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March 10, 2010 |
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Greetings!
Below are letters recently mailed to clients which we felt could benefit other recipients as well. If you find our articles helpful, direct your friends to our web site to sign up for our newsletter or simply forward this email to them by clicking on the "Forward Email" at the bottom of this newsletter.
As always, we enjoy hearing from you. To provide feedback, simply email us.
Best,
John A. Frisch, CPA/PFS, CFP
President & Founder |
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Bear Market Surival Kit Letter Series |
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Bear Market Survival Kit Series Cover Letter, March 4, 2010
One of my primary responsibilities as your advisor is to keep you from making impulsive changes to your investment plan during a bear (or bull) market. Unless changes are warranted by your unique personal financial circumstances, I consider helping you stick to your original plans as vital as any other service I provide. Maybe more so, for if you do not stay the course, the rest is unlikely to do you much good.
Bear markets are inevitable. We know they will happen. We've already built them into your investment plan. But historical evidence is that, after bear markets, things eventually get back on track. That's why one of the main ways to botch up your expected returns is to panic - sell and miss the major run-up that follows. My simple conviction is that the market's permanent trend is upward. I also accept that it will have temporary downward corrections, sometimes long and severe, with unknowable timing. To capture the market's rewarding long-term trend, we must stay put as it goes down, so were in when it goes back up.
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Letter from the President: One Year Later |
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Bear Market Survival Kit Series Letter #1, March 4, 2010
Why We Do (Did) Not Sell During A Bear Market
As I draft this letter, the S&P 500 Index (which represents about 75 percent of the overall U.S. stock market capitalization), stands at 1120. A year ago today, I sent my clients the enclosed letter, 'Why We Do Not Sell During a Bear Market'. Talking about interesting timing. Two days later, as clients received my letter, the S&P 500 dropped to 667, which turned out to be its bottom in the bear market now considered passed. The year's difference between 667 and 1120 is a 68% increase.
Now, before anyone interprets my comment as a claim to having cleverly predicted the market bottom, let me be very clear. When I dropped that letter in the mail, I had no idea when the market would turn around. I would hate to tempt fate into serving up another bear market to punish any such hubris.
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Reflection: Letter from the President, March 2009 |
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Why We Do Not Sell During a Bear Market
As you are well aware 2009 has seen the investment markets continue the decline begun in October 2007. In this writing I would like to address for you why I do not suggest we sell and go to cash even though the market seems to go down every day and the economic news just gets worse.
If I were omniscient I might know that the market was going to continue to decline. So I would sell everyone's investments, go to cash, watch the market continue to fall, and then swoop back into investments once I knew the market was about to rebound. But note that (a) I am not omniscient and (b) two separate decisions have to be made correctly in an effort to realize this scenario. The first question is when do we sell? Well I suspect you'll agree that it feels like we should be selling right now. It does appear that the economy will get worse before it starts to improve and that stocks will continue to decline. Our Fed Chairman Ben Bernanke said last week that the economic recovery is not expected until 2010. Well let's assume that's the easy decision and that we sell today and go to cash. Now assume that tomorrow it looks like the right call because the market continues it descent.
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| About Us: Located in Woodbridge, VA, Alliant Wealth Advisors (formerly Millennium Capital Management Corp) was founded to help a select group of families achieve all that is important to them financially. To achieve our mission we use a consultative wealth management process, which includes both investment consulting and advanced planning. Our approach assumes that every client is unique; every client has varying needs and objectives; and no two clients share the same risk tolerances, time horizons and dreams. In addition to providing our expertise we work with clients' existing advisors and, where there is a gap to fill, we use our own outside experts in the fields of tax, legal and high-end Insurance. |
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