tolerate a 3% loss in a BAD year, enter the amount minus 3. Do this now. This number will help the software "pick" a portfolio on the efficient frontier that does not violate the client’s minimum rate of return requirements.

The Contributions and Withdrawals button allows the user to show varying cash flows into and out of the portfolio

CLICK on the Next button or CLICK on the Portfolio Tab

You should now be looking at the Portfolio input screen.

Name the portfolio. Portfolio naming conventions might include examples like "Current Holdings", "Charles Schwab 3/31/99" or "Proposed Holdings." Also, you might want to create a portfolio with just one security or index for comparative purposes. For example, you might name a portfolio "S&P 500" and include 100% allocation to the S&P’s index.

Name the portfolio "Current Holdings." Type $100,000 for the Portfolio Value and CLICK the Add Assets button.

The "Building the Portfolio" screen allows you different ways of adding securities to your portfolio. The Select Assets button allows you to pick securities right out of the database. Though this is the fastest way to create portfolios, this option gives you little flexibility.

The "Classify Specific Securities" button allows you to select a specific Mutual Fund or Stock from the database and the software categorizes it into either an asset class or an investment style. Only US Equity Mutual Funds have a style attached to them.

The "Wilson Pre-Defined Assets" button gives you a preset list of assets and constraints that may be appropriate for the objective.

The "User Pre-Defined Portfolio" button allows you to select a model portfolio you have already constructed. The "model" portfolios can be created under the Options menu choice.

The "Firm Predefined Portfolio" button is only available for Broker Dealer and Investment firms that have provided Wilson with "model" portfolios for their investment representatives.

For purposes of this training, CLICK on the Classify Specific Securities button.

During this training, we will assume we are entering our client’s current portfolio into the software first. We will assume our client owns only two mutual funds. To choose a database, CLICK on the Asset Data button at the top left corner and select Mutual Funds.

CLICK inside the Search box and type I-N-V-E-S-T. The mutual fund Investment Company of America should be at the top of the box on the left.

If you are interested in some information on this mutual fund, CLICK one time on the fund. Now CLICK on the Information button. This information is updated quarterly.

Close the Security Information screen with the CLOSE button at the bottom right corner.

To add Investment Company of America to the portfolio, DOUBLE CLICK on the fund or use the arrow pointing to the right. The mutual fund is now on the right side.

You will also notice the fund has been assigned a Surrogate Asset to represent it in the analysis. In this case, the Growth and Income index is defaulted. If you have the optional Mutual Fund database, which is available with Ramcap Gold and Power Optimizer, you will notice a box directly to the right of the Surrogate Asset. This box gives you the option of using the actual security’s historical data in the analysis.

Now, CLICK in the Search box again and type BOND. Bond Fund of America should be at the top of your list. Again, DOUBLE CLICK on this fund to select it.

The Hold Amount total at the bottom should equal the Portfolio Value to the right. CLICK OK to proceed.

You should be back on the Portfolio tab. Note each asset is identified with its holding percentages and dollar amounts.

CLICK on the OK button.

The screen showing is the Portfolio Status screen. This screen shows several stats on the portfolio as a whole and on each asset independently.

To view the portfolio graphically, CLICK on the View Graphs button on the right Side Bar and select the Asset Mix/Pie choice. Now, DOUBLE CLICK on any of the pie slices to view information on each slice.

CLOSE this window by CLICKing the X that is directly at the top right corner of the graph window.

You have completed entering in the client’s current holdings.

To enter the Recommended Portfolio, CLICK the YELLOW NEW button on the top tool bar. For the Portfolio Name, type Recommended.

CLICK Add Assets.

The left column lists the asset classes available to create the recommended portfolio and they are divided into categories. For example, Mutual Fund indices are located in the Pooled Funds section and the S&P 500 is located in the Domestic Equities section. Note the buttons on the top allow you to move quickly to the Next or Previous section. The scroll bar on the right of the list can also be used to maneuver.

To begin, we must choose the assets we want to use in our recommended portfolio. Begin by selecting the Prime Rate Index by DOUBLE CLICKing on it. Scroll down to the section titled Cash Equivalents. DOUBLE CLICK on the Donoghue Money Mkt. These assets should show up on the right side under Selected Assets. If not, use the Add button at the bottom.

Scroll down on the list until you get to the Pooled Funds section. Under Pooled Funds, find International Equities. Add it to your portfolio by DOUBLE CLICKing or use the Add button.

Scroll down a little farther and find Specialty Financial Services. Add this asset. Also add Specialty Technology.

Now, CLICK on the Next Section button. You should be on the Domestic Equities section. Scroll down under Domestic Equities until you get to Wilshire Large Co. Growth. Add this asset. Also add Large Co. Value, Small Co. Growth and Small Co. Value.

CLICK on the Next Section button at the top 2 more times. You should be on Domestic Bonds.

Scroll down on Domestic Bonds until you get to Salomon Corporate Bonds 3-7 years. Add this asset. Scroll down to Salomon Treasuries 1-3 years and add this asset.

The next section is International Bonds. Double CLICK on International Bonds under this section.

CLICK on the Next Section button 5 more times. You should be on the Futures Section. Double CLICK on Futures Pooled Index to add this asset.

You will note all of the Selected Assets are listed on the right side. If you want to remove one, just Double CLICK on the asset at the right.

CLICK on the OK button at the bottom.

The Portfolio Tab allows you to modify the Asset Name, add you own asset allocation percentages or dollar holdings and it allows you to establish the investment policy.

Typically the "policy" refers to the Maximum and Minimum you are allowed to invest in each asset. For our purposes, we will assume the client does not want us to have anymore than 20% in cash at any one time. Also assume the client is requiring us to hold at least 5% in cash at all times.

CLICK in the Max box for Donaghue Money Markets. Delete the 100 and type 20. Now, using your keyboard hit your Right Arrow button until the Minimum Box is highlighted. Again, using you keyboard, type 5. You have established an investment constraint on Cash that does not exceed 20% but requires at least 5%.

Using your arrow keys again, hit the left arrow once and the down arrow once. You should be on Futures Pooled Index. Type 15% for the Max. Hit the down arrow again. For International Bonds, type 10. Continue as follows:

International Equities        20% Max

Prime Rate                 15% Max

Salomon Cp. Bds. 3-7 Yrs 20% Max    5% Min

Salomon Treas 1-3 Yrs 20% Max    5% Min

Specialty - Fin Srvcs        5% Max

Specialty – Technology 5% Max

Wilshire Large Co Growth 15% Max

Wilshire Large Co Value 15% Max

Wilshire Small Co Growth 15% Max

Wilshire Small Co Value 15% Max

Keep in mind, these are constraints on the portfolio optimization process also. If we simply wanted to allocate a certain percentage or dollar amount to each asset, we would have used the Hold or Amount fields.

Now, CLICK on the OK button.

The Efficient Frontier

The Efficient Frontier Graph shows the curve representing 9 portfolios that are historically "efficient" relative to expected return and risk (standard deviation). Ramcap chooses the portfolio on the curve that allows the greatest Rate of Return at the most feasible Risk (Standard Deviation). The light colored ball on the curve represents this "optimized" portfolio while the highlighted column represents the mix.

Note the "optimized" portfolio does not violate the client’s Minimum Rate of Return goal (-3%) for our example.

Note the Scroll Bar directly to right of the efficient frontier.

Scroll down several times by CLICKing on the down arrow. This illustrates dynamically the changing asset mix based on Risk and Return. The farther down the ball is on the efficient frontier, the lower the risk and the lower the expected return.

Comparing Current vs. Proposed

To compare the client’s current portfolio to the efficient frontier of the proposed, CLICK on the COMP P button on the top tool bar. Choose the client’s current portfolio by DOUBLE CLICKing on the portfolio named "Current Holdings."

Note the red triangle below the efficient frontier. This represents the comparison portfolio or in this case, the client’s current portfolio.

When you have decided on the portfolio to recommend, CLICK on the Save button at the bottom left corner. Keep in mind, a portfolio that is northwest of the triangle will have higher return and lower risk than the current or comparison portfolio.

Implementing the Portfolio

Since we have created the portfolio using asset classes and indices, we will now make specific product recommendations for each asset class.

CLICK on the Implement Portfolio button on side tool bar. The screen showing displays the dollar amounts that are required in each asset category. To make a product recommendation for Specialty Financial Services, DOUBLE CLICK on it.

The Implement Asset Screen allows you to either type in the name of the investment your want to recommend or you can select the asset from the database. CLICK on the Select from List button at the bottom left corner.

Since Specialty Financial Services is a mutual fund index, Wilson has a link to all securities that have this as their class. Because this index is a mutual fund index, we will select Wilson Classified Securities and Mutual Funds.

The list of funds displayed includes all Financial Services funds in the database. DOUBLE CLICK on Davis Financial and INVESCO Strategic Financial. CLICK OK

If you would like to invest equally in each of these funds, CLICK on the Split Evenly button. Otherwise, type in the Hold Percentage or the Hold Amount you would like to allocate to each fund.

You have now made a specific security recommendation for Specialty Financial Services. At this point, you would continue to make security selections for each asset class.

CLICK OK

Viewing Graphs and Tables

To view graphs, CLICK on the View Graphs button on the side tool bar or each individual graph button on the top tool bar. Choose Asset Mix/Pie.

CLICK on View Graphs again. Choose Returns/Std Devs. Note the optional button at the bottom right corner. Try each of these now.

Printing Reports

Each of the graphs and tables could have been printed individually or you can batch print them with boiler plate pages that include Cover Sheet, Cover Letter, Table of Contents, Blank Questionnaire and others.

To batch print, CLICK on the Print Reports/Graphs button on the side tool bar.

Select the Boiler Plate, Tables and Graphs that you would like to include in your investment presentation report. Do this by DOUBLE CLICKing on the desired report. If you would like to change the order, you can Drag and Drop each report in the order you would like them to print.

If you would like to save a set of reports, CLICK on the Save button at the top after you have made your selections. This will produce a Report Folder that you can select the next time you are ready to print.

I hope this tutorial has been helpful to you. This tutorial only covered the basics of Ramcap.

Good Luck,

Scott Abboud, CFP

800-831-7636