A Quick Market Newsletter

A short post tonight.  Here is a link to a useful free financial newsletter from Axiom Financial.  The format has remained the same for several years and provides a quick weekly update of market conditions.


Image from Axiom Financial

Image from Axiom Financial


The performance of the Financial Place Online balanced portfolio

The Financial Place Online balanced 401k portfolio example was developed based on a grouping of common Vanguard funds available to various 401k plans.  The asset allocation is as follows:

As compiled from Vanguard’s website, the performance record for each of these assets is impressive.

VanguardThe first thing to note here is the omission of the Developed Markets fund.  That fund has been recently established.  In its place, the MSCI EAFE index has been used, which is a more than reasonable assumption.  Each of the four funds have experienced strong performance in the past.  It is important to remember that past performance is just that; past performance.  What is important is what each of these funds represent.  As a combination, this portfolio covers ownership of the U.S. S&P 500 index, a stong mix of Real Estate Investment Trusts, the U.S. aggregate bond market (high credit rated bonds) and developed markets in Europe and Asia.  There will be profitability in the future.  You can be sure of that.  Businesses are all about increasing shareholder value, though some are better at it that others.  This portfolio is geared towards capturing as much of the total market profits as you can in as cost effective of a method as possible.

Time to take some gains off of the table

Bull MarketWith the S&P 500 now at 1472 investor confidence appears to be at a high.  The recent closing reinforces FPO’s forecast of being above 1400 come February 1st, but does that mean that its wise to stay in stocks?

As the investor, you are not your customer.  Your goal is to make money.  As such, if something is being made out to be an attractive buy, as stocks have been this last month, your job should be focusing on fulfilling that demand.  It is time to sell.  It doesn’t have to be a 100% move away from stocks, but taking some gains off of the table and going for what others are dumping is what the smart money is doing; by either selling into this rally or by moving all of their money elsewhere.  Attractive options include bonds, real estate, and commodities other than gold (which is still relatively high).

This principle of serving as a facilitator to the markets is close to being a “market maker”.  In the strictest definition, a market maker simultaneously buys and sells all asset classes that they participate in at their predefined spread.  They operate at a large scale of economy which is why they can command this spread, however they must participate on both ends which means bearing risks of buying assets when there may be no one to sell to.  The average investor does not operate with the economy of scale of a true market maker, but their position is better in that they can choose what they buy and sell.

Seems simple, right?  Investing techniques can be heavily determined by charts and valuation data.  In fact doing so, is an essential part to being successful.  At it’s roots, investments are made by individuals, which are subject to behavioral patterns.  Part of the basic programming here is to buy what looks attractive.  This runs contrary to money making principles, which dictate to sell what looks attractive and use the proceeds to buy something of value.

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