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Investing enters new world order


Based on our experience over the years, we believe the rules of investing and planning for retirement that one can feel confident in have changed forever.

Key Points

The folk music trio Peter, Paul, and Mary sang a song back in the '60s, "The Times They Are A- Changin." If you don't believe they are, and you are aged more than 40 years, consider the technologic prowess that young people have today. My 14-yearold grandson, Matthew (whom I consider a genius-although I may be biased), is so far ahead of me technologically that often I'm not even sure I know what he's talking about. He has certainly grounded me in the technologic chasm that exists between me and his generation. (In my defense, however, his college plans do include MIT.)

So, what does this have to do with your future financial independence? Everything! The rules of investing have changed, and the old approach of "buy and hold" may not be enough to achieve goals. Though there's still a place for this time-tested method within your portfolio, our experience indicates that it must be complemented by and coordinated with other more sophisticated investment strategies. If you are frustrated and even stressed by watching your portfolio zig-zag for the past 10 years, reaching new highs and then back to new lows and winding up back where you started, then it may be time to look at an updated approach that's potentially better suited for the times.

Portfolio construction

Profound geopolitical, economic, and technologic shifts are reshaping the world's industries, governments, and consumers. Have you noticed the rising correlation between world events and your portfolio statement values? One example of a geopolitical shift is that in 1960 the United States represented 39% of global gross domestic product, but in 2009 it accounted for just 24%. (Source: Central Park Group)

The average investor is struggling and needs to find ways to adapt to the pace and complexity of these accelerating changes. Many individual investor portfolios reflect conventional stock and bond allocations, heavily weighted toward long-only portfolios of publicly traded securities with limited (if any) exposure to alternative investments: commodities, currencies, hedge funds, structured products, private equity, and opportunistic credit funds. Most investors' returns tend to be measured on a relative basis against a narrow group of benchmarks.

But, did you know that today there are investment managers with global operations that trade 24/7 all around the world? And, they do this at lightning speed in markets so complex that the average individual investor could not hope to compete. Unprecedented global change seems to be the catalyst for opportunities that investors must begin to position their portfolios to capitalize on po- tentially in order to achieve their goals in this new world of investing.

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