You have diversified your portfolio to reduce risk and increase your likelihood of a good retirement. Congratulations! By focusing your attention on what matters most—finding the right mix of stocks, bonds, and cash—and keeping your allocation on target through steel-veined rebalancing, you have elevated your portfolio into the top 10 percent and are enjoying the company of the top endowments and of wealthy families. You are no longer the stock market’s dog taking its daily beating.

As you have grown in sophistication, you have also become aware that the big players use alternative investment vehicles—hedge funds, private equity deals, absolute return strategies, and venture capital—to further increase diversification and elevate returns.

Take a look at Yale’s endowment manager David Swensen. One of the leading evangelists for low-cost index investing across stocks, bonds, and cash, Swensen follows a different path for the endowment he manages. In his portfolio you will find a hefty allocation to alternatives, namely 50.6 percent across absolute return strategies and private equity as of 2010.

Why does Swensen make so much room for alternative investments? There are several reasons. One such rationale is that alternatives provide real diversification within the university’s portfolio. While equities from the United States, foreign developed countries, and emerging markets sometimes seem to move in lockstep, alternative investments are more likely to zig when corporate stocks zag. That accomplishes a big goal of diversification. Another reason is something called risk-adjusted returns. For just a little more risk, Yale is able to increase its returns over a ten-year period by approximately 4 percent annually. That’s a bet they want to take.

So to truly follow the endowment model, you would think that alternatives should be represented in your portfolio as well. Additionally, in recent years, a new class of mutual funds has emerged, giving regular investors access to alternative deals that they were once locked out of. Is it time for you to board the alternative investment train?

Probably not. Here are four reasons the average guy should be cautious:

Qualification. The SEC has set rules about who can participate in alternative investments. Because alternative vehicles do not fall under the same SEC regulations and oversight as public stocks, and because there is a history of volatility and increased risk, the rules now state that to participate, you must be an accredited investor who has earned $200,000 annually for the past three years or who has a net worth, excluding home equity, of $1 million or more. The assumption is that a person with those assets is more sophisticated and more able to assess and survive the risks involved. And if you are not bringing a minimum of $500,000 to the game, there is no need to apply. Most funds set that amount as the minim hurdle for participation. Alternative investment mutual funds, however, have removed qualification barriers by allowing average investors the opportunity to pool their funds and participate.

Quality. Access is one thing, but quality is the bigger issue when it comes to alternatives. It doesn’t help to gain access to alternatives if you’re buying into the leftovers and walking dead, as the VC world calls them. Access to the best managers and funds is highly sought after, and a serious competition rages between endowments and wealth managers commanding billions of dollars of assets. Your little alternative mutual fund is the yapping Chihuahua that is fighting for his chance at the dog bowl while the pit bulls ravish the meal.

Fees. Even if you do luck out and find your way into a quality alternative fund, beware of the fee structure. While the institutional investors are able to knock down fees, the average Joe can expect to pay a 2 percent annual management fee and another 20 percent on all profits before he gets money out. Under the mutual fund model, add another onerous layer of management fees, usually around 2 percent annually, plus marketing fees and sometimes additional loads. Your underlying investments better include the next Facebook if you expect to see stellar returns.

Visibility and transparency. Finally, there is the issue of the visibility of your investments and the transparency of management. If David Swensen calls up ACME Enterprises to get an update on his European private equity holdings, his call will be taken and the discussion will be deep and wide. If you call your mutual fund provider to find out about how your investment in XZY Ventures is going, you will be put on hold until you go away. You have no shot of really understanding anything that is happening with your investment dollars short of what the mutual fund managers provide in their polished quarterly reports. And if the house starts to burn, count on being the last dog out the doggie door.

Big, smart money has ways of accessing alternative deals the average guy has a hard time understanding, let alone selecting. Alternative investment mutual funds can provide access to some high-priced leftovers. Smart access to alternatives comes in the form of index funds pointed at real estate through U.S. and international REITs and commodities in the form of U.S. and global energy and precious metals investments. These alternatives technically fall outside the typical stock/bond mix and provide real diversification via low-cost and reasonably transparent investments. Include these alternatives in your portfolio mix. If you try to play in the alternative world with the big dogs, you’re likely to end up with leftover dog meat that will leave you growling.

Volatility was up in 2011, and brought out all of the “forecasters” in droves predicting which way the markets will blow.  Most have been wrong.  Bill Gross, who runs the largest bond fund in the world bet against US Treasuries, which was the top performer in 2011.  Famed investor Meredith Whitney predicted the demise of municipal bonds.  Following her advice would have been devastating as munis rallied after her “insights.”  Hedge funds that focused on picking stocks were down 7% in 2011 with a Dow up 5%.

One of our members asked, why we recommended Vanguard’s Exchange Traded Fund  VGK an index made up of the largest 482 stocks in 16 European countries when “everyone knows” that Europe is in trouble. VGK was down nearly 18% last year, while the S&P was flat.

First, think of the thousands of investors all around the world, who deeply understand the economic circumstances of every country in Europe, focused every second on figuring out what every one of those 482 companies are worth.  Is your opinion on VGK’s price better than theirs?  Second, VGK belongs in a globally diversified portfolio, because we care about the long term.  Europe will recover.  In 10 years, VGK’s price today will likely look cheap because those 482 companies will be more valuable.  When CNBC says “Europe” remember these are real global businesses making money, employing millions of workers.

A year ago, when TIPS were selling at a high price, one of our members declined to include it in his recommended portfolio because in his opinion “it was over valued.” TIPs were up over 12% last year.

Trying to time and guess the market’s direction is futile for most mortals and investment professionals.  It’s during times like these, that you can really appreciate the calming logic of a simple and disciplined asset allocation investment methodology.  Since we never know how one particular asset class will perform –own them all at a very low cost, in proportion to our risk tolerance.  Then rebalance them as the markets shift.

Sounds easy to “buy low and sell high” doesn’t it?  Would you buy more Europe now if you were under-allocated?  We certainly hope so.  Is your asset allocation right?  This market provides you with a litmus test.  If you have been feeling panic lately, then perhaps your stomach lining isn’t strong enough for amount of equities in your portfolio.  It may be time to consider whether you should increase your exposure to bonds and TIPs.

Markets like these test you.  Stay the course and take a gut check.  Keep rebalancing and make the market’s volatility your friend. If your allocation is right, you’ll be able to keep your mind off the stock market, keep CNBC off and focus on the rest of your life.

While traders fret and squabble over the next best stock to buy or sell, smart portfolio managers focus on the big picture, spreading money across broad asset classes including U.S. stocks, foreign developed stocks, emerging market stocks, real estate, bonds, inflation-protected securities and sometimes commodities. Asset allocation is supposed to reduce risk within a portfolio by spreading bets across investments that move independently of one another. While one part of your portfolio zigs, the other zags, helping you make money (and preserve capital) in all environments.

Recent critics of asset allocation, however, have pointed out that due to factors such as globalization, many assets including stocks now move in lock step. This trend, they say, is illustrated in the 2008 crash when all sorts of assets fell in tandem, supposedly revealing that the benefits of diversification are ephemeral.

A quick look at the core stock classes in 2008 shows that pain was evenly spread across every major category with U.S. stocks down 36.2 percent, foreign developed down 43.4 percent, emerging market stocks 52.9 percent, and even the nontraditional classes of REITS and commodities hit with declines of 37.6 percent and 31.9 percent respectively. Where is the non-correlation in this asset allocation? These facts, the critics point out, prove that the asset allocation models of the past are now bunk and in need of a desperate overhaul. 2008 is said to have sounded the death knell for all of modern finance. In response, one idea that has gained traction among some managers is the notion of adding global currency as a new type of uncorrelated asset class.

Is Asset Allocation Dead?

Did Modern Portfolio Theory (asset allocation) really die in 2008? MPT does not guarantee that an investor will make money every year. It really does not even say that asset classes will always be uncorrelated. What it does say is that on average, over time, asset classes perform differently, and a diversified portfolio will exhibit less variation in returns than a portfolio with one asset class. This diversification should lower risk, help investors stay the course and achieve their goals over the long haul. Did this hold true?

A look at some diversified portfolios shows that it did. In 2008, bonds returned 5.2 percent. Disciplined investors who kept a strong allocation to bonds experienced much less pain during this historic downturn. A 50/50 split between bond and equity allocation would have reduced losses by more than half. Less pain means a lower likelihood that an investor will panic and abandon their planned course during turbulent times. But woe to those who did bail out. In the following year, U.S. stocks were up 25.2 percent, foreign stocks rallied 31.8 percent and emerging markets gained a whopping 82.6 percent.

More diversified portfolios declined less than the markets over 2008 giving diversified investors the courage to stay with their plan. Those who stayed the course reaped a robust reward the following year.

For a dead idea, MPT worked pretty well.

Should You Add Currencies into Your Mix?

Some MPT advocates suggest that currencies as the new answer for a truly diversified portfolio.

Take currency returns over the past year. While Mexican peso was is down 7.8 percent against the U.S. dollar, the Japanese yen was up 7.5 percent and the Swiss franc up 6.7 percent for the same period. A quick study of currencies demonstrates that they are in fact highly uncorrelated to stocks. Should we then conclude that they belong in your retirement portfolio?

For the average investor, the answer is no for two simple reasons:

1. A diversified portfolio of stocks and bonds already provides exposure to global currencies. Large U.S. multi-national corporations may trade in U.S. dollars, but they conduct business in foreign lands using foreign currencies. By default they are already affected by currency exchange rates. Furthermore, beware of holding investments that trade in currencies other than the dollar as you are exposing yourself to both the risk of the underlying companies as well as the foreign currency. That presents a lot of risk to understand, let alone manage.
2. Currency values are tied more to inflation speculation than economic growth. History demonstrates that economic growth does not necessarily result in a stronger currency. If you think corporate profits are hard to predict, try predicting inflation. It’s a daunting task best left to the pros.

Placing all your eggs in one basket remains as bad an idea today as it did forty years ago when the fathers of MPT first began suggesting diversification strategies. Although 2008 was a rough spot for all investors, those who stayed true to diversification through the tumult are smiling today.

The Eagles, The Long Run

The Eagles understood something about relationships that many investors have yet to learn about portfolio management. Success is measured in the long run.

In both romance and investing, bright beginnings inevitably turn to tougher times that test our metal. What we do in such moments as investors will significantly impact our retirement outcome and reveal if we are the type that runs for the door or hangs tough to see a better outcome.

The principled investor buys equities based in policy driven portfolio management, not inspiration. With cold-hearted accuracy, these investors know that as soon as they make their purchase, their investment is as likely to go down as up. They don’t care. They are thinking about a five, ten, twenty, even thirty-year time horizon.

The inspired investor, however, is in a sense looking for a touch of magic in their purchase.  It may be the investments PE ratio, technical characteristics or even an insightful analysis from a trusted expert that makes this investment irresistible. There are countless reasons the inspired investor falls in love, but in every case, the same expectation is shared – that this new object of affection will break free of the market’s gravitational pull and float skyward towards unfettered wealth.

When such an investor finds his special equity, he can’t help but feel a smidge of infatuation with his new purchase. In this early phase of the investment cycle, the investor is dancing with Cinderella under the stars in all her glory. But even for Cinderella midnight must eventually come.

When that inevitable moment strikes and sends his darling plummeting, the inspired investor is gripped with horror as he watches his Cinderella like vision of beauty and grace turn into a soot covered house cleaner tumbling down the boulevard like a tattered pumpkin towards what appears to be an ignominious demise. At such a moment, we learn if the investor is merely a one-night stand specialist or a truly inspired prince who is in it for the long run.

Are U.S. Companies Really Worth 15% Less Than One Week Ago?

Infatuated investors are also those that suffer the greatest whipsaw effect. As the fret mongers and deep-dive analyzers abounded this week decrying the demise of American ingenuity and business, their dour chorus crushed many an investor’s inspiration, turning it to disillusionment. As quickly as these inspired souls rushed in, they now in turn rush out with similar enthusiasm.

This whipsaw effect was sadly illustrated once again in this week’s market crash. And strangely, this crash was accompanied by the pundit’s singular focus on the bad news leaving the story about corporate earnings mostly unnoticed.

It is early in the second quarter earning season with just 143 of the S&P 500 firms reporting. And the reports are promising. 75% of firms have reported earning above expectations. 13% have met expectation and a mere 13% have missed targets. Historically, only 62% beat expectations.

Furthermore, the earnings details are also quite encouraging. Average earnings for those reporting is 9.2% over last year – good but not shockingly good. Take into consideration, however, that Bank of America had to settle a lawsuit that represents a one-time, non-recurring expense, remove that singular expense from the calculations, and earnings skyrocket to a very encouraging 15.2% over last year.

More firms must still report and surely it will not all be good news.  But apart from the dour media makers, reality tells us that U.S. companies are essentially earning 15% more while the public markets just decided that they are worth 15% less.

Buy, Hold and Rebalance

Buy low and sell high. It is a simple principle to understand, but much more difficult to follow, especially in times like these. We can all look back at ’08 and recall the many testimonies of those that ran for the door when the DOW was at 7,000, just to in turn stand on the sidelines, paralyzed, as the markets moved back up to 12,000. Don’t be that investor. It is easy to get out but very difficult to know when to get back in. If you miss a few critical days of market movement, you miss most of your portfolio growth.  As others run for the door in fear, follow Buffett’s famous adage and be bold to buy. For the flint-jawed long term investors, now may be the perfect time to trim winners and buy losers in principle driven rebalancing act.

When all hell broke loose for Prince Charming, he knew that the slipper in his hand belonged to a woman he was not going to let go of. As an investor, do you know that your investments are worth holding onto? If in fact you own a globally diversified portfolio of low-cost index funds or ETFs, you can rest assured that today’s pumpkin will in fact transform into tomorrow’s carriage, yet once again.

Simply put, the law of compound returns says money left alone creates more money. Einstein said, “Compound interest is the eighth wonder of the world.” Ben Franklin echoed that thought, saying, “Money can beget money, and its offspring can beget more.” Warren Buffett’s partner Charlie Munger expressed a similar sentiment about money: “Never interrupt it unnecessarily.”

Think of the law of compound returns as a small snowball rolling down a hill gathering weight, which increases its speed, which keeps increasing its size. Wet snow and a long hill are the conditions that turn a snowball into a very large boulder. Continuing with the metaphor, snow moisture relates to an investor’s rate of return, and the size of the hill is one’s time horizon.

Your job as an investor is to find a level of risk that you can live with and then structure an efficient portfolio accordingly. Then you must let the law of compound returns work its magic.

No one can give you a longer hill, but your investment choices will determine if your snow is wet. Taxes, investment fees, and underperformance interrupt the law of compound returns and lower your returns. They dry out your snow.

Using exchange-traded funds can lower fees by 80 percent, which helps you keep more of your returns. But remember: Trading ETFs frequently can increase taxes and take a bite out of the snowball as it rolls down the hill. The less trading you do the longer you can defer taxes, which leaves more money to snowball year after year. After you’ve held your ETFs for a year, small gains from rebalancing are taxed at the lower long-term capital gains rate. And because most ETFs track indexes, you will never lose your money betting on investment themes that don’t pan out.

The “law of 72″ helps us understand compounding. Divide your yearly return by 72. The result is the number of years it will take for your money to double. Money doubles every 12 years with a 6 percent return and every eight years with 9 percent. That means if you are 40 years old, a $100,000 investment with a 6 percent return will double twice to $400,000 by the time you are 64 years old. At 9 percent, it will double three times to $800,000! If you achieve a consistent higher rate of return for many years, your wealth can snowball into a fortune. But you have to live some with volatility.

Inflation is the dark side of the law of compound returns and determines how your savings deteriorate over time. Assuming real inflation is 4 percent per year, with the law of 72 that means every 18 years prices double, and your money will buy half of what it did before. As an investor you fight the reality that 20 years after you retire your money will lose 50 percent of its buying power.

The law of compound returns is a slow, powerful, and largely invisible force that you can’t ignore. Because of how it operates with inflation, your money will be worth half of what it is today in 18 to 24 years. But if you can reduce your fees, taxes, and increase your returns by just 2 to 3 percent per year, you’ll double your savings in 24 years.

There is one conspiracy however, worthy of your attention: Those on Wall Street don’t want you to know that their industry is a sham. For Wall Street, the hypnotic malaise they cast over the unknowing investor is nothing less than an $11 trillion dollar shell game. Their gambit makes the baccarat table at the Bellagio look like the neighborhood lemonade stand.

And like any good shell game, they keep the pea moving so you never really understand what just happened. Hideous mutual funds vanish into thin air leaving only winners so that fund companies can claim their funds are leaping tall indexes in a single bound. High fees slip out the back-end of your account while you lie in bed asleep at night, thinking they got your back. And how about that reporting? It’s so convoluted you would have to be a Nobel Laureate in economics to even know what you made—or lost—after fees and taxes in any given year. Did you know that it practically took an act of Congress to force 401(k) providers to tell employees in plain language how much they are paying in fees?

Speaking of Nobel Laureates, fortunately there are a few that have been paying attention: Harry M. Markowitz, Merton H. Miller, William F. Sharpe, and Nobel candidate Eugene Fama, not to mention other notable luminaries such Princeton professor and author Burton Malkiel, John Bogle the founder of Vanguard, and William Bernstein, the acerbic author and truth teller. If you haven’t yet familiarized yourselves with their findings, the time has come to do so. They’ve blown Wall Street’s cover in reams of research. Never mind that they conclusively demonstrate that low-cost indexing beats active management by a long shot, or that the buy, hold, and rebalance style of investing trumps the vein-popping practices of Jim Cramer and crew.

Worse yet, the good guys’ PR campaign is weak. While they stutter in the corner, Wall Street is rolling out eloquent waves of hypnotic media, which roll over us as in a tsunami of minute-long TV ads, billboard artistry, and heart-grabbing radio spots. Each makes you want to pull out your hanky, pick up the phone, and call your mom to say you love her.

Who cares about facts when Smith Barney speaks? Why not talk to Chuck? He sure seems like a nice guy. His name is Chuck. Have you ever met a mean Chuck? Or what about the TD Ameritrade guy, Sam Waterston. He played stalwart Jack McCoy on the NBC series “Law & Order.” He sure cracked the code there, so he’ll be the guy I can trust for my retirement, right?

Yes, Charles Schwab, TD Ameritrade, and others are excellent brokers. For a fair, low price you can have excellent trade execution and fulfillment, as well as receive tremendous customer service and online reporting. But watch your pocket if you go to these firms for investment advice. Chances are they will roll out the four-color glossy print, full-court press, and slip you right into some mutual funds from their supermarket that drip, drip, drip away your hard earned savings in high fees and underperformance.

Conspiracy theories are for the birds. Ours, however, isn’t one of them.  Facts are for the discerning. When it comes to Wall Street, the facts have been revealed by the best economic minds in the world. Are you listening?

Add to Bogle’s comments radical yet opaque tax reform, QE2 efforts backfiring, and the 18 member deficit commission recommendations that we take a serious look at changing even the most sacrosanct Government institutions.  To make our point, we bring you a small sample of these topics from last week’s news.  As Yogi Berra once said:  “It’s tough to make predictions, especially about the future.”

Those of us with a nestegg to protect truly face unnerving times. We have a recurring nightmare that grabs us by the throat and drags us, though protesting, into a House of Horror-like carnival ride where we “retire” as an 82-year old Walmart greeter (no offense, but not a fate to which most of us aspire).

That’s why elite endowments, billionaire family offices and sophisticated investors focus on their global asset allocation strategy.  We bring their methodology to every investor and allow those who follow our lead, not only survive the madness, but find growth through our uncertain future.  Exposure to bonds, TIPS, emerging markets, foreign developed stocks, US large, mid and small cap equities, gold, and energy makes for a secure portfolio.

Stay the course with your allocations and enjoy peace-of-mind.

The Gallup World Poll of 132 nations and over 136,000 respondents revealed that the U.S., though the richest nation on Earth, is losing out to poorer nations when it comes to personal contentment.  And Latin American countries trounced the U.S. in day-to-day happiness even though their income levels fell far short.

Why is that?  According to the study, after basic human needs are addressed, happiness appears to increase based upon rewarding relationships and a strong sense of community, not greater wealth.

Researchers found two categories of happiness that correlate to wealth. The first   relates to our overall assessment of our life, rooted in how we compare ourselves with our peers.  We tend to establish an internal accomplishment rating such that the greater our wealth, the more our satisfaction depends upon our perception of how we are doing relative others in our world.

The second type of happiness was “day-to-day contentment” as measured by  behaviors such as laughter, smiling, joy and what researchers call social-psychological well-being. Shockingly, any income increase over $75,000 a year had no impact on increased “day-to-day contentment.”

One of the more revealing findings was that the more time we spend thinking  about money, the lower our happiness rating becomes. When researchers exposed subjects to pictures of large amounts of dollars or Euros, their savory rating (a measurement of how good the subject felt towards images of a sunset, panorama and the like) substantially decreased.

Finally, when we sense that our life is financially secure, we score higher in terms of day-to-day happiness. As Dr. Ed Diener of the University of Illinois pointed out, one individual may have a motor home while another a mansion. If the person with the motor home feels secure that it will never be taken, then his happiness rating will be higher than the individual who is fearful of losing his mansion. This security principle underscores the importance of living within our budget and not putting retirement capital at unnecessary and higher risk.

These studies have clear implications for investing styles and underscore the value of passive asset allocation over stock picking and active forms of management. Active management requires increasing risk in the never-ending search for increasing returns. Index investing across a variety of asset classes lowers risk and provides much greater stability to our portfolios.

Could it be that adopting our MarketRiders investment philosophy increases happiness? Using an asset allocation strategy with index funds or ETFs frees your time and mind for more important things in life. When you know that your money is diversified and your assets are safe, you can leave your computer monitor behind and get busy with the truly valuable things in life. You’ll be thinking less about your money and more about the people around you. And contrary to what some might believe, most friends and family members really don’t want to hear about your recent stock or option conquest.

How products, people, or ideas move from unknown to “cool” and back again was explored by Malcolm Gladwell, in his book The Tipping Point: How Little Things Can Make A Big Difference.  He offers a unique premise whereby people he calls Connectors define what is cool for Mavens who in turn popularize the new fad with Salesmen, who take the message to the world.  By this process, products, services, or fads can suddenly be thrust from obscurity to cool.

Take, for example, Crocs sandals that became the rage with pro-athletes and movie stars. These cultural icons shamelessly donned these strange pink rubber slippers. In the blink of an eye, Crocs were strangely hip. Croc kiosks offering a wide array of colors and sizes became ubiquitous in airports, malls and retail outlets to cater to kids, moms and businessmen alike.

Then one day someone ran into George, their profoundly “uncool” neighbor, wearing his neon green Crocs. For some reason, they just didn’t look the same on George — who was pale and out-of-shape, wearing shorts several dreadful inches above his knees — as they did on Kobe Bryant. Crocs were done. The complete uncool to cool and then back to uncool cycle had transpired before our eyes.

Unfortunately, investment strategies have waves of cool and uncool as well.  When we started MarketRiders, we knew that our biggest marketing challenge would be its lack of cool.  How could an investment philosophy that replaces the casino-like thrill investing with a sane, buttoned-up institutional method, ever compete with the daily fun and excitement of a Jim Cramer?

But Gladwell’s process seems to be taking hold and low-cost investing seems to suddenly be getting, well, cool.  New websites are launching every month to tout the merits of the MarketRiders approach.  Schwab, Fidelity, and Vanguard are actively swapping investors out of expensive mutual funds and into ETFs.

Cool or uncool, we’ll keep wearing our version of pink Crocs not because Kobe wears them or that our neighbor George does not. No, we stay faithful to our approach because we simply love how this pair of sandals fits.

But with investing, arguably the most competitive and highest stakes game on
earth, few understand the stats. Many who have accumulated sizeable nesteggs from a lifetime of work understand the RBIs and batting averages of their favorite baseball hero better than how their money manager is performing.

The most important element contributing to investment performance is risk. You just can’t evaluate performance without the context of risk. Many investment advisors sell returns, not “risk adjusted” returns. They’ll tell you about their favorite manager who “killed it,” but you’ll never hear that he did so by taking risks that could have led to your losing all of your money.

Evaluating performance without measuring the amount of risk taken is like looking
at a golf score without adjusting for a handicap. The most sophisticated endowments
and family offices rigorously monitor “risk adjusted” performance. They hire the best
money managers and monitor levels of risk. They understand how a manager achieved
his results as much as the results themselves.

If your strategy is to actively manage your portfolio, then measuring risk is a vital,
complex, expensive and time-consuming pursuit. How many fund-of-funds invested in Madoff after extensive due-diligence and were blindsided by the risks they had taken?

Conversely, with MarketRiders passive strategy using ETFs, risk is simple to measure. In return for giving up the prospect of outperforming the market you lower risk, pay lower fees and statistically, “outperform” most who are paying for performance. In a MarketRiders portfolio you’ll never find hidden leverage, quant algorithms predicting market moves, quirky money managers, conflicts of interest or managers placing large bets with your money.

We measure performance by how efficiently our portfolios deliver returns given the
level of risk you were willing to assume (read our methodology section). You will get near exact returns for the amount of risk you are willing to take. In 2008, our low risk portfolios were up because they contained mostly bonds, and our portfolios with large equity allocations were down. The reverse was true in 2009. As we say, it’s about as exciting as watching paint dry.