Your Advisor's Thoughts

2011: The Year in Review

When the history books are written about 2011, what will be the highlights that will stand out in your mind? It has been a year in which we have experienced hurricanes, blizzards, a tsunami, tornadoes, sandstorms and earthquakes. We have watched our politicians struggle in so many areas as they attempt to revitalize America. Many Americans are out of work and many more have lost their homes. As I look at 2011 in retrospect, I will remember it as a year of challenges and blessings, natural disasters and phenomenal accomplishments.

On the financial front we have watched the stock market go up and down sharply on almost a daily basis. It seems as though the slightest bit of news, either negative or positive, has tremendous repercussions for the market. Most of you reading this have been touched personally in some way by the effects of our wavering economy.

Well, is it all doom and gloom? Absolutely not! Is the cup half full or half empty? From my view point, it is not only half full, it is full and running over. Despite all the challenges facing our nation, we still live in the most amazing country in the world. While my family has not been immune to the challenges of 2011, I still believe the opportunities and blessings far outweigh the issues we face.

You may question my optimism, but it is based on the following: When you chart both the S&P and the DOW over the past two years, both of these indices have actually seen slight increases. When compared to the current economic situation in many other countries across the globe, this is an unquestionable positive. In addition to those documentable figures, I have also noticed a growing regional trend of increasing numbers of “Help Wanted” signs. I am not referring here to seasonal jobs, but rather jobs that will generate income and benefits for families.

Personally, the most significant lesson that I learned in 2011 as I spent time reading through the book of Proverbs is that we need to show more mercy to one another. I was struck by how much more pleasant our lives would be if we routinely treated one another with attitudes of compassion and forgiveness. I look forward to 2012 with great anticipation as it is my desire to grow in knowledge, wisdom and understanding.

I know you will agree that as you get older, each year seems to go by much, much quicker than the year before. 2011 has not been an exception. This year has flown… as we watch 2011 go out, we have great expectations for next year. It is my hope that 2012 will be one of the most wonderfully memorable years of your life.

With warmest regards,

Phil Giambri

This is a guest blog by Philip M. Giambri, the founder and owner of “Your Best Interest” Financial Services, Inc.

Securities offered through Trustmont Financial Group (TFG) Inc. Member FINRA/SIPC Advisory services offered through Trustmont Advisory Group (TAG) Inc. 200 Brush Run Road, Greensburg, PA 15601 724-468-5665 Neither “Your Best Interest” Financial Services, Inc. nor 401kPRO are affiliated with TFG or TAG.

Toe-May-Doe---Tow-Mah-Toe

A September 16, 2008 headline: "Financial crisis as Dow drops 504 points"

 

The Dow is a stock market index that has tremendous history dating back to 1896.  Its official name is the Dow Jones Industrial Average (DJIA).  It is a computed average of the stock price of each of the 30 largest and most widely held companies in the US.  For the geeks, the average is a scaled average which is a price weighted average which compensates for splits and other adjustments.  Being a price weighted average, it gives higher relative priced stocks more influence over the value of the index.  This means if a $10 stock declines 10%, or $1, it can be washed out by a $100 stock increasing in value by $1, or 1%.  You have to keep in mind that this is the average of only 30 stocks when over 7000 are publicly traded.

 

 

A better indication of a well constructed portfolio (one that has a reduction in systematic risk), and a measure of overall market performance, is the S&P500 index.  It is comprised of an index of 500 companies selected by a committee and is mostly US stocks.  It is mostly large cap common stocks and the index is calculated by using float weighting.  The S&P500 index can usually be found by the ticker symbols ^GSPC, INX, $SPX.

 

 

Overall, I think most people should use the S&P500 index.  It is a better measurement of overall market performance unless, of course, you own a portfolio similar to the DJIA.  Although using the S&P500 index is against popular convention and may seem like swimming upstream, you need to be an informed investor.  Personally, I attempt to be bi-lingual (speak both Dow and S&P500) but use the S&P500 as my indicator of choice.

 

 

As a side note, one of my favorite services for market data when I am not at my desk is to text message (google) 466453 the message "stocks inx".  The service will reply to you with the current value of the S&P500 index.  (Google's service is free, but text messaging rates of your wireless phone provider may apply).

 

 

You should also note you cannot invest directly in any of the above indices or averages.  They are simply calculated values based on the stock market.

 

 

Stay Tuned For More...

Greg Teal is an investment advisor representative of Trustmont Advisory Group, Inc., Member FINRA, SIPC

Wow! The stock market has been very volatile.

It seems that investors are attracted and scared away at the first sign of good or bad news.  Wednesday March 19, 2009, was the perfect example.  Here is a graph of the S&P500 index. 

 

If you look at the section highlighted with an orange circle which was at approximately 2PM when the FED made their announcement, you can see instantly the market shot up over 3%.  Then shortly after you can see half the gains were given back. 

What do I draw from this?  It is evident; a large component of the general public is not thinking rationally when it comes to this market.  People are still scared, and letting their emotion dictate their financial future.

My advice is still consistent.
1). Formulate a plan to Invest appropriately for your time horizon, and risk tolerance.
2). Act on it.
3). Stick with it.

Stay Tuned For More…

Greg is an investment advisor representative for Trustmont Financial Group Member FINRA, SIPC.