A Word From The Advisor
"Happy New Year"

Happy 2008! In the spirit of the New Year, we have compiled a few top ten lists for you to read and think about.

As this is an election year, the first is:

Top Ten Reasons to Be an Elected Official in 2008

10) You can add two and two together (and the answer must always be four). This is a good thing.
9) Your hair has to be perfect…every day.
8) You buy better stuff at the grocery store, because everybody’s watching.
7) Everyone (almost) knows your name.
6) Someone is always awake at midnight, and wants to call you.
5) You have inside information about City Hall.
4) You get to ride on the back of a fire truck on the 4th of July.
3) School kids want to be you.
2) Someone will always disagree with you about something, and you like it.
1) You are able to create change and make a difference.

On a more serious note, here is a real Top Ten list of why you will be a successful investor in 2008.

10. Markets Work
Capital markets are not perfect and prices are not always in balance, but markets are so competitive that it is unlikely an investor can systematically profit from mispricings in the market at the expense of other investors over extended periods of time.

9. The Plight of Active Management
For active managers to succeed, free markets must fail. There have been (and will be) managers that outperform the market, in the short run, but no more than you would expect by chance, and it is difficult to identify them in advance.

8. Market Timing Is Risky
Following decades of empirical investigation of capital markets by literally thousands of financial economists, there is no widely accepted and conclusive evidence that market timing works. A successful timing strategy requires three correct decisions: when to get in, when to get out, and when to get back in. When timing between stocks and cash, for example, the frequency of correct decisions must also be high enough to overcome the higher expected returns of stocks over cash and to make up for the costs of transactions. Academic research favors a buy-and-hold strategy.

7. There Is No Crystal Ball . . . and You Don’t Need One!
At the root of all forms of active management is some sort of forecast, but the future is by definition unknowable. Although no one can predict the future, you don’t need to in order to have a successful investment experience. With capitalism, there is a positive expected return on capital.

6. Risk and Return Are Related
Markets are drawn to a state of equilibrium where risk and return are related. Returns come from risk. Financial science over the last fifty years has brought us to a powerful understanding of the risks that are worth taking and the risks that are not. Only non-diversifiable risks are rewarded with higher expected returns.

5. Diversification Is Key
Diversification is the closest thing there is to a free lunch. Proper diversification increases the likelihood of earning expected returns and may reduce risk you are not being compensated for taking.

4. You have Brought Discipline to the Process
Capital markets are noisy; but in the face of that noise, you have learned to maintain your discipline and stick to a long-term investment strategy in order to have a successful investment experience that captures capital market rates of return. Some studies conclude that individual investors underperform the market by as much as 5% over time, likely due to a lack of discipline that results in chasing hot stocks or hot funds or by trying to time the markets.

3. Investor, Know Thyself
Investors often exhibit behavioral biases that can lead to poor investment decisions. You have learned that overconfidence, self-attribution, mental accounting, searching for patterns, hindsight, regret, and fear are cognitive biases and emotions that Oakwood Capital Management has helped you overcome in order to promote both your wealth and well-being!

2. Costs Matter
All investors in the aggregate form the capital markets. Therefore, it must be the case that the average investor earns the market rate of return less fees and expenses. Managing costs (management fees, operating costs, trading costs, taxes, etc.) allows you to capture more of the capital market return that is there for the taking. We help to keep costs down and increase your net return on investment.

1. Oakwood Capital Management is your wealth management advisor
Our mission at Oakwood is to provide our clients with outstanding investment and wealth management services. The time-tested investment process we use to tailor portfolios to our clients’ specific needs is based on quantitative and qualitative techniques and sound research. We all know that anyone can go to the store to buy flour, eggs, sugar and butter. The “magic” occurs in how those ingredients are put together to create a culinary masterpiece. The same is true of stocks, bonds, or mutual funds. The “magic” occurs when these investment vehicles are properly structured to create a portfolio that matches your risk tolerance and return objectives.