Strategic, Flex, and Index Portfolio Performance Through Septemeber 2014

We are having a correction in this Bull market.  I believe we are not beginning a bear market.  Meanwhile, here are the portfolio model performance #s though end of September:

US and Foreign Indexes		3 mo	1 yr	3 yr	5 yr	10 yr	2008
Stock Markets (50-40-10)		-2.3%	11.5%	17.8%	10.7%	7.6%	-39.7%
S&P 500		1.1%	19.7%	23.0%	15.7%	8.1%	-37.0%
MSCI EAFE		-5.9%	4.3%	13.7%	6.6%	6.3%	-43.4%
US OE Diversified Emg Mkts		-3.5%	4.8%	7.9%	4.3%	9.8%	-54.4%
Barclays Agg Bond--US		0.2%	4.0%	2.4%	4.1%	4.6%	5.2%
Barclays Agg Bond--Global		-3.1%	1.2%	1.2%	2.7%	4.4%	4.8%
Aggressive		-2.2%	10.7%	16.5%	10.3%	7.1%	-36.3%
90 Flex V		-2.3%	8.0%	12.9%	9.7%		-19.1%
90 Strategic II		-3.4%	7.8%	17.8%	13.3%	9.5%	-34.0%
90 Schwab index		-3.5%	8.8%	17.4%	11.2%	7.5%	-35.2%
Moderately Aggressive		-2.2%	9.8%	14.8%	9.7%	6.9%	-32.0%
80 Flex V		-2.0%	7.8%	12.3%	9.5%		-16.9%
80 Strategic II		-2.9%	7.8%	16.5%	12.4%	9.2%	-30.0%
80 Schwab index		-3.0%	8.5%	15.8%	10.6%	7.2%	-32.1%
Moderate		-2.0%	7.8%	11.3%	8.1%	6.4%	-23.1%
60 Flex V		-1.4%	7.7%	11.6%	9.5%		-13.1%
60 Strategic II		-2.2%	7.3%	13.7%	11.0%	8.5%	-23.9%
60 Schwab index		-2.0%	7.8%	12.5%	9.2%	6.3%	-25.6%
Moderately Conservative		-1.8%	5.7%	7.9%	6.5%	5.8%	-13.3%
40 Flex V		-0.8%	7.8%	11.2%	9.7%		-13.1%
40 Strategic II		-1.6%	5.9%	10.0%	8.6%	7.2%	-16.2%
40 Schwab index		-1.3%	6.5%	9.0%	7.5%	5.4%	-18.8%
Conservative		-1.6%	3.7%	4.5%	4.8%	5.1%	-2.5%
20 Flex V		-0.3%	7.4%	10.1%	9.4%		-5.2%
20 Strategic II		-1.0%	4.7%	6.8%	6.4%	6.0%	-8.1%
20 Schwab index		-0.7%	4.9%	5.5%	5.5%	4.3%	-11.7%
Asset Allocation		USA	x-USA	Bond	Cash	Other
20 Flex V		14%	5%	47%	30%	4%
20 Strategic II		11%	6%	56%	24%	3%
40 Flex V		28%	10%	30%	26%	5%
40 Strategic II		22%	12%	43%	19%	3%
60 Flex V		34%	15%	21%	24%	6%
60 Strategic II		35%	18%	30%	15%	3%
80 Flex V		45%	20%	8%	21%	7%
80 Strategic II		45%	25%	16%	12%	2%
90 Flex V		51%	22%	1%	18%	7%
90 Strategic II		50%	28%	9%	10%	3%
NOTE 1:  Past performance is no guarantee of specific future results.  This data is presented by Potomac Wealth Strategies, LLC.  This data is from Morningstar and should be accurate, but it has not been independently verified.
NOTE 2:  "Flex", "Strategic", and "Index" models are designed and managed by Potomac Wealth Strategies, LLC.  These models show track records of better returns, lower volatility, or both--or, in the case of the Index models, closest possible tracking--compared to their benchmarks and popular competitors.
NOTE 3:  "XX Schwab index" models are low-cost portfolios.  They are comprised of index funds available free of transaction charges to my clients at Schwab.  This is what many might recommend due to low-costs and portfolio efficiency.
NOTE 4:  Nothing on this blog post represents investment advice to any individual or organization.  If the information hereon is of interest to you, please contact me at Garo.Partoyan@PotomacWealthStrategies.com for a consultation.

Cash--Not Just Bill Gross--Leaves PIMCO

Friday the 29th of September will probably go down a major historical moment in the modern financial services world's history. Bill Gross resigned from PIMCO, the firm he founded in 1971 and grew into the largest bond portfolio manager in the world.  Gross not only resigned, but he moved to Janus Capital and will run a global-macro fixed income fund there.

It's probably a long story, but my take is that Gross was at odds with the people running PIMCO (which a while back was bought by Allianz, a giant insurance company based in Germany) on how to run the company.  Gross just wants to manage money.  Evidently.  He is a billionaire and 70 years-old...  not exactly in need of a new job.

Here's an article from the Wall Street Journal about cash flowing out of PIMCO's Total Return fund, which Gross has led since inception.  It's the largest mutual fund in the world.  If all investors cashed-out and the fund liquidated all holdings, bond prices would surely be affected adversely around the globe--supply and demand is a real thing, and flooding the marketplace with $200 billion in bonds would have impact.

Perhaps the main take on this for my clients is that it's an example of how I can help.  1/3 of PIMCO Total Return fund's assets are from individual investors' 401(k) plan holdings.  How many of us know what's in our 401(k)?  A lot of us, but not enough.  And even among those who know, how many were clued-in to the Gross resignation and know how to respond?  Well, that's where I believe I am extra helpful...

Bill Gross Leaves PIMCO, Starts At Janus Capital Group on 9/29/14

Bill Gross, the founder and co-head of PIMCO (perhaps the world's largest manager of bond mutual funds) has left the firm and joined Janus Capital Group.  He starts next week.

My job here is to figure out if we should continue using our PIMCO mutual funds.  I think the answer is going to be Yes, but I'm working to make sure I am still comfortable with each fund we are using.

I won't offer too much speculation here, but what I do know is that Gross founded PIMCO and built it into a huge, and hugely successful and greatly respected firm, that PIMCO is owned by Allianz (a German insurance/financial giant), and that Gross' former co-leader at PIMCO left PIMCO last year but retained a high-level position at Allianz.  Gross maybe had to jump ship from his own company, or maybe he got pushed out.  The man is a true billionnaire and so this probably is not about his compensation.  Anyway, that's where I start to get into spectulation…

PIMCO has a lot of great talent, several of the PIMCO mutual funds I use for my clients were not actually managed by Bill Gross, and we can get out of any PIMCO product we want at any time.

So, please contact me with questions, and I'll be back in touch about whether I want us to stick with our PIMCO funds.

Thank you, and happy Friday!

--Gary

Gary Partoyan

Potomac Wealth Strategies, LLC

(703) 746-8195 direct

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Strategic, Flex, and Index Portfolio Performance Through 2014-08-31

Here are the latest performance #s.  The Vanguard and Fidelity strategic portfolios have been taken out, replaced by similar portfolios comprised of index mutual funds available at Schwab and free of sales loads and transaction fees.  Schwab is the custodian I use for most of my clients' accounts, and I am now showing the actual Index-based portfolios that I would offer to clients who want to use low-cost index funds.

In the most recent 1-year period, the Index fund-based models have performed best.  Over the 3-, 5-, and 10-year periods, though, the Strategic models have performed best.  The Flex models remain an excellent way to "stay invested, even if we expect or are in rough markets", and they would have fared significantly better in the market crash of 2008.

I do not favor market-timing--I prefer we remain invested using Nobel Prize-winning portfolio theory.  Some points to consider:

• Index fund-based models will have the lowest internal costs (and my advisory fee remains the same) and each should most closely track the blended benchmark assigned to it.
• Strategic models should deviate more from the benchmarks, but they have demonstrated the ability to significantly outperform over the longer time periods, and most Strategic models have done so without performing significantly worse in down markets.
• Flex models show better performance in down markets, but they tend to lag their benchmarks in strong upward-moving markets.
• Most of my clients should be using Strategic models now.  In some cases, due to risk tolerance or sensitivity to mutual funds' internal expenses, the Flex or Index models are more suitable.

US and Foreign Indexes		3 mo	1 yr	3 yr	5 yr	10 yr	2008
Stock Markets (50-40-10)		2.4%	21.2%	15.1%	12.4%	8.2%	-39.7%
S&P 500		4.7%	25.3%	20.6%	16.9%	8.4%	-37.0%
MSCI EAFE		-1.2%	16.4%	11.4%	8.2%	7.0%	-43.4%
US OE Diversified Emg Mkts		5.5%	19.2%	4.2%	7.5%	11.2%	-54.4%
Barclays Agg Bond--US		0.9%	5.7%	2.9%	4.5%	4.7%	5.2%
Barclays Agg Bond--Global		0.4%	6.2%	1.3%	3.7%	4.8%	4.8%
Aggressive		1.6%	19.0%	14.5%	11.6%	7.5%	-36.3%
90 Flex V		1.5%	14.0%	10.3%	11.3%		-19.1%
90 Strategic II		1.5%	16.4%	15.8%	15.0%	10.2%	-34.0%
90 Schwab index		2.0%	18.4%	15.3%	12.9%	8.2%	-35.2%
Moderately Aggressive		1.5%	17.5%	13.1%	10.9%	7.4%	-32.0%
80 Flex V		1.5%	13.5%	9.9%	11.0%		-16.9%
80 Strategic II		1.5%	15.3%	14.7%	14.0%	9.8%	-30.2%
80 Schwab index		2.0%	17.0%	14.0%	12.1%	7.7%	-32.1%
Moderate		1.3%	14.3%	10.2%	9.2%	6.8%	-23.1%
60 Flex V		1.5%	12.6%	9.4%	10.8%		-13.1%
60 Strategic II		1.5%	13.4%	12.3%	12.3%	9.0%	-24.2%
60 Schwab index		1.9%	14.4%	11.4%	10.4%	6.8%	-25.6%
Moderately Conservative		1.0%	11.1%	7.3%	7.4%	6.2%	-13.3%
40 Flex V		1.5%	12.0%	9.4%	10.9%		-13.1%
40 Strategic II		1.1%	10.2%	9.2%	9.6%	7.6%	-16.8%
40 Schwab index		1.6%	11.4%	8.5%	8.4%	5.7%	-18.8%
Conservative		0.8%	8.0%	4.5%	5.6%	5.4%	-2.5%
20 Flex V		1.5%	11.0%	8.6%	10.4%		-5.2%
20 Strategic II		0.9%	7.5%	6.3%	7.2%	6.2%	-9.1%
20 Schwab index		1.2%	8.3%	5.5%	6.2%	4.5%	-11.7%
Asset Allocation		USA	x-USA	Bond	Cash	Other
20 Flex V		14%	5%	48%	30%	4%
20 Strategic II		11%	6%	52%	28%	3%
40 Flex V		28%	10%	31%	26%	5%
40 Strategic II		22%	12%	40%	22%	3%
60 Flex V		34%	16%	21%	24%	6%
60 Strategic II		35%	18%	27%	17%	3%
80 Flex V		44%	20%	8%	21%	7%
80 Strategic II		45%	25%	14%	14%	3%
90 Flex V		51%	22%	1%	19%	7%
90 Strategic II		50%	29%	8%	11%	3%
NOTE 1:  Past performance is no guarantee of specific future results.  This data is presented by Potomac Wealth Strategies, LLC.  This data is from Morningstar and should be accurate, but it has not been independently verified.
NOTE 2:  "Flex", "Strategic", and "Index" models are designed and managed by Potomac Wealth Strategies, LLC.  These models show track records of better returns, lower volatility, or both--or, in the case of the Index models, closest possible tracking--compared to their benchmarks and popular competitors.
NOTE 3:  "XX Schwab index" models are low-cost portfolios.  They are comprised of index funds available free of transaction charges to my clients at Schwab.  This is what many might recommend due to low-costs and portfolio efficiency.
NOTE 4:  Nothing on this blog post represents investment advice to any individual or organization.  If the information hereon is of interest to you, please contact me at Garo.Partoyan@PotomacWealthStrategies.com for a consultation.

Strategic and Flex Portfolio Performance Through July 2014

US and Foreign Indexes		3 mo	1 yr	3 yr	5 yr	10 yr	2008
Stock Markets (50-40-10)		1.8%	16.1%	12.4%	13.1%	7.6%	-40.2%
S&P 500		3.0%	16.9%	16.8%	16.8%	8.0%	-37.0%
MSCI EAFE		0.6%	15.1%	8.0%	9.4%	7.1%	-43.4%
US OE Diversified Emg Mrkts		6.5%	13.0%	0.3%	7.0%	11.3%	-54.4%
Barclays Agg Bond--US		0.9%	4.0%	3.0%	4.5%	4.8%	5.2%
Barclays Agg Bond--Global		0.4%	5.1%	1.6%	4.0%	5.0%	4.8%
Aggressive		1.7%	14.6%	11.4%	12.1%	7.4%	-36.3%
90 Flex V		0.8%	9.9%	8.5%	11.3%		-19.1%
90 Strategic II		0.8%	11.2%	12.6%	15.5%	10.0%	-34.0%
Fidelity 90		1.6%	14.2%	12.2%	13.2%	7.8%	-35.2%
Moderately Aggressive		1.6%	13.5%	10.4%	11.4%	7.3%	-32.0%
80 Flex V		1.0%	9.6%	8.1%	11.0%		-16.9%
80 Strategic II		0.9%	10.5%	11.8%	14.4%	9.6%	-30.2%
Fidelity 80		1.2%	12.7%	10.3%	11.3%	7.3%	-32.0%
Moderate		1.3%	11.0%	8.4%	9.6%	6.8%	-23.1%
60 Flex V		1.3%	9.1%	8.0%	10.9%		-13.1%
60 Strategic II		1.1%	9.3%	10.1%	12.6%	8.9%	-24.2%
Vanguard 60		1.9%	9.3%	9.1%	10.3%	6.6%	-23.8%
Moderately Conservative		1.0%	8.5%	6.3%	7.7%	6.2%	-13.3%
40 Flex V		1.6%	8.7%	8.1%	10.9%		-13.1%
40 Strategic II		1.0%	7.3%	7.7%	9.9%	7.5%	-16.8%
Vanguard 40		1.5%	6.8%	6.6%	8.0%	5.9%	-15.1%
Conservative		0.8%	6.0%	4.2%	5.7%	5.5%	-2.5%
20 Flex V		1.9%	8.2%	7.6%	10.4%		-5.2%
20 Strategic II		0.9%	5.4%	5.4%	7.4%	6.3%	-9.1%
Vanguard 20		1.3%	5.2%	4.9%	6.6%	5.6%	-0.7%
Asset Allocation		USA	x-USA	Bond	Cash	Other
20 Flex V		14%	5%	48%	29%	4%
40 Flex V		28%	10%	31%	26%	5%
60 Flex V		34%	15%	21%	24%	6%
80 Flex V		44%	20%	8%	21%	7%
90 Flex V		51%	22%	1%	18%	7%
20 Strategic II		11%	6%	52%	27%	3%
40 Strategic II		22%	12%	40%	22%	3%
60 Strategic II		35%	18%	27%	17%	3%
80 Strategic II		45%	25%	14%	14%	3%
90 Strategic II		50%	29%	8%	11%	3%
NOTE 1:  Past performance is no guarantee of specific future results.  This data is presented by Potomac Wealth Strategies, LLC.  This data is from Morningstar and should be accurate, but it has not been independently verified.
NOTE 2:  "Flex" and "Strategic" portfolios are designed and managed by Potomac Wealth Strategies, LLC.  These models show track records of better returns, lower volatility, or both, compared to their benchmarks and popular competitors.
NOTE 3:  "Vanguard 80" and "Fidelity 80" are low-cost Moderately Aggressive portfolios.  They are comprised of index funds from Vanguard or Fidelity.  This is what many might recommend due to low-costs and portfolio efficiency.
NOTE 4:  Nothing on this blog post represents investment advice to any individual or organization.  If the information hereon is of interest to you, please contact us at Garo.Partoyan@PotomacWealthStrategies.com for a consultation.

Strategic and Flex Portfolio Performance Through June 2014

US and Foreign Indexes		3 mo	1 yr	3 yr	5 yr	10 yr	2008
Stock Markets (50-40-10)		4.9%	23.0%	11.2%	14.9%	7.8%	-39.7%
S&P 500		5.2%	24.6%	16.6%	18.8%	7.8%	-37.0%
MSCI EAFE		4.1%	23.6%	8.1%	11.8%	6.9%	-43.4%
iShares MSCI Emerging Markets		6.6%	13.8%	-0.9%	8.1%	11.2%	-50.0%
Barclays Agg Bond--US		2.0%	4.4%	3.7%	4.9%	4.9%	5.2%
Barclays Agg Bond--Global		2.5%	7.4%	2.6%	4.6%	5.1%	4.8%
Aggressive		4.3%	21.9%	11.4%	14.1%	7.2%	-36.3%
90 Flex V		2.4%	16.5%	9.3%	13.1%		-19.1%
90 Strategic II		3.2%	19.5%	13.0%	18.0%	10.0%	-34.0%
Fidelity 90		4.2%	21.9%	11.2%	14.3%	7.4%	-35.7%
Moderately Aggressive		4.1%	20.1%	10.6%	13.2%	7.2%	-32.0%
80 Flex V		2.4%	15.5%	8.9%	12.7%		-16.9%
80 Strategic II		3.1%	17.9%	12.2%	16.7%	9.6%	-30.2%
Fidelity 80		3.9%	19.8%	10.4%	13.3%	7.2%	-32.0%
Moderate		3.6%	16.1%	8.7%	11.0%	6.7%	-23.1%
60 Flex V		2.5%	13.7%	8.6%	12.3%		-13.1%
60 Strategic II		3.0%	15.0%	10.5%	14.5%	8.9%	-24.2%
Vanguard 60		3.4%	12.7%	9.6%	11.4%	6.6%	-23.8%
Moderately Conservative		3.0%	12.2%	6.8%	8.8%	6.2%	-13.3%
40 Flex V		2.7%	12.2%	8.6%	12.2%		-13.1%
40 Strategic II		2.6%	11.3%	8.1%	11.2%	7.6%	-16.8%
Vanguard 40		2.8%	9.1%	7.3%	8.9%	6.0%	-15.1%
Conservative		2.5%	8.4%	4.9%	6.5%	5.6%	-2.5%
20 Flex V		2.8%	10.1%	8.0%	11.5%		-5.2%
20 Strategic II		2.2%	7.9%	5.8%	8.4%	6.3%	-9.1%
Vanguard 20		2.4%	6.5%	5.7%	7.3%	5.7%	-5.6%
Asset Allocation		USA	x-USA	Bond	Cash	Other
20 Flex V		14%	6%	48%	29%	3%
20 Strategic II		11%	6%	53%	27%	3%
40 Flex V		28%	12%	32%	26%	3%
40 Strategic II		22%	12%	40%	22%	3%
60 Flex V		34%	17%	22%	23%	4%
60 Strategic II		35%	18%	27%	17%	3%
80 Flex V		44%	23%	8%	20%	5%
80 Strategic II		45%	25%	13%	14%	3%
90 Flex V		50%	26%	1%	18%	5%
90 Strategic II		50%	29%	8%	11%	3%
NOTE 1:  Past performance is no guarantee of specific future results.  This data is presented by Potomac Wealth Strategies, LLC.  This data is from Morningstar and should be accurate, but it has not been independently verified.
NOTE 2:  "Flex" and "Strategic" portfolios are designed and managed by Potomac Wealth Strategies, LLC.  These models show track records of better returns, lower volatility, or both, compared to their benchmarks and popular competitors.
NOTE 3:  "Vanguard 80" and "Fidelity 80" are low-cost Moderately Aggressive portfolios.  They are comprised of index funds from Vanguard or Fidelity.  This is what many might recommend due to low-costs and portfolio efficiency.
NOTE 4:  Nothing on this blog post represents investment advice to any individual or organization.  If the information hereon is of interest to you, please contact us at Garo.Partoyan@PotomacWealthStrategies.com for a consultation.