There has been no shortage of headlines to digest coming from the financial markets over the past two weeks.  Lehman Brothers declares bankruptcy.  Merrill Lynch is acquired by Bank of America.  AIG receives an $85 billion loan from the government in exchange for 80 percent of the company.  Morgan Stanley and Goldman Sachs convert from investment banks to traditional bank holding companies.  The oldest money market in the United States, Reserve Primary Fund, saw its net asset value fall below the usually constant $1 net asset value, an event referred to as “breaking the buck.”  And all this occurred on the heels of the Federal government’s takeover of Freddie Mac and Fannie Mae.

Perhaps what was most amazing about these unprecedented events is the fact that they occurred almost simultaneously!  As a result—and as most would probably expect—the combination of events happening concurrently created an incredible amount of fear ...

If you follow this link (http://www.monetagroup.com/News/Blog/08-09-25/Rebalancing_Opportunity.aspx?ReturnURL=%2fNews%2fBlog.aspx) to the archives of Moneta Group blogs on our Website you’ll note that I last discussed the topic of rebalancing in September, 2008.  The market was in a tailspin, to put it mildly.  The Dow Jones Industrial Average was at 10,800, off considerably from its October, 2007, high of 14,000.  Bear Stearns was gone.  Lehman Brothers was gone.  AIG was effectively owned by the U.S. Taxpayers.  The credit markets were in complete disarray and confidence in our financial system seemed to be worsening every day.

In the midst of this financial chaos, I ‘blogged’ that the market had created an opportunity for clients to rebalance their portfolios.  What I should have continued ‘blogging’ was that this opportunity was not simply a ‘one time’ event in a market downturn, nor should it be considered a one-way street.  As most investors are well ...

The last several months have been challenging—to say the least.  During this time we have spent a significant amount of time trumpeting the benefits of rebalancing portfolios to get back to the agreed-upon asset allocations clients set when they considered their risk-tolerance and future goals.  We believe rebalancing a portfolio forces us to “buy low and sell high,” always a good strategy. A severe market decline, like the one we have experienced over the past few months, provides a great opportunity to buy low.

Although the approach sounds easy, as many clients have experienced, it is not a comfortable thing to be buying into the stock market when the daily headlines and talking heads exclaim about how bleak things are in the economy.  You may say to yourself, “I’ve already lost so much value in my portfolio, why would I want to throw more money into the market? I ...

“Sell my U.S. Treasury bond and buy stocks and real estate… Are you crazy?!”  This may be your reaction when your Moneta Family CFO recommends rebalancing your portfolio—and you aren’t the only client feeling that shiver of anxiety in these turbulent times.

It is difficult to remove emotions from investment decisions.  After all, we are human, and acting emotionally is eminently human.  We want more of what is working well and prefer to sell an investment when it is performing poorly.  Many studies illustrate that the average investor underperforms.  A recent JPMorgan report compared the annualized returns of the average equity investor over the 20 year period ending December 31, 2007.  The results are staggering!

Our role, as Family CFOs, is keep you focused on your long-term goals, help separate emotions from your ...

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While considering possible topics for this week’s ‘blog,’ it was hard to ignore the Madoff investment scandal.  The scope of Mr. Madoff’s fraud is almost incomprehensible in terms of the hundreds of people and organizations that have been impacted.  That he was able to defy detection for several decades, in spite of numerous government investigations, is unbelievable given the intense scrutiny with which the SEC conducts its audits of investment advisory firms including Moneta Group.  Although I found the whole saga interesting, in my world, major headline scandals rarely make my ‘radar screen’ as life changing events.

Today, however, reading the St. Louis Business Journal, I discovered that some charitable organizations in St. Louis will likely discover that a portion of their endowments were indeed invested indirectly in funds managed by Mr. Madoff.  My initial and somewhat indignant reaction centered on one question: How could one person be so ...