Wake Up and Smell the Coffee! Please!

In September 2011, an acquaintance expressed concern that one of his smaller accounts was underperforming (losing money) and asked me if he should be more conservative,  just before the market bottomed and rose 25%. In March of 2012, another acquaintance informed me that he felt bullish and implied that he was going to be more aggressive with his account, weeks before the high for 2012. In May 2011, a relatively new acquaintance (who I was trying to gain as a client) expressed concern that my approach was calling for too many bonds and was concerned he would be hurt by interest rates that were sure to be rising soon. Within four weeks the market topped out and then dropped 20%. My clients, including this individual trusted my judgement and only saw a dip of 3-5% in their accounts during that period. These were all financially sophisticated, successful, level-headed people. If you honestly reflect on how you felt at those turning points in the market, you can remember people who were just as wrong about where the markets were going next. Perhaps, even you were wrong.

Investing for long term returns is NOT easy! Listening to the financial news on TV is hazardous to the health and welfare of your portfolio, plain and simple.

Only a few professional investors, and even fewer individual investors, succeed in reaching their goals in the financial markets. Everyone, even the professionals, make mistakes. What enables the professionals to succeed is having a discipline… a methodology that provides figurative guardrails to keep your portfolio on track. Individual investors have about the same odds of long-term success, as a good high school athlete does of succeeding in professional football.

What am I trying to say? Wake up! Smell the Coffee! Hire me to manage your money. At the very least, buy the PortfolioWisdom App and start comparing it’s recommendations to those of your current advisor. If you do, in six months or less, you will probably call me.

Look at your brokerage or 401k statements for the last two years… or for the last 5 years. Have you made any progress? Has the broker or advisor you use charted a wise course through the ups and downs of the markets? Did you experience an emotionally crippling portfolio loss that caused you to sell stocks at the bottom in 2008 or 2009?

We may be heading down into another crash. Please don’t go there again with your portfolio following the same strategy or advisor you did the last time.

Take care.


How Are the PortfolioWisdom App Users Doing?

Hey, App users? How are things going? I hope the “high” allocation to fixed income in the PortfolioWisdom App has been helping you this month! Have you noticed the way increasing equity and real asset volatility has decreased the allocation to those asset classes in the last four weeks? Please let me know if you have any questions.

Dang! Wish I had better timing on Facebook!

Hello everyone, Boy was my timing off on Facebook! As a professional investor, you occasionally make judgement calls as you try to do your best for your clients. Some work out beautifully, and some, like this one, don’t work out the way you envisioned. Of course, the last chapter has not been written (this is a long-term holding), but the early returns are painful. I’m sorry this judgement call has been such a drag (approximately -0.5%) on the portfolios so far.

The good news is that I took a very small initial position (approximately 2%), so the temporary drag is very manageable relative to our long-term results. In fact, because I raised so much cash in April, 2012 (another judgement call that is going very well so far), our results for the year are still on track with the basic portfolio models, or slightly better, depending on the risk tolerance of your portfolio model. In summary, we’re still doing fine.

As of this writing, we still hold approximately 25% in cash, and I will be gradually moving that cash back into the portfolio models as previously discussed. The Facebook position will simply be part of the overall portfolio allocation to US stocks.

Hope you had a great Memorial Day…. thanks to all of those who gave their lives for our nation and our freedoms. Thanks also to the families who have born the heavy load of living with the loss of their loved ones.

We’re at a Fork in the Road

A look back, then a look forward…. As I write this post Friday morning before the market opens, 10 of 12 of the assets classes in our client portfolios are down for the Second Quarter and 4 of 12 are down for 2012. Remember when I said “I had to Laugh” back in February? People were predicting that we would see another 15% gain or more in the S&P500 from that point! This is a perfect example for my rule to pay little attention to CNBC and the financial news of the day. It often leads you in the wrong direction, my opinion. Our Balanced portfolio model has dipped approximately -2.7% from this year’s highs, while the S&P500 has dipped approximately -5.9%. Our actual client accounts have done somewhat better, because of the cash I raised back in April when I wrote that “Something Doesn’t Feel Right”.

Regarding FaceBook … I recommend you pay no attention to the media news on this subject either … it is pointing you in the wrong direction, I feel. I’ve noticed many  mainstream media stories that engender fear; fear of losing all your money; fear of missing out on the big move up. Fear sells, and the media is in the business of selling. The media is a lousy basis for forming your market opinions, unless you’ve learned to filter the news very carefully. We purchased a very small position in Facebook, and we intend to hold it for the long-term… possibly several years, so it is not a big deal in my view… certainly not as big a deal as the news stories.

Looking forward … I believe we’re at short-term fork in the road. I don’t know if we’re going to get a bounce off of the recent lows, or break through to some scary selling on wall street. Either could easily happen, based on the developments in Europe. In the big picture, we know we do not need to make predictions to make money over time. All we have to do is manage risk by responding to the behavior of asset classes according to my methodology. We are holding approximately 25% cash, and will continue moving back to full investment in the models over the next few weeks.

If anyone has questions or concerns, please give me a call. Thanks for being a part of our community!

Still Buying on the Way Down today

Hi Everyone! This post is for my clients… Well, I was going to wait quite awhile after putting more money into the models on Monday, but when the market fell flat this morning, I put some more cash to work.

By the way, many of you now have a little Facebook stock in your portfolio!  Not more than 2%, though.  When Facebook (symbol FB) began falling right after it opened, it seemed like a good long-term opportunity. At this stage, I plan to make that a long term holding for you, even though I’m not a “stock guy”.

We also put more cash into the Nasdaq 100, which is down over 10% from the highs. There was a “mini flash crash” for about 30 minutes after the Facebook shares began trading on the Nasdaq exchange, so we bought some Nasdaq 100 ETF shares (QQQ) near the lows of the morning.

So far, the strategy of buying on the way down is working nicely. The Balanced Model accounts have dipped approximately -2.5% while the S&P is down nearly -8% as I write this on Friday morning. The aggressive accounts are doing worse, while the conservative accounts are doing better, generally speaking. As expected.

Remember, I’m not a market timer, and do not intend to try to “invest everything at the bottom”. Except for the Nasdaq 100 allocation, which is expected to be temporary, I’m simply moving cash into the model portfolios and getting back to our basic strategy. As I write this, we are still about 30% in cash.



Maybe This is It … But Not to Worry … Yet

Hello everyone. About a month ago, I said that Something Doesn’t Feel Right … then when the numbers did not back my intuition, I started Putting some cash back to work. Wouldn’t you know, just about 3-4 days after I began putting cash back to work, the equity markets started falling. As I write this post on Wednesday Morning, the S&P 500 is down about -1.3% from yesterday, and about -4% down from the highs of last week. Lo and behold, everyone is worried that Greece may default! Although everyone knew about this 3 years ago (some knew when Greece joined the Euro Zone back at the beginning!).

However, there is nothing for us to worry about. The PortfolioWisdom App models are doing just fine. For example, as of yesterday, the Balanced 12 Asset Model was down about -1.52% from recent highs while the other models are behaving as expected, depending on the risk tolerance you have selected. Overall portfolio volatility has not yet begun to rise much from recent levels.

For my clients, we’re doing OK as well. Even though I began putting cash back to work right at the highs (that’s why timing the market consistently is so impossible), we still have about 55%-60% cash which has not participated in this selloff. As the market falls, I’ve been putting more money back in to the equity markets every so often, which is good.

I’ll keep you posted.

Putting Some Cash Back to Work

Maybe it was bad pizza after all!  Actually, probably not. After I wrote my last note and raised a lot of cash, the Fed announced they are keeping interest rates low for a long time, and the overall volatility in our portfolio models actually began to decline. Since that decline in volatility was what I was looking for, I’ve begun re-investing the cash… not all at once, but probably over the next 2-3 months.

For my clients, I am making a couple of changes to the index funds inside the model portfolios. For the last 18 months or so, I’ve had 5 bond funds, 4 stock funds, and 3 real asset funds. I’m dropping one of the bond funds (TIP – Treasury Inflation-Protected Securities) and adding a fund that tracks the S&P Global Materials Index (MXI) which tracks companies that deal in natural resources (a kind of real assets). Also, I’m switching out GSG- The commodities index for IFGL, which tracks Global, non-US developed real estate. So, we’ll go forward with 4 funds in each of the three major asset class categories, equities, fixed income, and real assets.

People who are using the PortfolioWisdom App may ask if I am changing the funds used in the App. The answer is “No”, for 3 reasons: 1. There isn’t yet enough market demand from the App clients to justify the cost of re-programming the App. 2. Also, the App will work just fine with the assets classes it already uses. 3. Finally, many 401k’s have funds that correspond to those in the App, while very few have funds that correspond to the new ones I am using for clients, so people managing 401k’s using their PortfolioWisdom App would have more difficulty if the App exactly tracked what I’m doing for my clients.

I’ll keep you posted.


Something Doesn’t Feel Right

I apologize in advance to everyone, including clients and PortfolioWisdom App subscribers, if you are confused by me doing something based on gut feel, after all these months/years of promoting my methodology, but there it is. For the last few days, I’ve experienced a growing uneasiness about the way the markets are behaving. There don’t seem to be overt reasons… the headlines look about the same. Volatility has grown slightly, but is not at the level that would normally give rise to great concern. There are plenty of “reasons” for good things or bad things to happen, based on your personal agenda. The long-term problems like the Europe debt crisis and the growing U.S. deficit and debt don’t seem any worse than they have been. But I can’t shake the feeling something is wrong. So …

My plan is to raise cash in client accounts for awhile until my gut feeling goes away, or volatility begins to decrease again. To be clear, I’m not “making a bet” that stocks will drop or that bonds will drop by betting against any asset class. I’m simply moving money to the sidelines to reduce market risk until things seem more clear to me. So, if stocks rally from here and we miss some gains, I apologize in advance. If something really bad appears and all markets suddenly crash… I’ll take full credit for having “seen this coming all along!”  (just kidding).

If nothing drastic occurs, I’ll probably begin moving back into the market when I’m feeling more comfortable. Hmmm maybe it was some bad pizza…

Volatility Beginning to Increase

Well, if you are closely tracking your portfolio, or the PortfolioWisdom app, or the free model allocations on my blog, you have noticed that the Conservative (Model 1) and Conservative Balance (Model 2) portfolios are raising cash due to increased overall market volatility. Also, after a long time in which bonds had extremely low historic volatility, those ETF are getting more volatile, even faster than equities are getting more volatile. So, you will also notice, especially in the more aggressive portfolios, that the bond slice of the allocation pie is diminishing in favor of stocks and real assets.

I don’t see any signs of panic, though. Those would be times, like in 2008, when all asset classes begin to sell off at once.

So, to use my favorite analogy, the breeze is stiffening and the waves on the water are beginning to develop a little chop. We’ll have to wait to see if things calm down again, or get more stormy.

Don’t let the news or the predictions scare you. By the time its on the news, its too late to take advantage. And you already know what I think about predictions.

Take care.

Introducing PortfolioWisdom … the Mobile App!

Finally! There is a Mobile App that allows the individual investor to manage her own IRA or 401k without spending an arm and a leg on commissions,management fees, newsletter subscriptions, trading software, or computer hardware!

This mobile app works on the iPhone and iPad. But, it also works on Android smartphones and devices … including the color Kindle!

Even more, HTML5-compatible browsers like Safari and Chrome can run this mobile app, so you don’t even have to splurge on a smartphone if you don’t already have one. And the subscription price for this amazing tool? $10.00 every two years.  That’s right. $10.00. It’s almost unbelievable.

Click to subscribe to PortfolioWisdom the app!

This screen shot shows a five year backtest indicating that PortfolioWisdom Model Portfolio 1 (Risk Tolerance 1) would have provided a great deal of peace-of-mind during the last five years vs. the S&P500.

Here’s what PortfolioWisdom does for you.

Respects Your Privacy! Without gathering a great deal of personal financial information, this app asks for the approximate size of your portfolio and asks you to choose one of six model portfolios that best fit your personal risk tolerance.


  1. Provides recommended asset allocations for 6 to 12 asset classes (based on portfolio size) using market data as recent as the previous Friday. The asset classes are represented by Exchange-Traded Funds (ETF’s) which can be bought and sold very inexpensively in your own account at any discount brokerage. No huge commissions to a broker!
  2. Calculates a five year backtest showing the theoretical performance of your model portfolio versus the SPY(S&P500) exchange-traded fund.

Performs “What If” backtest calculations as you try different portfolio sizes and risk tolerances. By looking at different combinations, you can compare the way different models behaved in difference market environments and increase your confidence in following a tested methodology.



Helps you manage portfolio risk by responding to market changes. It is recommended that you run this app at least monthly, to see if market changes have caused your overall portfolio risk to change. If so, PortfolioWisdom recommends Dynamic Asset Allocation adjustments to help you mitigate the big losses that would normally occur during a crash, like stocks in 20008. Again, you can check the updated PortfolioWisdom backtests to see how the selected model and portfolio size would have behaved during the good and bad times over the last 5 years.

Free membership in the Portfolio Wisdom Blog with access to news articles and market commentary written by Dale P. Beals, a Registered Investment Advisor who developed and now uses this very algorithm in managing investments for his clients.

Click to subscribe to PortfolioWisdom the app!