Investment Planning

Many investors are familiar with the concept of asset allocation as a way of diversifying a portfolio to protect it in various types of markets and economic conditions. But a new term called asset location has emerged which should play an important part in the design of your portfolio.

Given the recent turmoil in the U.S. financial system, many investors are concerned about the safety of their cash and money market funds. This presents us with an opportunity to review the asset protection provided by institutions such as the Federal Deposit Insurance Corporation(FDIC), the National Credit Union Administration (NCUA), the Securities Investor Protection Corporation (SIPC), as well as the new program established by the U.S. Treasury for money market mutual funds. As this article goes to press (onOctober 23rd), it seems that the laws, rules, and regulations are changing daily. We have done our best to stay on top of these changes and provide you with up-to-date information.

Ten years ago an opinion piece appearing in The Wall Street Journal by a prominent financial writer claimed that the notion of broad-based international diversification of equity investments for US investors had been convincingly revealed to be little more than faddish "nonwisdom." He described a strategy of accepting market rates of return across a broad universe of countries as being littlemore than gambling since "speculators in 86 foreign markets apportion my funds." He had resisted suggestions from financial professionals to diversity globally, he said, smugly confiding that he had "no money in the former Yugoslavia, none in the present Argentina, none in the future Republic of Antarctica, none in Zambia, Belgiumor Kazakstan." (Even if he had, it might be hard to tell. The aggregate weight of these countries would have represented about 1% of a globally diversified capitalization-weighted portfolio.)

Futures began in the mid-19th century with the establishment of central
grain markets, where farmers could sell their products either for
immediate delivery or forward delivery. These "forward contracts"
between two parties to buy or sell at a certain future time for a
specified price became the forerunners of today’s exchange traded
futures contracts.

On April 23rd, Roger Gibson, CFA®, CFP®, spoke with FJY clients and friends on the topic of Multiple Asset Class Investing. Gibson is a well-known author and financial advisor and an internationally recognized expert in asset allocation and portfolio design. He is the Chief Investment Officer of Gibson Capital Management, Ltd. and author of the book, Asset Allocation: Balancing Financial Risk. Much of the conversation was focused on what Gibson believes are the four key determinants of portfolio performance.

Clients of Fox, Joss & Yankee occasionally ask why we do not participate in what many people call "Socially Responsible Investing" or SRI. Investors who practice SRI strive to make investment choices based - at least partially - on whether the companies in which they invest have a positive impact on the world. Or, more popularly, these investors try to avoid choosing investments in companies that have a negative impact on the world. As investment fiduciaries for our clients, FJY's primary goal and ultimate responsibility is to place our clients' interests above all other interests. It is in the context of being a fiduciary that FJY has determined against making SRI part of our investment philosophy.

On April 24 Westin Wellington, Vice President of Dimensional Fund Advisors (DFA), spoke to a group of FJY clients and friends. His presentation, "Redefining Investment Advice,"introduced the audience to an approach not typically emphasized in today's investment media. The passive investment portfolio theory he advocates is centered on diluting the risks associated with investing. Risk factors that influence investments include the effect of a particular company, a certain industry, or an entire market.