Wealth Planning&Management, LLC
Report to Clients and To Prospects Third Quarter, 2006 The fickle nature of performance reporting shows in a comparison between our first quarter report (“one of the best reports we have made”) and this one. During the three months ending September 30, our portfolios earned, on average, 3.49 %, and stocks within those portfolios returned 3.96 %. Meanwhile, the S&P Index of 500 stocks returned 5.17 %. A different view is gained by looking at the nine-month numbers which run from the end of last year. For us, portfolios earned 7.03 % and stocks 7.78 %, while the S&P did 7.01 %. An even more positive impression would be gained by looking at longer periods. On request, we will provide statistics with longer—and more significant—perspective. Three notable client events might have predictive character. First, we lost one large account “because we do not feel right about the market.” They said that they will invest in real estate or gold. (While under our management, they earned almost 12 % per year since the late 1990s.) Second, our best-performing account was transferred to another, more expensive, advisor. Had the client looked at relative results, she could not have justified a move. (Our opinion is that this change was “housekeeping.” This phenomenon takes place in the context of separation, divorce, changing homes and lifestyle, when people often change every long-term relationship.) Third, a client deposited large sums in his retirement plan account, but asked us not to invest the funds “until after the election.” The predictive character of these events is neither proven nor guaranteed. Also, we do not predict. However, we have noticed over the past thirty years that when more than one client makes similar decisions within a short period, subsequent results do not follow the implied direction assumed. For example, we experienced significant selling at the lows in ’74 and ’89. Three clients sold out six months either side of the lows in 2002. Several clients abandoned their bond funds during periods of rising interest rates and lower values, either just before or just after the change in trend. Extrapolating this phenomenon to the present would indicate that we will see many more months and years of positive stock market results. We shall see. JWG 12-7-2006 Wealth Planning&Management, LLC |