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

Flex Portfolio Performance Through October 2011

After a very difficult 3rd quarter, and an especially rough September, for stock markets, they went way up in October.  Since Potomac Wealth Strategies' Flex portfolios are widely diversified, their performance lagged relative to the stock markets.  Given the volatility of the markets, and the problems in the global economy, I am still strongly in favor of using a global/flexible portfolio and think Flex is the way to go.

So, how did Flex perform?  Not as well as I would like, and there are two culprits:  the Arrow DWA Tactical fund has been underperforming, 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; and Ivy Asset Strategy (which is much like a hedge fund and is the riskiest fund in the Flex portfolios) has invested fully in growth companies in emerging markets that have had a rough time lately.

What to do?  I am considering reducing the exposure to Arrow DWA Tactical for the Flex III portfolios; Flex II does not use this fund and performed significantly better recently, and about the same over the longer periods.  I am also in touch monthly with the folks at Ivy Funds--Asset Strategy fund has been performing very well lately (up 14.4% just in October, vs. 10.8% for the S&P 500, and up 2.2% vs. 1.9% so far in November), and I am inclined to stick with it because of its track-record and the potential for great returns.

Here are the performance #s:

For October 2011:
S&P 500:   10.8%
80 Fidelity:  8.3%*
80 Flex III:  4.6% 

60 Flex III:  4.2%

40 Flex III:  3.8%

Trailing Three-months (through 10/31):
S&P 500:    -2.5%
80 Fidelity:  -5.2%

80 Flex III:  -6.7%

60 Flex III:  -5.7%

40 Flex III:  -4.6% 

For 2011 YTD (through 10/31):

S&P 500:     1.2%
80 Fidelity:  -1.7%

80 Flex III:  -1.2%

60 Flex III:  0.3%

40 Flex III:  0.5%

For the 2-yr period ending 10/31/11:

SP 500:     12.1% per year

80 Fidelity: 7.3% per year

80 Flex III:  8.5% per year

60 Flex III:  8.1% per year

40 Flex III:  7.7% per year

For the 3-yr period ending 10/31/11**:

SP 500:      11.3% per year

80 Fidelity: 10.4% per year

80 Flex II:  15.2% per year

60 Flex II:  14.2% per year

40 Flex II:  13.19% per year

For the 10-yr period ending 10/31/11**:

SP 500:       3.6% per year

80 Fidelity:  5.3% per year

80 Flex II:  11.5% per year

60 Flex II:  10.8% per year

40 Flex II:  10.1% per year

*   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:  32-18-14-36
40 Flex III:  21-26-11-42

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

Flex Portfolio Performance Through September 2011

It was a very difficult quarter, and an especially rough September, for stock markets.  European "sovereign debt" worries (countries potentially going bankrupt) and renewed concerns about the possibility of the USA entering another recession both hurt developed markets, and slowing growth in China put pressure on emerging markets' stock, commodity and currency markets.

How did my clients fare?  Well, that's obviously a personal and private matter for each client, but this blog entry shows performance data for the three most commonly-used portfolios in my practice.

For September 2011:
S&P 500:    -7.0%
80 Fidelity:  -7.0%*
80 Flex III:  -9.1%

60 Flex III:  -8.0%

40 Flex III:  -6.9%

For 2011-q3 (7/1 through 9/30):
S&P 500:    -13.8%
80 Fidelity:  -13.6%

80 Flex III:  -9.4%

60 Flex III:  -8.1%

40 Flex III:  -6.8% 

For 2011 YTD (1/1 through 9/30):

S&P 500:    -8.7%
80 Fidelity:  -9.2%

80 Flex III:  -5.5%

60 Flex III:  -4.3%

40 Flex III:  -3.2% 

For the 10-yr period ending 9/30/11**:

SP 500:       2.7% per year

80 Fidelity:  4.7% per year

80 Flex II:  11.0% per year

60 Flex II:  10.4% per year

40 Flex II:   9.8% per year

*   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:  47-9-17-27
60 Flex III:  35-17-14-34
40 Flex III:  24-25-10-41

I still believe staying the course with a global/flexible portfolio is, for most investors, probably 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

Giving Thanks to Those Who've Helped Me Build My Career!

We all learn a lot from others, and it's good to "give props".

Thanks to Soy Chu and Jeff Benjamin for giving me my first career-oriented job at New Year Tech.  I didn't know what I wanted to do or how to do anything in particular then, but they let me grow into some things and taught me a lot.  And Soy, the owner, kept me on even during the hard times.

Thanks to Rich Kotite and Todd Stayin for getting me into the corporate telecom world at Winstar.  That was a great ride and I learned a ton.  Todd got me in the door and took me under his wing when Rich hired me, and Rich made sure I had what I needed to learn the business and make contributions right off the bat.  And there is where I met Joe Thompson.  JT set me straight ("you're good, and we promoted you to Manager, but you gotta find something you love and do that; you like telecom okay and all, but find your passion and do it."), and that was huge.  It prompted me to consider taking a shot at what I always really wanted to do, which leads me to this...

Thanks to Bill Waggoner of Morgan Stanley in Menlo Park for giving me a shot ten years ago.

Thanks to Greg Davis of Morgan Stanley for letting me transfer my business to his MS office in Tysons Corner when I wanted to move back home; thanks, also, to Greg for helping me understand my strengths and weaknesses in various investment areas.

Thanks to Loren Evans of A.G Edwards & Sons (then Wachovia Securities, and now Wells Fargo Advisors) for opening my mind and practice to the idea of tactical adjustments within a long-term strategy (the genesis of my Flex portfolio methodology).

And thanks to Deana Arnett, Certified Financial Planner extraordinaire, for teaching me how to be a real financial advisor, not just an "asset gatherer" (can't help anyone if you don't "sell" and bring in the business, but then ya gotta make sure you're really helping people).

I have a few young go-getters who have thanked me recently for helping them get going in their careers, and that prompted me to reflect on those who've helped me.  Pay it forward, and don't forget to pay it back!

Flex Portfolio Performance Through August 2011

It has been a volatile time for the stock markets.  This is a quick blog entry to share the performance data for the three most commonly-used portfolios in my practice.

For August 2011:
S&P 500:     -5.4%
80 Fidelity:  -5.8%*

80 Flex III:  -2.0%

60 Flex III:  -1.7%

40 Flex III:  -1.4%

For 2011q3 (7/1 through 8/31):
S&P 500:     -7.4%
80 Fidelity:  -7.1%

80 Flex III:  -0.4%

60 Flex III:  -0.2%

40 Flex III:  -0.0%

For the 10-yr period ending 8/31/11**:
S&P 500:     2.6% per year
80 Fidelity:  4.7% per year

80 Flex II:  11.5% per year

60 Flex II:  10.9% per year

40 Flex II:  10.3% per year

*   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.

An important aspect of my Flex portfolios is their ability to tactically shift allocation within the long-term strategy; why stay put if you are pretty sure it's going to be rough and you have a better idea at the moment?  Right now, the Stock-Bond-Alternatives-Cash allocation percentages are approximately:

80 Flex III:  48-9-17-26
60 Flex III:  36-17-14-33
40 Flex III:  24-24-12-40

For long-term investors, staying the course with a global/flexible portfolio is probably 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 is mostly 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

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

message to clients on 7/30/11

Good morning and happy Saturday.  Investors just had a rough week, but our Flex portfolios held-up much better than the stock market.

Here is a quick update on how the most popular of my Flex portfolios have performed in the past year compared to the S&P500.

Time (as of 7/29)              80 Flex III             60 Flex III             40 Flex III             S&P500
1-day                                     -.07                        -.02                        .04                          -.64
1-week                                 -1.45                      -1.01                      -.56                        -3.91
MTD                                      1.55                        1.46                        1.38                        -2.03
YTD                                        5.95                        5.68                        5.40                        3.87
1-year                                   19.37                     16.56                     13.80                     19.47

NOTES:  Data comes from Morningstar; I usually prefer to ignore short-term performance in favor of 3-, 5- and 10-yr track records (where the Flex portfolios have massively outperformed their benchmarks), but I want to keep you as up-to-date as possible.

Thank you, and make it a great weekend!

--Gary
              

Garo Linck Partoyan
Financial Advisor & Owner

Potomac Wealth Strategies, LLC
1800 Diagonal Rd., Suite 600
PMB 12
Alexandria, Virginia  22314
(703) 746-8195
(703) 347-9483 fax
Garo.Partoyan@PotomacWealthStrategies.com
www.PotomacWealthStrategies.com
FINANCIAL BLOG:  http://potomacwealthstrategies.blogspot.com