| An eNews Update to our Quarterly Newsletter |
May 2002
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Investment Markets in 2002 The year 2002 is following the course of years 2000 and 2001, both of which were down years. So far in 2002, the various markets have performed thusly (as of March 31, 2002):
Take particular note of the significant differences in performance among the sectors. That has always happened. Historically, sectors have not moved in the same direction together or with the same intensity. So, how do we use this data? You already are using it! We have always utilized asset allocation so as to help balance out the disparate action of the market sectors. This is designed to help contain the volatility of your portfolio. One may ask why we don't just buy the sectors that are going up. That requires clairvoyance, and simply can't be done by anyone. However, with the right tools and experience, asset allocation can be utilized through all time periods and market conditions, and it doesn't require supernatural powers to accomplish as being clairvoyant would. During the hot market years of the middle and later 1990s, clients sometimes asked why we didn't use growth sectors exclusively and avoid the value sectors. Then, the period after that featured value stocks just as the current bumpy recovery period now is featuring them. Now, we see articles in the popular magazines asking if growth stocks will ever come back. Duh!? The question never is "if," it's "when?" The Nobel Prize committee awarded the prize in economics to the work that concluded that 92.5% of a portfolio's return (and risk) comes from the asset allocation model chosen. Only 5.7% of the outcome results from the actual securities selected, and a miniscule 1.7% results from whether the investment was made at the top, bottom or middle of a market's cycle. That makes your asset model pretty important! Here are the sectors we are utilizing for an evenly balanced client portfolio. Depending on the client's needs and risk tolerance level, we weight the allocation more in stocks or in bonds. But, the evenly balanced allocation illustrates how we have essentially positioned our clients during this downturn and have them poised for the potential recovery that, historically, has always followed.
We believe that you will agree that your portfolios are well positioned and, as a result, both protected and positioned to reap the potential benefits of future recovery. This should be true no matter which sectors recover first or best. You have large, mid and small sectors along with growth and value. You also have domestic and international opportunities. On the bond side, you have a mix of maturities and types of bonds. If you have any questions concerning this, please call your financial advisor with Fragasso Financial Advisors to discuss them. If you do not have a consultant with our firm, please call us to talk about your needs and how we can help. What to Expect Over the Remainder of 2002? No one can predict the future. The factors that loom largest over the economy include:
And, all of those and their impact on the remainder of 2002 will be the subject of June's electronic newsletter.
This article is for informational purposes
only and not intended as financial advice. Consult your financial
advisor to determine what is appropriate for your situation. If you have any comments, questions or suggestions concerning this
electronic newsletter, please email us at fgi@fragassogroup.com.
Visit Our Web site: A REGISTERED INVESTMENT ADVISOR ©2006 The Fragasso Group, Inc., All Rights Reserved
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