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The Canterbury Portfolio Thermostat
                        Process

Step Two: Classify the universe of securities into diverse investment classes.
Most equity asset classes perform best when markets are in a low volatility Market State. However, there are also
investment classes and securities (alternatives to the stock market) that benefit from a bearish stock market. The
Thermostat model typically invests in Exchange Traded Funds (ETFs) and categorizes each ETF into one of two major
classes: the “global stock market universe” and “bonds and alternatives to the global stock market.”
The Thermostat does not assign a risk label to any liquid asset class, such as risky or conservative. Markets and securities
with low or decreasing volatility are considered conservative and those with high or increasing volatility are considered
risky. We recognize that all markets and securities will experience both conservative (bull) and risky (bear) market
environments. It is, therefore, not appropriate to assign a traded asset class or security a risk label.
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