WH Cornerstone Newsletter
Independent solutions for life's financial opportunities May 2005

in this issue

Correlating Your Portfolio

The Dollar and Overseas Travel

Eyes on the Yield Curve

The Beauty of Bond Funds

How Much Is Enough?

What If You Become Incapacitated?


Correlating Your Portfolio

Regardless of how smoothly they operate, all individuals, organizations, industries, and economies routinely experience setbacks, ranging from minor inconveniences to major catastrophes.

Even the most closely managed portfolio is not immune to setbacks. In fact, they are so likely that the best defense may be to expect some losses but to employ a method to help reduce any damage.

Go Negative - Different groups of investments may be subject to different types of risk. Negative correlation is a portfolio strategy that is based on diversification - and the assumption that something, somewhere, is bound to go wrong. The idea behind negative correlation is to own asset classes that may offset risks present in other classes.

Perfect negative correlation would mean that when one group of investments in a portfolio performs poorly, another group of assets performs well, offsetting poor returns with good returns. Few asset groups are perfectly negatively correlated, but your portfolio may still be able to benefit from the principle.

A hypothetical example of negative correlation might be the relationship between airlines and rail carriers. Rail carriers may carry more passengers when airlines are facing challenges such as low passenger demand or labor strikes. Likewise, airlines may prosper when rail carriers are facing similar constraints. A hypothetical portfolio that has both airline and rail carrier holdings may be less volatile than a portfolio that owns one type but not both.

Building an efficient portfolio is a challenge, especially when you consider correlation and other factors. Please call if you would like to discuss strategies to help strengthen your portfolio.

Read on...


One of the important areas of financial planning that we review with clients is Estate Planning. End-of-life issues have been a hot topic lately. Because of recent news events, many people have decided to make clear to their spouses and family members what type of medical treatment they would want if they were to become unable to communicate for themselves. Be sure to read What If You Become Incapacitated? and take action today.

Time to Share. Create a Buzz. Duxbury's Open Space and Recreation Committee will be hosting a Nature Scavenger Hunt on Sunday, May 15 at 1:00 p.m. at Myles Standish Monument State Reservation off Crescent Street in Duxbury. Individuals and/or teams will be gathering a variety of items in the woods and those with the greatest point totals will win prizes. At the conclusion of the scavenger hunt, refreshments will be served. This event is free and open to all ages. It will be held sunshine or light rain. Directions.

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  • The Dollar and Overseas Travel
  • If you are among the 58 million Americans planning to travel outside the United States this year, the strength of the dollar could make a difference in your destination, your hotel, and where you dine.

    The dollar has been steadily losing value against several foreign currencies, including the euro and the Japanese yen, since February 2002. Economists expect the dollar to continue its decline, weakening against the euro through the first half of 2005.

    Read on...
  • Eyes on the Yield Curve
  • They say a picture is worth a thousand words. Some Wall Street observers would tell you that a chart or graph can tell a pretty good story, too.

    The Treasury yield curve is a closely watched indicator of interest rates - watched more closely at some times than others. For example, when the Federal Reserve reversed the direction of short-term interest rates in June 2004, the yield curve's reaction drew significant attention. The curve did not react as many people expected, but instead flattened out as long-term rates stayed low. This normally rare occurrence provided clues about the possible future direction of the economy.

    Read on...
  • The Beauty of Bond Funds
  • Just how savvy is the average investor when it comes to bonds? The results of a basic market knowledge quiz posted on the National Association of Securities Dealers Web site might surprise you.

    Well over half, 65 percent, failed the quiz. Only 39 percent understood the relationship between bond prices and interest rates, and 97 percent thought they needed to be better informed.

    Read on...
  • How Much Is Enough?
  • Take a moment to imagine exactly what would happen if your household suddenly had to adapt to life minus a primary wage earner. With 69 percent of American families owning life insurance, many people may believe that they are prepared for this eventuality.

    One study found that the average life insurance need is $459,000, whereas the average amount of life insurance owned is only $126,000. This results in an average $333,000 shortfall.

    Read on...
  • What If You Become Incapacitated?
  • End-of-life issues have been a hot topic lately. Because of recent news events, many people have decided to make clear to their spouses and family members what type of medical treatment they would want if they were to become unable to communicate for themselves.

    But what if spouses and family members forget? Or disagree? Or die first? Is it enough just to tell your loved ones what your wishes are? What if what you would want is not what your doctor would prescribe?

    One way to be certain that those around you know your wishes - and prevent them from making decision based on their own interests and desires - is by putting certain documents in place to speak for you in the event you become incapacitated.

    Read on...
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