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Managing Through Up and Down Markets

During the last 60 trading days, the S&P 500 Index has had 37 days of intra-day price swings of more than 2%. There have been both up days (up 11% since October 4th) and down days (down 18% prior to October 3rd), though unfortunately, more down days as of late. Sailors sometimes need to navigate and tack through changing wind conditions to get to their destination. Coaches sometimes need to make half-time adjustments to counter their opponents strategies (Which the Vikings are having trouble doing!) and win the ball game.

Likewise, we are adding a few investment strategies that will help navigate through these volatile markets. We are adding the Forward Tactical Growth and Virtus Premium AlphaSector Funds as additional large-cap allocations. Large cap stocks currently have the cheapest valuations, pay the highest dividends, and typically benefit more from export growth overseas. Unlike traditional large cap funds, these funds can also move to cash when markets become volatile. In addition, we are adding the PIMCO All Asset Authority Fund, which can diversify across all asset classes, but currently is invested primarily in bond sectors which have attractive yields. We view the fund’s 6% yield, well diversified across bond sectors and other assets, as a good option for long-term investors in these times of low interest rates.

We do not know when Europe’s debt crisis will ultimately get resolved. We do not know when the long-term deficit issues in the U.S. will be addressed, and we do not know when the housing and labor markets will begin to show meaningful improvement. But we do know that your portfolios will have added flexibility to sail through these tough times, capture some incremental yield, and take you towards your financial goals.

Please contact us with any questions or concerns. Feel free to forward this to others who might be interested.

Have a great day!

Bob and the All Star Team

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