What do you expect from your {select one} ?

It happens to me all the time.  Even some of my clients do it.  It’s not intentional on their part, and it’s even understandable considering the plethora of titles, designations, and certifications that exist in the financial services industry.

Someone will refer to me as a “financial planner” or a ”financial adviser” or perhaps even a “broker.”  I refer to myself as an “investment portfolio manager.”

What’s the difference and why is it important?

Worried about the markets? Consider “travel insurance.”

The “Roundtable” portion of yesterday’s This Week with Christian Amanpour was so troubling that I feel compelled to bring it to the attention of those I care about. (Note: if you want to skip 20-minutes of McConnell and Clyburn providing their ideology and non-answers to Amanpour’s questions, scroll down to the “Roundtable: Debt Divide” video on the left side of the page).

Unless you’re 70, you don’t know what it feels like to be 70

Americans are pretty good at kicking cans down the road.

Collectively, Congress is putting off our debt problems by arguing over spending cuts and balanced budgets that will take years or even decades to materialize.

And individually, many Americans are kicking their own cans down the road by adopting a retirement ‘strategy’ of either working into their 70s or, in some cases, planning to not retire at all.

“Honey, I think you should Sell in May and Go Away”

I must be getting pretty good at investing — a couple of weeks ago I suggested to my wife that she move the equity portion of her 401k into cash, at least for the rest of the summer. … And she actually followed my advice!

In my view, if the old Wall Street adage “Sell in May and Go Away” isn’t true this year, then it will never be (assuming it ever was in the first place).

“Japan” is Why Put Options Were Invented

With so many things to be frightened of today, it’s hard to remember the things we were so frightened of in our past.  Now I’m not advocating that we dwell on past fears; the only reason I’m mentioning this is that (to paraphrase Mark Twain) most of the things we worried about in the past never actually happened.

There are certainly a lot of global economic concerns that might cause investors to get out of the equity markets.  So many, in fact, that it is hard to determine just where to place one’s investment capital if he or she does decide to exit the market.

Put options can provide a means by which downside investment losses can be limited while still being able to participate in upside gains.  Let’s consider an investment in the Japanese market to illustrate why put options could be of benefit to investors while they participate financially in the rebuilding of the Japanese economy.

John Doe’s (remember him???) Portfolio Dashboard 2010

One of the (perhaps too many) regrets I have is that “The Reasoned Investor” has lapsed into silence over the past 4 months.  But investment performance is critical to the Johnson Harper LLC business model, and for reasons that will soon be obvious I’ve had to spend a lot of time at the drawing board lately trying to reconcile theory with practice.

I’m now ready to emerge from this self-imposed isolation to begin sharing with you over the coming year all that I have learned, and more, since my last post.

John Doe’s Portfolio – September 2010

John’s portfolio grew by a lackluster 0.7% in September despite the overall domestic market (as represented by the S&P 500 index) having gained by a remarkable 8.8% over the same period.  This immediately raises the question as to why John’s portfolio did not capture a larger portion of the gain in the S&P 500.

A properly designed dashboard with appropriate metrics should be able to both a) assist in answering this question, and b) provide an indication of corrective action going forward.  As I hope to demonstrate in this posting, our dashboard fulfills both requirements.

John Doe’s Portfolio – August 2010

Excited!  That’s the word I would use to describe how I feel about John Doe’s portfolio results for the month of August.

But taking a look at the dashboard below, you may wonder why I chose this word…

Using Asset Allocation to Reduce Systematic Risk

In an earlier post I discussed the use of diversification as a means to mitigate non-systematic risk (i.e., risk that is unique to a specific company).

If, for example, you happen to be bullish on oil, investing in a fund that holds a variety of oil company stocks greatly reduces the severity of decline in your portfolio if one of the companies experiences an Exxon Valdez or BP Deepwater Horizon event.  So diversification involves taking somewhat smaller positions in several companies that participate in similar markets.

But let’s now imagine that a major university reports that researchers have discovered a means by which zero point energy-based power generation systems can be commercialized, and with it the potential for electricity that is truly “too cheap to meter.”  In this scenario, the stock prices of all oil companies in your fund, and thus the price of your fund itself, would plummet.

Observations on The Great Fundamental vs Technical Debate

[The following is from an article I submitted for publication at Seeking Alpha (www.seekingalpha.com).  It may be of interest to readers of this blog as well, particularly for those that are confused about the appropriate use of fundamental versus technical analysis in selecting investments.  It should go without saying that, as a portfolio manager for the long-term, I do not rely on technical indicators to any great extent when making investment decisions and recommendations.]

I think I’ve figured out how to get an article placed on SA’s “Most Popular” list. Pick one side of the ‘fundamental’ versus ‘technical’ approach to stock selection, and then develop an argument as to why the other approach is useless. This is sure to spark a heated debate, which in turn will draw spectators and other participants looking to join into the ensuing bar room brawl. Next thing you know, your article has generated several hundred comments and you’ve made the list…