Quote from prof. charles:
ok so they are getting inflationary erosion...how is that worse than losing real dollars in the market? i agree that for long term investing market timing isnt a great idea, but if youre talking about those who have already been on the sidelines already in CD's, how can you argue that was dumb if they would have lost much more in the market? this is assuming of course they are average stock pickers, or would have been long s&p.
Well absolutely! I'd rather lose a few % to inflation than be down 12% with the DOW or SPX.
The ones that are sidelined in CD's BECAUSE of the market volatility, AND the fact that they are going to need some or all of that capital sooner than later is exactly why they shouldn't change a thing, staying in cash.
Now the people who are in CD's, are in their 30's-50's, and have been since 2002.:eek: Yes, that means they took their money (what was left of it) at the low, and put it in CD's missing the recovery in 03-early 07.:eek:
I model portfolios with Alternatives such as Oil and Gas drilling programs, Private REIT's, Equipment Leasing Programs (great hedge for rising interest rates and inflation. PM me, I'll tell you the details), and Commodities for my Accredited Clients. Alternatives as you should know are usually illiquid, so "it can't all go there."
The remainder of their money goes towards one or more SMA accounts holding stocks, bonds, and cash. For example, they could have anywhere from 30-40% of their money in 18-25 equities, 20% cash, and 15% bonds.
For my Balanced to Moderate Clients, I'm up about 1.2% YTD. Yes, I know, nothing to write home about. But, I'll take it in this environment. Will I be able to stay above water the next quarter? I doubt it...
The market has "done it's thing" to everyone who dares go long the major indexes. However, with the income from the alternatives, my Clients are happy with me. Especially when they talk to their friends who work with Merrill, Smith Barney, etc., I got a call this afternoon from a Smith Barney Broker wanting to know "what the hell are you doing?" LOL! I laughed about it with him for a minute as he realized that he has been making Smith Barney happy with the "stuff" they put on his plate instead of his Clients. I'm Independent. He's captive. He is going to have to jump through hoops to get the alternatives through compliance, as compliance doesn't know anything other than to say no these days. I can hear them now. "Sell them Mutual Funds that are defensive." LOL!!
Some guys wouldn't have helped him out, but I think that's nuts!! If a guy 30 miles away from me is handling Client money, he owes it to them to do the best he can do for THEM. So I gave him a good strategy for modeling portfolios with alternatives, and the correct % allocation used for each type of client from Conservative to Growth. If his Clients do well, our community does well, as they spend the money. Pretty common sense stuff. I hope...
), and money is flowing into cash.