Item 7: TYPES OF CLIENTS
Davinci generally provides advisory services to the following types of clients:
• Individuals (other than high-net-worth individuals)
• High-net-worth individuals
• Pension and profit-sharing plans (other than plan participants)
The majority of Davinci clients are retail clients that fall under the “Individuals (other than high-net-worth
individuals)” category. This category includes, but is not limited to, individual, joint, trust, IRA, 401(k) participant,
and custodial accounts.
Davinci does not have an account minimum to open an account.
Item 8: METHODS OF ANAYLSIS AND INVESTMENT STRATEGIES AND RISK OF LOSS
Investing in securities involves risk of loss that investors should be sure they understand and should be prepared to
bear. Each advisor associated with Davinci has the independence to take the approach he or she believes is most
appropriate when analyzing investment products and strategies for clients. There are several sources of
information that Davinci and the advisor may use as part of the investment analysis process. These sources
include, but are not limited to:
• Financial publications
• Research materials prepared by others
• Corporate rating services
• SEC Filings (annual reports, prospectus, 10-K, etc.)
• Company press releases
As a firm, Davinci does not favor any specific method of analysis over another and therefore would not be
considered to have one approach deemed to be a “significant strategy.” There are, however, a few common
approaches that may be used by Davinci or your advisor, individually or collectively, in the course of providing
advice to clients. Please note that there is no investment strategy that will guarantee a profit or prevent loss.
Following are some common strategies employed by advisors in the management of client accounts:
Dollar Cost Averaging (“DCA”): The technique of buying a fixed dollar amount of a particular investment on a
regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares
are bought when prices are high. DCA is believed to lessen the risk of investing a large amount in a single
investment at higher price. DCA strategies are not effective and do not prevent against loss in declining markets.
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Asset Allocation: An investment strategy that aims to balance risk and reward by allocating assets among a variety
of asset classes. At a high level, there are three main asset classes—equities (stocks), fixed income (bonds), and
cash/cash equivalents—each of which has different risk and reward profiles/behaviors. Asset classes are often
further divided into domestic and foreign investments, and equities are often divided into small, intermediate, and
large capitalization. The general theory behind asset allocation is that each asset class will perform differently from
the others in different market conditions. By diversifying a portfolio of investments among a wide range of asset
classes, advisors seek to reduce the overall volatility and risk of a portfolio through avoiding overexposure to any
one asset class during various market cycles. Asset allocation does not guarantee a profit or protect against loss.
Technical Analysis (a.k.a. “Charting”): A method of evaluating securities by analyzing statistics generated by market
activity, such as past prices and volume. Technical analysts do not attempt to measure a security’s intrinsic value.
Instead, they use charts and other tools to identify patterns that can suggest future activity. When looking at
individual equities, a person using technical analysis generally believes that performance of the stock, rather than
performance of the company itself, has more to do with the company’s future stock price. It is important to
understand that past performance does not guarantee future results.
Fundamental Analysis: A method of evaluating a security that entails attempting to measure its intrinsic value by
examining related economic, financial, and other qualitative and quantitative factors. Fundamental analysts
attempt to study everything that can affect the security’s value, including macroeconomic factors (e.g., the overall
economy and industry conditions) and company-specific factors (e.g., financial condition and management). The
end goal of performing fundamental analysis is to produce a value that an investor can compare with the security’s
current price, with the aim of figuring out what sort of position to take with that security (underpriced = buy,
overpriced = sell or short). This method of security analysis is considered to be the opposite of technical analysis.
Quantitative Analysis: An analysis technique that seeks to understand behavior by using complex mathematical
and statistical modeling, measurement, and research. By assigning a numerical value to variables, quantitative
analysts try to replicate reality mathematically. Some believe that it can also be used to predict real-world events,
such as changes in a share price.
Qualitative Analysis: Securities analysis that uses subjective judgment based on nonquantifiable information, such
as management expertise, industry cycles, strength of research and development, and labor relations. This type of
analysis technique is different from quantitative analysis, which focuses on numbers. The two techniques,
however, are often used together.
B. Risk of Loss
As mentioned above, regardless of what strategy or analysis is undertaken, there is risk of loss; in some cases, total
loss. Some risks may be avoided or mitigated, while others are completely unavoidable. Some of the common risks
you should consider prior to investing include, but are not limited to:
• Market risks: The prices of, and the income generated by, the common stocks, bonds, and other securities you
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