Over the last few years, there have been more and more articles surrounding the topic…
How Bad Is It?
As we expected, the volatility of the market to the downside is testing everyone’s patience. The market continues to go down as the confidence in leadership to get a deal done on our debt situation wanes. Just two months ago it appeared the market liked the idea of a Republican led team as polls favored Romney. Since the peak in the market on September 14th, however, we have witnessed a -7.35% decline in the domestic market (Russell 3000 Index) and a -5.90% drop in the more global broad market index (S&P Global BMI). A large chunk of this loss has come since Election Day as the domestic market has dropped -5.08% and -3.84% on the global market index.
You may have decided not to look at your portfolios in fear of a stroke, but you need to know, “it is not that bad!” In preparation of this potential outcome we took chips off the table by selling out technology and Korean exposures. We put that money to work in PIMCO’s All Asset All Authority high dividend play that is really a sophisticated income fund. As a result our Income, Balanced, Conservative Growth and Growth portfolios are down only -2.21%, -3.22%, -4.46% and -5.45% respectively since the peak on 9/14/2012. Since the election our portfolios are down only -1.70%, -2.21%, -3.02% and -3.48% respectively. These numbers show that we have lost only 30% to 74% of the domestic market downside. Those, I would say, are really good numbers. We can also look at it from a year to date perspective and feel good that we are still up 6% to 8%!
The phone has been ringing and we are seeing quite a few people who want to reduce their risk by moving to a more conservative portfolio. My response, I agree. If you are losing sleep over this mess we are in, it makes a lot of sense to reduce your risk by climbing down the ladder of risk. Going from our Growth portfolio to Conservative Growth, Conservative Growth to Balanced, and Balanced to Income will reduce your equity exposure by 5% to 20% and reduce that downside risk even more.
Please do not hesitate to call us at any time to review your personal situation and talk about what might be best for you in these uncertain times.
As always, be blessed and be a blessing.
Have a great day!
The All Star Team