Given the potential for further solvency issues in the Eurozone, China's slowdown, and stubbornly slow growth in the USA, as well as increasing potential for military flare-ups, or even war, in the Middle East, I believe it is important to remain flexible and diversified. The stock markets will hopefully continue to rise, but a correction (dropping 10% or more), or even another bear market (dropping 20% or more), can happen suddenly.
My Flex portfolios have been much less volatile than standard portfolios and the stock markets. When we have had pullbacks, corrections, and bear markets, Flex portfolios have protected us relatively--but significantly. For example, a moderately-aggressive investor using a portfolio of popular index funds from Fidelity during the worst 12-month period of the 2007-9 economic/market crisis would have been down 39%, compared to only down 22% if using 80 Flex II. Someone using just the S&P 500 (SPY, or the TSP's C-Fund, for example) would have been down 43%. Despite providing that relative protection, 80 Flex II still delivered better overall results--6.7% average annual gains in the 5-yr period, compared to -0.2% per year for 80 Fidelity and just 1.1% per year for the S&P 500.
Each quarter, I spend a great deal of time evaluating and tweaking my Flex portfolios, as well as designing and testing new ones to possibly replace them. But the risk-reward balance still appears to be best with the current line-up.
If you want to invest money for the long-term, not have to worry about making adjustments yourself, but also know the portfolio is being tactically adjusted by several professionals working for us, the Flex portfolios are a prudent solution.
| US and Foreign Stocks | 1 mo | 3 mo | YTD | 1 yr | 2 yr | 3 yr | 5 yr | 10 yr |
| Stock Markets (50-40-10) | 1.3% | -2.7% | 7.7% | -1.9% | 7.7% | 8.8% | -1.7% | 7.2% |
| S&P 500 | 1.4% | -0.8% | 11.0% | 9.1% | 14.3% | 14.1% | 1.1% | 6.3% |
| MSCI EAFE | 1.1% | -4.2% | 4.1% | -11.5% | 1.8% | 3.2% | -5.7% | 6.2% |
| Barclays Agg Bond--US | 1.4% | 2.3% | 3.8% | 7.3% | 5.8% | 6.9% | 6.9% | 5.7% |
| Barclays Agg Bond--Global | 1.2% | 0.6% | 2.7% | 1.8% | 5.4% | 5.7% | 6.5% | 6.5% |
| Moderately Aggressive | 1.2% | -1.6% | 6.7% | -0.1% | 7.8% | 8.4% | -0.1% | 6.6% |
| 80 Flex II | 0.6% | -2.0% | 5.4% | -1.1% | 7.8% | 9.5% | 6.7% | 10.9% |
| 80 Fidelity | 0.9% | -1.9% | 6.6% | -0.6% | 7.4% | 8.2% | -0.2% | 6.6% |
| 80 Flex III | 0.7% | -1.6% | 5.5% | -2.0% | 7.5% | 9.0% | ||
| Moderate | 1.2% | -0.8% | 5.8% | 1.5% | 7.4% | 8.0% | 1.8% | 6.6% |
| 60 Flex II | 1.0% | -0.9% | 6.0% | 0.1% | 7.3% | 9.1% | 7.3% | 10.4% |
| 60 Fidelity | 0.9% | -0.9% | 5.7% | 1.1% | 6.8% | 7.6% | 1.4% | 6.3% |
| 60 Flex III | 1.0% | -0.7% | 6.1% | -0.6% | 7.1% | 8.8% | ||
| Moderately Conservative | 1.2% | 0.0% | 4.8% | 2.9% | 7.0% | 7.4% | 3.6% | 6.5% |
| 40 Flex II | 1.3% | 0.1% | 6.6% | 1.3% | 6.8% | 8.7% | 7.9% | 9.9% |
| 40 Fidelity | 1.0% | 0.2% | 5.0% | 3.1% | 6.4% | 7.2% | 3.0% | 6.0% |
| 40 Flex III | 1.4% | 0.3% | 6.6% | 0.8% | 6.6% | 8.5% | ||
| Asset Allocation | Cash | Stock | Bond | Other | ||||
| 80 Flex II | 20% | 54% | 16% | 10% | ||||
| 60 Flex II | 24% | 41% | 27% | 8% | ||||
| 40 Flex II | 29% | 27% | 38% | 6% |
