message to clients 8/9/11

Good morning.  As you probably know, yesterday the S&P 500 index was down -6.7%.  The Flex portfolios I use for most of my clients fared better.  For example:

80 Flex III:  -2.9%
60 Flex III:  -2.4%
40 Flex III:  -1.9%

Meanwhile, for the Quarter-to-Date (7/1 – 8/8), the S&P 500 is down –15.1%, and the Flex portfolios have again fared better:

80 Flex III:  -5.9%
60 Flex III:  -4.6%
40 Flex III:  -3.2%

Some clients have asked about going to cash or seeking shelter, and the Flex portfolios have already been doing quite a bit of that for us, as I reminded everyone in some recent messages.  Right now, the Stock-Bond-Alternatives-Cash allocation percentages are approximately:

80 Flex III:  50-10-15-25
60 Flex III:  35-15-15-35
40 Flex III:  25-25-10-40

(So, even the portfolio that normally aims to be 80% in stocks is only about 50% in stocks now, and the Flex portfolios are holding ~25% or more in net cash.  Each mutual fund in the Flex portfolios has its own range of investment discretion, so the cash on-hand in those funds is ready to be invested whenever their managers see fit.  When a market declines broadly like this, many stocks become significantly undervalued, so having cash on-hand for opportunistic investing is one of the great advantages delivered by the funds in our Flex portfolios.)

Anyway, the Flex portfolios are demonstrating superior performance compared to the stock market.  They did so also in the market's terrible 2008 through early-2009 period.  They also recovered impressively after that.  And the 3-, 5- and 10-year track records of the Flex portfolios are double or even triple the annualize performance of the stock market.

Thus for long-term investors, it is sensible to stay the course with a global/flexible portfolio instead of trying to time the market.  Having said that as your investment advisor, I recognize it is your decision if you wish to make any changes.  If you do, let’s discuss it and go forward.

In any case, please contact me with your questions or thoughts.  Thank you!

--Gary

(FYI, my own retirement portfolio is in 80 Flex III—I have a pretty strong risk tolerance and plan to be working and saving for the next 25 years.)

Garo Linck Partoyan
Financial Advisor
Potomac Wealth Strategies, LLC
(703) 746-8195
Garo.Partoyan@PotomacWealthStrategies.com
www.PotomacWealthStrategies.com