End-of-August Update/Tweak

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I am updating this as we move into the last day of August.

Over the last week the rate-of-change indicators on the C-Fund (SPY), I-Fund (EFA), and S-Fund (VXF) have moved quickly -- too quickly in fact.  I am aggressively allocated as per my previous message here, and the gains since that change are +1.203% in 6 trading days.  Normally, I'd yawn at this, but considering that we're heavily in cash (G-fund, 67%), this is a notable movement and one that is too aggressive for the volatility of the markets right now.

My risk models are all suggesting that this leg upward is failing to materialize, and that we are due for a pullback. While my longer-termed outlook is still cloudy (your crystal ball is as good as mine), my short-termed one suggests a reallocation to lighten up on equity until we get a clearer emergence of a trend upward.

Again, this trend upward has moved far too fast to be sustained.  Given this, I'm moving my wife's funds around as follows:

G-Fund:  79%
F-Fund:  12%
C-Fund: 5%
S-Fund: 3%
I-Fund:  1%

I consider this quasi-aggressive/conservative.  If your time horizon is long (like mine -- about 9 years), then this is probably too conservative, but I feel better.  Conversely, if your time horizon is short (e.g., less than 1-2 years), then for the short-term future (next month or so), then this allocation is probably a little too aggressive in the present climate.  If you fall into the shorter-termed category, look to lighten up (0% in) the I-Fund and S-Fund and put these monies into the G-Fund as a temporary parking place.  Both the S-Fund (small cap stocks) and the I-Fund (international stocks) are getting the heck walloped out of them lately and have the highest volatility.  A 20% drop in the markets here with the allocations shown above would take 2% off the top, and we've fought hard for these gains over the past 8 months (over 7% on a rolling 12 month tally).

Recapping, if conservative, look to the following allocation:

G-Fund:  83%
F-Fund:  12%
C-Fund:  5%

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Remember, you are responsible for your own investment decisions, and I am not.  Please do your diligence, and please take ownership for your actions.

We'll revisit the portfolio this weekend.

Regards,

pgd