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Don’t Let Hurricane Sandy Destroy Your Investment Portfolio

Hurricane Sandy was a disaster. On that, there is no debate. Many of us were either in the thick of it ourselves or have close family and friends who were. All of us face a swarm of questions in the weeks and months ahead: Could we have been better prepared? Will the seeming increase of weather disasters continue? How (and with what funding) will we rebuild our communities? What comes next?

If we can offer comfort at this time, it might be a brief reminder that there is at least one big, burdensome question from which you don’t have to answer: You need NOT wonder what trades should be made in your portfolio in reaction to Sandy. (And this goes for the election as well.)

As you know from our ongoing communications, your portfolio is already positioned to capture the overall expected growth in our markets. It’s also diversified to dampen as much risk as possible from news like Sandy. Any changes to your holdings should be based on the portfolio’s goals and risk tolerances, not in reaction to current events. Hurricane Sandy, as awful as it is, is no exception to these rules guiding your disciplined investment strategy.

That’s not to say many investors won’t try anyway. The venerable Wall Street Journal ran a live blog of the market reopening, which included a 6:10 a.m. call to action: “Bring on the car pools, crank up those generators and let’s get trading!”

While we love the indomitable spirit of New York and the U.S. in general – let’s not “get trading.” Not unless your portfolio’s goals or risk tolerances have changed.  If that is the case we need to review the new circumstances and devise a plan to best reach those goals.  Otherwise, making changes to your portfolio based on a large scale weather event would be a reactionary move throwing your portfolio off tack.

Index Performance                                  Oct.       YTD    Trailing 1 Yr       

US Stock (Russell 3000)                              -1.72%    14.12%     14.75%        
Foreign Stock (FTSE AW ex US)                0.47%     11.55%       4.56%        
Total US Bond Mkt. (BarCap Aggregate)   0.20%     4.20%       5.25%         
Short US Gov. Bonds (BarCap Gov 1-5 Yr) -0.11%   0.80%        1.12%
Municipal Bonds (BarCap 1-10yr Muni)     0.16%      3.41%       5.78%
Cash (ML 3Month T-Bill)                             0.01%    0.08%       0.08%