Vol III, No. 11

December 2015

A monthly commentary about the role of behavior (and misbehavior) in investing

The Misbehaving Investor

With another holiday season upon us, the color red is everywhere, from Starbucks cups to certain reindeer noses.

This issue touches on red light runners and what it might say about their investment behavior.

Also, we invite you to learn more about the Triad Small Cap Value Fund (TSCVX). Click here to learn more.

Have a wonderful holiday!

John Feb 5

John Heldman, CFA

Partner | Portfolio Manager

Dave Hutchison, CFA

Partner | Portfolio Manager

About Us

Triad Investment Management manages all-cap, small-cap and balanced portfolios with a focus on Research, Behavior and Ethics. Triad is also the Adviser to the Triad Small Cap Value Fund (symbol TSCVX). Founded in 2008, Triad is a 100% employee-owned SEC registered investment adviser. Learn more at www.triadim.com.

Triad managed $114 million as of September 30, 2015. The Concentrated All-Cap Equity composite return, annualized and net of fees since inception, is 6.4% vs. 6.8% for the S&P 500 Index (April 30, 2008 to September 30, 2015).

Please review our Concentrated All-Cap Equity annual disclosure presentation and the important disclosures at the bottom of this issue. Past performance does not guarantee future results.

Carmageddon

Driving in Southern California provides insight into human behavior, occasional moments of comedy, and every once in a while a few investment insights. A few weeks ago I was driving home on my usual route and came upon a yellow light. I had plenty of time to stop. And stop I did. However, some of my fellow road warriors apparently didn't have adequate brakes, adequate reflexes, or in this case, adequate patience to stop in time.

I don't know if I'm just getting old and grumpy or if there is some social phenomenon at work, but it seems that we have an epidemic of people who are so busy that they must drive through red lights. Not yellow lights, but flat-out red lights.

On this day, I set a personal record for witnessing blatant traffic light abuse. My personal record was seeing not one, not two, but three drivers who were ALL BEHIND my car drive right past me as I stopped. They all had plenty of time to stop.

The quickest managed to get to the middle of the intersection before the light turned red. OK, that's probably not a traffic ticket, and unlikely to cause an accident. But the other two drivers weren't even in the intersection when the light turned red. I guess their houses were on fire or they left the gas stove on. Why would someone risk a traffic ticket, or worse, a serious accident, just to save a minute or two?

I think about this risky behavior, and the potential for life-threatening consequences for the drivers, their passengers, other cars, or even pedestrians (although around here, a pedestrian in suburbia is a rare sight). Why take these chances? Insurance companies refer to these risks as "low frequency, high severity"; a low probability of disaster, but severe consequences. A personal hurricane. Why would anyone do that to themselves?

I wonder what sort of investment plan these aggressive drivers employ? Do they even have a plan? Is it disciplined? Are they prone to occasional big bets that carry the potential for disaster? Are these the folks who trade frequently and jump around from one idea to the next? Who employ too much borrowing in the hope of higher returns?

Careful risk assessment is critical on the road and in the investment world. But some risks are just not worth taking. Running through red lights deliberately qualifies in my book as poor risk-taking. We believe that not having an investment plan with a sound philosophy and a disciplined process is akin to running an investment red light.

-John Heldman, CFA

Past performance does not guarantee future results. Results are presented net of fees and include the reinvestment of all income. The opinions expressed herein are those of Triad Investment Management, LLC and are subject to change without notice. Consider the investment objectives, risks and expenses before investing. The information in this presentation should not be considered as a recommendation to buy or sell any particular security and should not be considered as investment advice of any kind. You should not assume that any securities discussed in this report are or will be profitable, or that recommendations we make in the future will be profitable or equal the performance of any securities discussed in this presentation. The report is based on data obtained from sources believed to be reliable but is not guaranteed as being accurate and does not purport to be a complete summary of the available data. Recommendations for the past twelve months are available upon request. In addition to clients, partners and employees or their family members may have a position in any securities mentioned herein. Triad Investment Management, LLC is a registered investment adviser. More information about us is included in our SEC Form ADV Part 2, which is available upon request.

Triad Investment Management, LLC claims compliance with the Global Investment Performance Standards (GIPS�). Triad has been independently verified by Ashland Partners & Company, LLP for the period from the strategy's inception, April 30, 2008, through September 30, 2015. Triad is an SEC-registered investment advisor. The composite includes all fully discretionary separately managed accounts that follow the firm's Concentrated All-Cap Equity investment strategy, including those accounts no longer with the firm. Triad's strategy is to invest in a concentrated portfolio (usually holding between 20 to 30 securities) of common stocks, unrestricted as to market capitalization, of both domestic and international companies. The U.S. Dollar is the currency used to express performance. Past performance is not a guarantee of future results, and there is a risk of loss in investing in equities. Results are presented net of fees and include the reinvestment of all income. Investments made by Triad for its clients differ significantly in comparison to the referenced indexes in terms of security holdings, industry weightings, and asset allocations. Accordingly, investment results and volatility will differ from those of the benchmarks. As of June 30, 2013, the Triad Equity Composite was renamed the Concentrated All-Cap Equity Composite. For more information or for a copy of the firm's fully compliant presentation and the firm's list of composite descriptions, please contact us at (949) 679-3991.

%	3Q 15	YTD	1 Year	3 Year	5 Year	Inception
Triad Concentrated All-Cap Equity	(15.4)	(20.7)	(18.5)	2.6	6.9	6.4
S&P 500 Index	(6.4)	(5.3)	(0.6)	12.4	13.3	6.8

As of September 30, 2015. Results presented net of management fees.

� 2015 Triad Investment Management, LLC