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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...
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Greetings!
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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friend by using the Forward email button at
the end of the newsletter.
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| The Dollar and Overseas Travel |
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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.
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| Eyes on the Yield Curve |
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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.
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| The Beauty of Bond Funds |
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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.
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| How Much Is Enough? |
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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.
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| What If You Become Incapacitated? |
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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.
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