Moderate that Volatility

Not only are there now many more types of investments available to the investor, but many more strategies are now executable that were virtually impossible a short time ago. Alternative assets and alternative strategies both offer the possibilities to hedge against unexpected movements in various growth markets. Such prevarication may help your portfolio travel a smoother route; allowing your assets to grow while allowing you to sleep better at night.

The Moderation portion of your portfolio will be between 60% and 20% of the total portfolio depending on our discussions with you and Moderation Allocationwill include traditional diversifying assets such as cash and bonds as well as more esoteric assets and strategies including hedging strategies and diversifying assets. 

The fixed assets include three basic components: cash and cash equivalents, protection assets, return assets and complimentary moderating strategies. 

We try to keep the cash level in your investments portfolio to about 2% or less and only for the small amount of instant liquidity always necessary. Cash is part of the Protection component.

The Protection component is exactly what its name implies; we seek those investments that will lessen or eliminate volatility and will have some assurance that they will retain their value. In addition to cash and cash equivalents, the Protection component may contain US Treasury Bonds and Bills, FDIC insured bank CDs, fixed portions of variable annuities, stable value funds and GICs, and income guaranteed deferred annuities. We are not seeking much return from the Protection; we are seeking protection from unforeseen "bad things in bad times".

The Return component of Moderation is where we seek to gain a market return for taking a market risk in income producing investments. Typically, the Return portion will be made up of total bond market funds, global, domestic and foreign corporate bonds and municipal bonds. The durations may be from very short to intermediately long as the markets and needs dictate. More volatile than other bonds and only when the situations make it advisable, you may see some US and foreign High Yield (junk) bonds and Emerging Markets Debt in the Return portion.

The complimentary strategies used in the Moderation portion of the portfolio may be based on bonds, stocks, a combination of both or based on derivatives of either. The point is that the strategies intend to produce a higher returns than the typical bond fund while exhibiting less volatility that an equity fund. They offer a moderated level of volatility while seeking higher returns.

The point of using diversifying strategies is to diversify some of the volatility away from the Growth portion of the portfolio. If a particular strategy proves to follow the trend of traditional markets even if it has lower volatility, it may not really serve the function of a diversifying strategy. Sometimes, this higher-than-expected correlation of volatility only shows up when markets are trending downward -- exactly the time we need the diversifying strategy to be uncorrelated. Finding the investments that actually produce their "promised" performance is a daunting task and one that we are constantly pursuing on your behalf.

Growth Allocation ⇔ Portfolio Risk