The title for this newsletter comes from my dear friend and first client, Pastor James Ritch. Humpty Dumpty refers to his IRA account. If you know him, feel free to talk to him about it. Way to go Pastor James Ritch!!!!!
During June 2007, when the Dow was about 13,500, I had the pleasure of having Pastor James Ritch become my first client. During September 2009, when the Dow was about 9,900, his IRA account balance recovered and returned to about the same initial amount. As he explained, his IRA account fell, cracked wide open, was put back together again in better shape, and made it back on top of the wall.
When the Dow reaches about 13,500 in the future, about 35% higher from here, his account will be doing great and I will be smiling. This economic downturn provided a wonderful buying opportunity that turbo-charged his account. Pastor Ritch is a car guy. The end result is a better Humpty Dumpty.
How did this happen? Here are some of the things that were done:
Communication: This was a very turbulent time and we communicated on a regular basis.
Defensive: As the environment change, his account was changed and was repositioned to be more defensive. In hindsight, I should have even been more defensive.
Data: Data was used to determine the bottom of the fall and when to start buying. The use of statistics is very powerful in determining the probability of an event.
Courage: He had great courage and viewed the fall as a buying opportunity. When other investors were concerned and were afraid, he viewed it as a great buying opporunity.
Keep the Portfolio in Balance: As the value of the equities dropped, the percentage of equities reduced below the target level. To get it back in balance, a bond mutual fund that did not perform as well as it should was sold to purchase more of an equity mutual fund.
Aggressive: As the recovery progressed the account was tweaked again to increase the amount in a more aggressive equity mutual fund. In addition, he bought stock for the first time in his life, buying a technology company and a financial company that have done very well.
Performance: This period was great to determine the true performance of a mutual fund. Only highly rated mutual funds with a minimal fee rate were used. Keep the best and leave the average to the rest.
For those who use an investment advisor, I hope your Humpty Dumpty is doing as well. If not, it would be my pleasure to help you.
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