Retirement Planning Advice and Financial Related Education by Barry Unterbrink, Chartered Retirement Planning Counselor

Thursday, June 10, 2010

Stetson Wealth Clients Lose No Sleep

No Sleepless Nights for Stetson Clients

We are supposed to be in the summer doldrums (see last post, "Sell in May...") but you would not know it from the action of the stock market of late. UP, Down, Up, Down, and then the recent volatility has been: Down, Down, Down, and Down.

Fortunately for Stetson Wealth Management clients our strategy has been to be mostly out of the stock market and into Bond ETF's (exchange traded funds) during this market correction.
In fact the Stetson owner's family funds and portfolios have also escaped the worst of the turmoil as we invest for ourselves just like we do for our clients. We eat our own cooking, as the saying goes.

We have also been switching from owning individual stocks to investing in ETF Funds for most of our investment. Using our classic market timing techniques with these baskets of stocks or bonds we have improved our performance AND reduced risk. For example, with the second quarter almost over the stock market is down over 9.4% while our major clients portfolios are UP amost 3%. If we could compound this difference over the full year the clients would have over 1/3rd more dollars than being fully invested in the market.

One might ask, "Why not just pick individual winning stocks and rack up gains as my broker wants me to do?" Well, there are problems with individual stock selection these days. Most Wall Street firms are cutting back on research dollars probably trying to make up the dollars lost from their past sins. The research they are putting out is increasingly faulty. Earnings and revenue estimates are wrong more than they are correct near market highs. If this is by happenstance rather than design I will not speculate but far too often Wall Street firms are falling back into their old habit of selling from their inventory stocks they are coincidently advising clients to BUY (conflicts of interest are rampant in this industry). Near market peaks one gets 20 buy ratings on stocks for every sell rating. Their Buy and Hold fallacious theory is perpetuated. This same plan has caused many investors and retirees to lose up to 50% of their life savings in the latest big stock market crash - in just 17 months!

University research has estimated that 70% of a stocks daily price change is due to the action of the market in general. Another 20% is due the SECTOR the stock resides in. i.e. Utilities, Energy, Technology etc. That leaves only 10% of the change is due to the individual stock. The ETF Funds of baskets of stocks or bonds packaged into all different sectors are ideally suited to take advantage of this situation especially if you are adept ar market timing. Selecting good sectors of the market combined with excellent timing have served us well at Stetson.

My son Barry and I cooperated in We have collectively been investing and trading securities for over 70 years. We have become experts at selecting winning stock sectors and thus: ETF Funds are the right vehicle at the right time for us. ETFs make it easy to trade instantly baskets of stocks in any sector economically, many times with NO commissions. Is your broker using these techniques? This makes for big savings for investors on commissions.

Utilizing Funds we have been able to save our current clients over $200,000 in losses had they invested in the market at the recent market highs a few months ago. I consider our investment management a success if it greatly reduces or eliminates stress in our client's lives. Most of my philosophy can be summed up by the plaque I keep on my rolltop desk. It says:

The Two Most Important Rules of Investing.
Rule # 1. Never lose money.
Rule # 2. Never forget rule # 1.
by Warren Buffett

Clients: New statements in about 5 weeks. Watch for them.

Larry Unterbrink
Director of Research
Stetson Wealth Management
(954) 719-1151

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