Reporting a bad quarter is difficult for money managers. First, no one wants declines. Second, the pain of decline is enhanced by precise measurement. Third, statistics are out-of-date on receipt. Finally, the money manager must decide which portfolios to include in the composite report, and which periods to report. Making these choices offers multiple opportunities for obfuscation.

For the period December 31 to September 30, the composite result of all accounts over which WP&M has discretion was 4.92 percent (actual, not annualized). The composite consisted of 18 accounts during the first quarter, rising to 23 by the last quarter. It represents the results of total portfolios, including bonds. For equities only, the result was 6.46 percent. The comparable result of the S&P 500 index was 7.36 percent.

The last quarter, July through September, was very difficult. An average total portfolio, weighted by size, was down 7.03 percent, while equities alone were down 11.02. The S&P was down 10.30 percent actual.

Money managers expend great literary energy explaining why values are down, or why his/her results are above/below average. My explanation is that portfolio results are randomly distributed. For example, among the portfolios of WP&M, results varied widely, depending on the amount of bonds in the portfolio. An additional factor is the dates of purchase. For example, one account might purchase XYZ in January, another in June, depending on when cash is available.

During the quarter (and continuing in November and December) WP&M considered the income tax effects of selling securities at a loss. Realizing losses often increases the net worth of taxable investors by reducing income tax obligations. (More accurately, realizing a loss reduces the negative impact of taxes.)

The Indianapolis Star will sponsor a public financial planning seminar on Saturday, January 16. The featured speaker is Jane Bryant Quinn. Discussion panels will include various local financial planning and investment planning professionals.

--John Guy, CFP