Flex Portfolio Performance Through November 2011

This continues to be a rough year across the global markets.  Given the volatility of the global stock, bond and commodities markets, and the problems in the global economy, I remain strongly in favor of using a global/flexible portfolio and think my Flex portfolio method is the way to go.

So, how did Flex perform?  Not as well as I would like, for the second month now.  I am considering changes:

• I may replace The Arrow DWA Tactical fund.  It is 1/2 of the "growth-oriented" portion of the Flex III portfolios, and it has been underperforming greatly.  It seems to just miss the boat right now, despite the great track record of the underlying portfolio methodology.  This is likely because it uses an intermediate-term trend-following methodology that really does well over the long-haul but does not react to the kind of short-term volatility we are experiencing now.

• Ivy Asset Strategy is going to stay in the Flex portfolios, despite being on my Watch List lately.  This fund is the only hedge fund-like component, and I want that kind of guts and flexibility in this portfolio series.  It is invested pretty much fully in growth companies in emerging markets that have had a rough time lately; I am eager to see what happens when that market regains its footing.

What to do?  If I reduce the weighting of Arrow DWA Tactical fund, I will either convert Flex III investors into Flex II (Flex III but without Arrow DWA Tactical), or I will bring on another fund I have identified as suitable.

Here are the performance #s through November 2011:

US and Foreign Stocks 1 month 3 month YTD 2 year 3 year 5 year 10 year S&P 500 -0.2% 2.9% 1.0% 8.7% 14.0% -0.2% 2.8% MSCI EAFE -4.9% -5.6% -11.3% -1.5% 10.1% -4.0% 4.8% Moderately Aggressive Benchmark -2.1% -1.1% -2.7% 4.1% 11.4% 0.0% 4.7% 80 Flex III -0.5% -5.3% -1.6% 6.0% n/a n/a n/a 80 Flex II -1.1% -2.4% 1.2% 7.6% 15.4% 7.4% 11.1% 80 Fidelity -1.3% -0.6% -3.0% 4.7% 11.9% 0.0% 4.8% Moderate Benchmark -1.7% -0.9% -0.2% 4.5% 10.3% 1.8% 5.2% 60 Flex III -0.9% -5.0% -1.2% 5.8% n/a n/a n/a 60 Flex II -1.3% -2.8% 0.9% 7.0% 14.1% 7.6% 10.5% 60 Fidelity -1.1% -0.2% -0.9% 4.8% 10.7% 1.4% 4.9% Moderately Conservative Benchmark -1.3% -0.7% 2.2% 4.7% 9.2% 3.4% 5.7% 40 Flex III -1.3% -4.6% -0.8% 5.6% n/a n/a n/a 40 Flex II -1.6% -3.1% 0.6% 6.3% 12.7% 7.7% 9.8% 40 Fidelity -0.8% 0.2% 1.5% 5.1% 9.6% 2.8% 5.1%
*   80 Fidelity is a portfolio of very popular and widely-available index funds from Fidelity Investments allocated in a 80% stocks, 20% bonds strategy similar to that of the 80 Flex portfolios, and I want to compare the two; the 80 Fidelity portfolio uses a style-pure, buy-hold-rebalance method, while the 80 Flex portfolio allows for a great deal of tactical adjustments within the 80% stock long-term strategy. ** Not all Flex III funds were available for the full 10-year period, but all Flex II funds were. The Stock-Bond-Alternatives-Cash allocation percentages are approximately: 80 Flex III:  43-10-18-29 60 Flex III:  32-20-14-34 40 Flex III:  21-29-11-39 I still believe staying the course with a global/flexible portfolio is a lot better than trying to time the market.  Please contact me with your questions or thoughts.  Thank you! --Gary (FYI, my own retirement portfolio remains mostly in 80 Flex III.) Garo Linck Partoyan Financial Advisor Potomac Wealth Strategies, LLC (703) 746-8195 Garo.Partoyan@PotomacWealthStrategies.com www.PotomacWealthStrategies.com