Winston & Companies

Recently, several of my Clients “Stock Brokers” repositioned substantial portions of their investment Portfolios into Bond funds.

In each case the clients were advised that these were to be considered “Defensive” positions within the Portfolio to guard against sharp declines in the market. The fact is that as the market continued to go down, their NAV (Net Asset Values) dropped as their yields increased. Just about then Mr. Greenspan began to reverse the interest rate trends by making quarter point increases in the Fed Lending Rate. Bonds share an inverse relationship with interest rates! As interest rates begin to rise the values of the bonds begin to fall. Furthermore, since the re-Election of President Bush, the Stock Market has seen a nice rally.

Defensive Position? Let me share a simple fact that I have found to be almost universally true in visiting with my clients and reviewing their Portfolio Statements with them. There are generally two types of Clients.

Type One are those who Love the Stock Market and literally cannot wait until the mail carrier shows up with their monthly statement. They literally will take the statement with them out to lunch and pour over it with great interest and fervor. They call the investment firm daily to get the exact account value that day, and their moods will ebb and tide much like that of a sports fan when their team wins or loses. These clients (and you know who you are) became Stock Market Junkies probably in 1999 and 2000. They actually believed their Stock Brokers/Firms or even they had something to do with reaching a level of wealth never seen before. Heck, everyone had so much money on paper anyway that it even led congress to enact the Sunset Provision on Estate Taxes. Now for the hard core question of questions. Why didn’t you sell your Stocks in the summer of 2000? Why did your Stock Broker let you continue to buy Cisco at $65/share? Well, greed is ultimately the answer. Nobody wanted to believe it was ever going to stop! And so when it started falling people held on, Stock Brokers kept telling customers it was a slight correction. Nobody knew of the free fall that was at hand. NOBODY, not me, not you, and certainly not the Stock Brokers!

So who is the second type of Client? Type Two are those that have had enough, and will actually admit they have NO IDEA what is going to happen in the market. They admit that they have NO IDEA of the fees they are being charged by their Broker/Firm. They know that interest rates across the board are poor, but unlike what happened between the summer of 2000 and 2003 they know they simply DO NOT want to lose any more money.

More and more Type One clients are becoming Type Two clients and the reason can best be summed up in a quote from Will Rogers, “As a Senior, I am more concerned about return OF my principal than return ON my principal.” Your money is for spending and Living On! Learn about why we call EIA’s the Ultimate Defensive Position by calling me for more information. In nutshell, they will outpace inflation, exceed the returns of CD’s and Money Market Accounts, often match Bond Yields, with two distinguishable differences. NO Fees, and NO Market risk. Your Original Premium Deposit can never be lost.