Diversification is the biggest part of the risk management strategy we have in place for you. We task mutual fund managers to actively manage their part of the portfolio. We can trust that these managers will do two things. First, they will diversify within the sector that they are investing. For instance, the manager of a financial services mutual fund will invest in more than just bank stocks. They will also own different insurance firms and investment brokerage companies. Second, we can trust them to monitor the banks and sell the stocks that are too risky to be good investments.

If one bank were to fail, the exposure to that one company would be a small part of any one mutual fund, and the individual fund is a limited part of your portfolio. It's like one bad cherry in a slice of the whole cherry pie. It may not be the sweetest bite, but you will not get food poisoning. You have a strict limit to financial sector exposure. Further, our research showed that as of 7/31/08, the funds we recommend had no exposure to Lehman Brothers, and only one fund had an AIG holding that totaled .26 of 1% within that fund.

The most important thing to know is that the potential market downturn is expected to be a long, inexorable slide for the next decade. We will not advise “buy and hold,” or cross our fingers and hope that the 75 year average upward trend saves the day. Looking back, October of 2007 could prove to be the peak in market values before this decline. While we may not have exited the market at this peak, we will continue to attempt to preserve the value of your portfolio. In our meetings, I will be continually outlining our plan and sharing with you the defensive measures we have in place to preserve and maintain your sources of retirement income.

Always remember that the politicians and media are in business to keep you watching, listening, excited, and anxious. They are not in the business of giving long-term advice. Notice how little fanfare was given to the drop in oil to $90/ barrel. There was a bigger news story to flock to. Do you recall when, just last month, sky rocketing oil prices were going to ruin our economy? Will there be debates and stories about how we may now be on a road to recovery and that inflation is being kept in check? Will the political parties look at a long-term issue like the solvency of Social Security? Or will they continue to jump from issue to issue, blaming each other and coming up with their new plan to fix the problem of that day?

You have a plan in place that is designed to carry you through good times and bad. There are planned changes to your portfolio on the horizon. This may be a very turbulent time. We appreciate you remaining calm in the storm that has been created by the bursting of the bubble in real estate. Even more importantly, we welcome your questions and concerns and we appreciate having an open dialogue at all times. Our highest priority is exiting before the predicted economic winter season of the economy sets in.

Until Next Time,