Smart Investing

We've had three (3) difficult years in the stock market: 2000, 2001, and 2002. During that time an advisor's approach to portfolio management has been tested. It is clear that we must wisely manage assets through both the ups and downs of the business cycles. There are five (5) important concepts that have guided me through good times and bad:

1. Modern Portfolio Theory (MPT) and Asset Allocation
   MPT says that you should invest in a number of different types of investments (asset classes) which don't go up and down in unison. Theoretically, this can help reduce risk while still taking advantage of potentially higher investment returns. MPT is a very important part of wise portfolio management.

2. Moderate Funds
   The last few years have highlighted the risks of investing. I have always emphasized moderate funds, that is, funds which are less volatile. I continue to feel that most clients are well served by this approach.
   
   Please note that the principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost.

3. Don't Just Do Something, Stand There
   When markets go down, we need to hang in there. One of the worst things an investor can do is jump out during a down market.

4. Don't Chase Returns
   Chasing returns means loading up on the latest hot investment. In the late 1990's that was tech stocks and tech funds. Currently, real estate and hedge funds are hot. Investors need to avoid chasing returns or they will get burned.

   Sector funds may involve a greater degree of risk than an investment in other mutual funds with greater diversification.
   
   Understanding inherent risks such as interest rate fluctuation, credit risk and economic conditions are important when considering an investment in real estate.

5. Timing the Market
   Timing the market means moving out of the stock market prior to downturns and back in just before the market heads up. The markets are very unpredictable, thus, I do not believe market timing is a wise investment strategy.