Portfolio Newsletter Year End Update 2013

As Christmas and New Year’s fast approach, for many people this is a time of reflection. For me it’s also a time to look forward as I set in motion the adjustments to the portfolios for the coming year.

As I began my annual review process to determine which funds will be kept and which funds will be replaced, it quickly became apparent to me that due to the market rising over the last six years, certain sectors risk profiles have increased. The challenge isn’t maintaining my investment philosophy; its finding funds within those sectors that are low risk and still have high returns.

The U.S. market has enjoyed an impressive Fed-fueled run up over the past six years, giving a much needed boost to investors’ accounts after 2008. With the market reacting to every little word from our Fed Chairman, it has many people wondering how much more gas is in the tank as the threat of rising interest rates looms in the future. This poses a number of challenges as I must attempt to predict what the Fed is going to do in 2014. The Fed’s decisions will have a direct impact the direction of the bond market and the stock market. As we face what may be the slowest year of the market since 2008, investment selection is increasingly important.

This is why I don’t simply look at the Alpha and Beta; and why I look at things like Standard Deviation, Sharpe Ratio, Duration, Maturity and Manager Tenure. The goal is to find funds that are lower risk and have the potential to continue generating above average returns.

Taking the data into consideration – it’s important not to be complacent with one’s portfolio, and for this reason each position is being reviewed to make sure each fund is the best in its position for 2014.

In the pages that follow I have reviewed each fund to determine which need to be replaced. Keep in mind this list may change slightly as I continue to review data until the end of the year.

Trading schedule:

December 27, 2013: Trades will be entered for positions scheduled to be replaced.

December 31, 2013: Portfolios will be rebalanced; new positions will be purchased.