Three Model Portfolios Designed to Help You Sleep Well At Night

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Friday, August 27, 2010

Conservative Retirement Portfolios

Conservative Portfolios for People in or Approaching Retirement
A primary goal of The Retirement Advisor is to help our subscribers achieve their financial or retirement goals in a suitable time frame and reasonable fashion.  Our Retirement Advisor Model Portfolios were constructed with that goal and one other important goal in mind: Simplicity.  Studies have shown that the most effective way to save and invest for retirement is to construct and maintain a diversified portfolio of low-cost index funds matched to one’s retirement needs and risk tolerances.  There is no need (and in fact, this may be detrimental to your financial health) to invest in the hottest technology fund, or buy actively managed mutual funds where annual expenses could be over five times as high as low-cost index funds. 
The Retirement Advisor Portfolios Dollar Value on 7/31/10 Change
Model Portfolio 1 $219,682 9.8%
Model Portfolio 2 $231,512 15.8%
Model Portfolio 3 $248,518 24.3%
DJIA 12,501.52 on 1/1/2007 $10,466 (16.3%)
S&P500 1,418.30 on 1/1/2007 $1,101.60 (22.3%)
The Retirement Advisor Model Portfolios all began with $200,000 on 1/1/2007
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Each month, subscribers to The Retirement Advisor will receive updates to three different Model Portfolios.  These updates will include any portfolio changes based on our latest outlook of the economy, interest rates, and inflation, as well as portfolio rebalancing as different asset classes deviate from target weightings.  In addition, the performance of individual funds will also be updated on a monthly basis.
We designed our three different model portfolios for individuals who are in retirement or who are pondering retirement, taking into account 1) their current stage in life, and 2) their risk tolerance (i.e. how much risks they can incur without losing sleep at night).  In presenting our three different model portfolios, we have ordered them starting with the most aggressive portfolio to the most conservative. 
We designed our first model portfolio, the Aggressive Growth and Income Model Portfolio 1, for someone approaching retirement who is interested in a “balanced” approach to investing, which combines a mixture of stocks and bonds.  Its 50% stock market weighting gives it the potential to increase your standard of living over time when rebalanced at key time points.  
We designed our second model portfolio, the Moderate Growth and Income Model Portfolio 2, for individuals in retirement who believe sleeping better at night with less stock market volatility is worth giving up some of the potential for gains in standard of living to get lower volatility.

We designed our third model portfolio, the Conservative Capital Preservation Model Portfolio 3, for investors who invest solely in fixed income securities without any stock market exposure.
Portfolio Performance By Year Through July 31, 2010
Model Portfolio 2010 YTD 2009 2008 2007 2007 to Now
#1: Aggressive 2.4% 19.7% (18.2%) 9.5% 9.8%
#2: Moderate Risk 3.3% 13.2% (8.7%) 8.5% 15.8%
#3: Conservative 4.8% 5.5% 3.7% 8.3% 24.3%

Start Sleeping Well Tonight!

Wednesday, August 25, 2010

Hindenburg Omen - Definition and History

There is a lot of talk on TV and in the press about the Hindenburg Omen.
From Hindenburg Omen The Hindenburg Omen is a technical analysis pattern that is said to portend a stock market crash. It is named after the Hindenburg disaster of May 6, 1937, during which the German zeppelin Hindenburg was destroyed.
In order for the Hindenburg Omen to be reached, all of the following must occur:
1. The daily number of NYSE new 52-week highs and the daily number of new 52-week lows are both greater than or equal to 2.8% of NYSE issues trading that day.
2. The NYSE’s 10-day moving average is rising, or the index has moved higher during the past 50 trading days.
3. The McClellan Oscillator is negative on the same day. This is the the difference between the advancing and declining equities on the NYSE.
4. New 52-week highs cannot be more than twice the new 52- week lows (though new 52-week lows may be more than double new highs).
The traditional definition requires each condition to occur on the same day. Once the signal has occurred, it is valid for 30 days, and any additional signals given during the 30-day period should be ignored. During the 30 days, the signal is activated whenever the McClellan Oscillator is negative, but deactivated whenever it is positive.
This is important:
The Hindenburg Omen has predicted every stock crash since 1987, BUT it also has a ton of false positives. Only about 25% of the time does it actually foretell a crash. 

The criteria above for the omen has actually been met twice this month, once on August 12th, and another time last Friday the 20th. 
The model portfolios in the Retirement Advisor already account for market events like these so we have made no changes.

The Retirement Advisor Portfolios
Dollar Value       on 7/31/2010
Model Portfolio 1
Model Portfolio 2
Model Portfolio 3
DJIA 12,501.52 on 1/1/2007
S&P500 1,418.30 on 1/1/2007
The Retirement Advisor Model Portfolios all began with $200,000 on 1/1/2007.

Start Sleeping Well Tonight!