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The Budget Conundrum

Posted by: SHARON PRYSE

Posted on: July 21, 2011

What is Congress going to do about the budget?  What is The Trust Company doing to protect your portfolio?  While we cannot speak for Congress, we do know that The Trust Company will stay the course.  By talking to you about your cash needs (i.e. making sure that your portfolio can meet your distribution needs by holding short term investments) and determining your appropriate investment mix between stocks and bonds, we are able to take a longer term perspective.  "Staying the course" means that we will continue to monitor your asset allocation and realign your portfolio when there have been significant market moves.  In December of 2008, we rebalanced portfolios.  That means we were buying stocks because the market had gone down.  By March of 2009, we questioned if that was the right move, but by December of 2009 client accounts were rewarded by sticking to our philosophy.  We are not market timers, but rather disciplined advisors focused on maintaining the appropriate asset mix.

What Coca-Cola stock is going to be worth in five years will be determined by how many Cokes they sell and their profit margins.  We have no idea what will happen to the price of Coke stock on August 2nd or 3rd based on whether or not there is a budget compromise.  Our concern is that our managers remain focused on the long-term performance of your investments.  That is not to say that we have not been making changes.  So far this year, we have increased the international bond position, added a new conservative bond manager, and are in the process of replacing Selected American Value Fund with Manning & Napier Dividend Focus A Fund (MNDFX) and William Blair Small Cap Growth Fund with Marshall Small Cap Growth Y Fund (MRSCX).  We will continue to make strategic long-term asset allocation and manager changes when appropriate; however, we are not market timers.  By staying with our discipline and realigning portfolios, we are forced to sell when prices are high, locking in profits, and buy when prices are low.  To be a market timer you have to be right twice: not only when to get out of the market but when to re-enter.  We recognize we are not smart enough to do that, but by staying disciplined through the years we have continued to add value to your account.  We know these are tumultuous times, so please contact your relationship manager or any of us at The Trust Company with questions or comments.  We appreciate your business.