May 2012 Monthly News Letter

The equity markets (as measured by the S&P 500, Dow and Nasdaq) had all three made significant moves upward sense September of 2011 with very little rest along the way.  Back in February I suggested that we could expect the markets to rest and likely consolidate after the nice run up.

Well, we certainly had some consolidation in May, which has continued into June.  In May alone, the aforementioned indexes all fell 6+%.  Greece and Spain were in the news most down days.  Will Greece stay in the Euro or will it leave?  We also had some less-than-impressive domestic, economic reports.  The Commerce Dept revised Q1 GDP from +2.2% to +1.9%, reported poor job creation in May and a drop in Factory Orders.

The volatility we are currently experiencing and have experienced over the past 12 years has led some to ask about alternative, investment strategies, as compared to a more traditional, “buy-and-hold” strategy.  With the latter, a portfolio is typically comprised of a diversified basket of investments.  Over the years, the owner may rebalance, make occasional changes, but generally they stick with their investment strategy.

However, utilizing multiple investment strategies may be a good way to further diversify a portfolio.  A “tactical” strategy is an alternative that is more reactive than traditional buy-and-hold.  Simply put, a tactical strategy means using a money manager that actively changes the portfolio allocations and the investments held.

The manager could make these changes as often as month-to-month, week-to-week, day-to-day, etc….  The changes are made based upon a variety of factors, including market moves, economic conditions, world events, etc….  The key is to use a skilled, tactical money manager.  (Disclaimer: A tactical strategy may involve more frequent trading activity, so please consider transaction costs and tax consequences)

If you would like to learn more about alternative strategies, please let me know.

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