Investment themes, a famous Warren Buffet quote, how financial planning may differ for women versus men, and an update on our firm.

1. Financial Planning Investment Management Tax & Estate Services
Elmwood Wealth Management
2027 Fourth St., suite 203
Berkeley, CA 94710
(510) 858-2723
info@ElmwoodWealth.com
www.ElmwoodWealth.com
Elmwood Quarterly Insights
In This Issue:
1) In tandem with a brief state of the
firm address, the Elmwood team
would like to extend a warm thank
you to our clients.
2) We talk about the great Warren
Buffet quote, “only when the tide
goes out do you discover who’s been
swimming naked” And what it means
for our stock market
3) We take a look at how financial
planning considerations for women
may differ from those of men
4) A summary of current Elmwood
investment themes and our strategies
that go along with them
July
2013

2.
We Build and Preserve Wealth
Financial Planning Investment Management Tax & Estate Services
Elmwood
Wealth Management
Elmwood Company Update
With the first half of 2013 officially at a close,
Elmwood Wealth Management has now been
in operation for eight months, and looking
back, we are astonished just how fast this initial
period passed! We would like to extend a
heartfelt thank you to our clients and business
partners as our initial success exceeded our
expectations. At the close of June, we find
ourselves nearing a milestone of $50 million in
assets under management. We are thrilled to
be working with both past relationships as well
as new clients just recently introduced to the
Elmwood team. We sincerely appreciate the
trust you have placed in our advisory services.
Our initial success gave us the opportunity to
double our office space via the custom build-out
of an adjacent suite. At the completion of the
build-out, we hosted a successful open house
event for clients, business partners, and friends
of Elmwood. With our current lease taking us
to the year 2016, we are pleased to establish a
long-term base within the East Bay community.
With the larger office space, we are actively
pursuing the addition of a fourth member to
our investment team. We have the good
fortune of taking our time to find someone who
will provide a good fit for the long-term. We
would also like to introduce our new summer
intern, Sherry Jiaa, who is currently a student at
U.C. Berkeley.
Advancements in technology allow us to
Quarterly
Insights:
July
2013
operate our business in a very lean fashion.
As a direct result of our smaller and more
efficient structure, we are purposely
positioned to have a large degree of flexibility
in meeting with our clients. While our new
office space certainly provides a convenient
meeting spot for clients throughout the Bay
Area, we just as often meet clients in their
respective homes or businesses. In addition,
technology offers us the ability to host video
meetings over the internet. This flexibility is
something our client’s value when doing
business with Elmwood. The development of
close, personalized relationships sit at the core
of Elmwood’s value proposition.
With summer in full swing, we want to
remind clients of our love of baseball! In
support of our East Bay location, Elmwood
holds season tickets to the Oakland A’s.
Open dates remain for what should be an
exciting pennant race in July, August, and
September. To this point in 2013, the A’s
have done their part to remind everyone that
Bay Area baseball expands beyond a certain
black and orange team from across the bridge!
Thank you again for your support in helping
make Elmwood a success. We look forward
to a long and rewarding relationship together.

3.
We Build and Preserve Wealth
Financial Planning Investment Management Tax & Estate Services
Elmwood
Wealth Management
A View From The Beach
Bob Gillooly, CFA
Volatility returned back to the stock and bond
markets the last two months. Our domestic stock
market was up more than three percent, yet foreign
markets and our own bond market did not fare so
well. Though all have rebounded somewhat since
this time, at one point in June the S&P 500 had
fallen almost five percent and some emerging markets
more than 15 percent. These rough waters remind us
of the famous Warren Buffet quote, “Only when the
tide goes out do you discover who’s been swimming
naked”. These short market pull backs provide an
opportunity to look at our own portfolio to analyze
potential vulnerability. Here was our view from the
beach.
First, the U.S. stock market held up much better than
foreign markets. This is a good sign and we continue
to expect domestic stocks to outperform
international, particularly U.S. small company
stocks. Secondly, with cash earning nearly nothing
the past four years, investors have been very aggressive
trying to earn income in other areas. It appears this
idea has been overplayed when areas like REITs were
down 12%, utility stocks down 11%, and junk bonds
down 8% in just a short period of time. Interestingly
enough, stocks that paid no dividends at all were
actually up the last two months. Next, health care
stocks continued their strong relative performance
and are now up 20% this year, likely due to their
more defensive nature and the recent improvement
in Medicare reimbursement rates. Last, as the 10 year
U.S. Treasury interest rate rose from 1.60% to 2.60%
(see chart) in just a few weeks, there was a mini-panic
of investors rushing to get out of bonds. This also led
to some dislocations within the bond market, mostly
by bond funds that use leverage to improve returns.
Quarterly
Insights:
July
2013
Our Investment Strategy
Now that we’ve seen what it looks like when the
tide goes out, we feel more prepared for the summer
ahead. Recent volatility confirms our suggestion
published in our April Elmwood Insights when we
took action by reducing some of our more volatile
stocks, including some investments in China and
the Emerging Markets. Looking forward, we will
continue to overweight our U.S. holdings relative to
those held internationally. Our stocks are focused
on the growth of their dividends, rather than the
absolute level of yield. Healthcare remains a key
theme as we continue to build around companies
that can manage well in a higher cost environment.
Our bond approach remains conservative, and we
will take advantage of any further dislocations in the
market to improve the interest earned.

4.
We Build and Preserve Wealth
Financial Planning Investment Management Tax & Estate Services
Elmwood
Wealth Management
Financial Planning Considerations For Women
Shannon S. Lemon, CFP®
Life events such as marriage, having children, retiring, and
caring for aging family members, all can have a profound
impact on our financial circumstances. Women often face
a different set of financial considerations than men. They
are more likely to exit the workforce to stay at home with
children or aging parents, tend to live longer than men,
and often have a different risk tolerance when it comes to
investing. This makes it extremely important to address
women specifically in the financial planning process when
working with couples. Women need to be very proactive
in managing their finances and preparing for life events.
Women need to start saving early! Life gets in the way of
our retirement savings plans all the time. We have tuition
to pay, cars to fix, vacations to take, concerts to attend,
shoes to buy, sickness to deal with and more. Participating
in a 401k plan as early as possible is important to building
retirement assets. Because women may experience periods
being out of the workforce, their contribution levels to
retirement plans and their earnings history for social
security is less than their male counterparts. Regardless of
how much is contributed, the important part is getting
started. If you are unsure of how much to contribute at
least try to put away the required amount that will allow
the full employer match, which is usually between 3-6%.
Over time as comfort grows with budgeting, contributions
can be increased.
For women, a greater portion of their retirement is
financed with social security because they have limited
assets elsewhere. Not enough emphasis is placed on when
and how social security should be taken versus applying at
the earliest possible age. Deferring social security until
full retirement age for both spouses can have a significant
financial impact, especially for a surviving spouse.
There are always other factors to consider such as health
and the need for additional income, but overall a great
Quarterly
Insights:
July
2013
deal of planning can be done with regards to configuring
the largest payment based on the individual’s earnings
record or their spouse’s earnings record. Some
individuals may be dually entitled if they are divorced or
widowed. So before you file with the social security
office, have your advisor walk you through the various
options available to maximize your social security
payment.
Women tend to live on average 5 years longer than men,
which equates to needing additional assets to cover their
living expenses throughout their lives. This is further
impacted by the fact many individuals have higher
expenses near the end of their lives due to increased
medical expenses. With women living longer than men,
the likelihood they will need some type of long term care
at the end of their lives is very likely. Planning for a
serious illness or care at the end of life can be achieved
through a long-term care policy. Generally long
term care policies are not considered until someone
reaches their 50’s but the key to a long term care policy is
putting it in place well before a serious illness occurs and
while a policy is still cost effective. Being prepared can
avoid a financial hardship for the surviving spouse.
Life Insurance also plays an important role in financial
planning and helps to relieve financial stress due to an
unexpected death of a spouse. If a couple has young
children, significant debt such as a mortgage, it is
especially important to carry adequate life insurance to
cover these obligations so the surviving family can
continue to meet their financial obligations.
Finally, it is important for both spouses to be involved
and active regarding their finances. Transitions between
the various stages of life can often be difficult; however,
planning ahead financially can help couples be better
prepared to meet the financial obligations and allow
them to focus their time and energy on one another and
their family.

5.
We Build and Preserve Wealth
Financial Planning Investment Management Tax & Estate Services
Elmwood
Wealth Management
Quarterly
Insights:
July
2013
Investment Theme:
U.S. Energy Resurgence – Not
only has there been a tremendous amount of natural
gas discovered in America, but new technology has led
to a boom in new oil discoveries as well. The
abundance of new energy will mean our country must
invest in virtually every aspect of our energy
infrastructure to make this resource available.
Elmwood’s Strategy:
We are investing in companies
that have large underground reserves of both natural
gas and oil. We are also taking advantage of less
obvious ways to exploit this theme. For example,
companies which help clean up gas and oil wells, and
transportation companies that move both supplies
and the commodity itself across the country.
Investment Theme:
Total Return Equity Investing –
Total return takes into account both price appreciation
and dividend payments. Companies are increasingly
raising dividends and buying back stock as a return to
shareholders.
Elmwood’s Strategy:
Look for companies that have the
cash flow to both buy back their own stock and
increase their dividend. If a company bought back 2%
of their outstanding shares annually and paid a 2%
dividend yield, your total return would theoretically be
4%. This is a great backdrop in any circumstance.
Investment Theme:
U.S. Health Care Needs – With
new health care legislation now in place, approximately
40 million individuals will become eligible for health
care coverage. This fact, coupled with the aging baby
boomer demographic will create substantially more
demand for health care going forward.
Elmwood’s Strategy:
An increase of both the number
of participants and the frequency of accessing health
care inevitably will drive up the cost to cover this
phenomenon. The investment opportunity lies within
companies that benefit by serving a larger number of
participants, yet are able to help reduce the cost of
service. Insurance, benefit management, and product
distribution companies all look well positioned here.
Elmwood’s Strategy:
We take a more active approach to
our bond portfolio. We are buying high current income
corporate bonds (6-7%) with good credit quality, yet are
relatively short in maturity. Some of these will likely be sold
before maturity. We are also using higher income paying
preferred stocks (6%) that offer more favorable tax
treatment as a substitute for longer maturity bonds.
Investment Theme:
High Current Bond Yields –
Yields for most good quality bonds are extremely low.
Yet there is a segment in the market where you can
buy both high quality and high current interest paying
bonds.
Investment Theme:
Mortgage Backed Bonds – The
housing market has found a bottom and default rates
are declining. Should interest rates rise, these bonds
typically perform better than most.
Elmwood’s Strategy:
Investors have been reluctant to
re-engage with the mortgage bond market since the
financial crisis. Much of this risk has been accounted
for and there is an opportunity to find higher yields.

6.
Financial Planning Investment Management Tax & Estate Services
Elmwood Wealth Management
2027 Fourth St., suite 203
Berkeley, CA 94710
(510) 858-2723
info@ElmwoodWealth.com
www.ElmwoodWealth.com
Elmwood is committed to making life easier for
you while maximizing your investment potential.