This Update covers two major activities we are focused on.
- Celebrating our 15th year anniversary of serving the financial needs of our clients.
- Rebalancing client portfolios for the most attractive risk adjusted returns.
D3 Business Update: D3 15th year Anniversary Celebrations
March 2012 will be the 15th year anniversary of D3 Financial Counselors. To celebrate this accomplishment that you helped make possible, we will be hosting an open house at our Downers Grove office on March 7th from 5:00pm until 8:00pm. We will also be hosting a second celebration in Chicago, at the Luxbar on March 14th from 5:00pm until 8:00pm. All of you are invited to attend either or both events. Please RSVP to Patty by March 1st.
We also ask that you to mark your calendars for June 2nd. We will again sponsor our Bring Spring event at the Morton Arboretum. All clients and their friends are invited to visit the world class Arboretum as guests of D3 Financial Counselors. We will again be providing lunch. It is our hope that you will bring a family member or friend, whom you think might benefit from our services. This is not a sales pitch, just an introduction and another way of saying thank you.
D3 Investment Insight:
The employment report came out this morning and was surprisingly positive. The unemployment rate declined to 8.3% as the U.S. economy created 243,000 new jobs.
This slow but steady economic growth provides further evidence reinforcing the portfolio asset allocation changes that we will be executing next week. More details below.
D3 Investment Outlook:
Based on our 10 year outlook for the most attractive risk adjusted returns we have slightly revised our general asset allocation models. Attached to this email (letter) are the revised asset allocation models. Where clients have unique portfolio objectives or constraints, we have overridden the models to reflect those limitations. Our weighted average 10 year total return projections are at the bottom of each model. The return projections are lower than last year and that is part of the reason we are refining our asset classes. We are splitting our Value category into large and small and we are splitting our International category into developed and emerging.
Besides refining asset classes, the other minor changes were to reduce cash holdings because the Federal Reserve has said it will be keeping interest rates low until 2014. If we know you have a cash flow need we retained money market funds in your accounts. We also reduced the allocation to Income by 5% because we can generate higher yields by investing in Equity Income oriented securities. Finally, we generally increased our allocations to Alternatives to reduce overall portfolio correlation risk and to increase portfolio cash flow.
D3 Investment Strategy:
We have reviewed all of the investments in everyone’s accounts (brokerage, IRA, 401k, 403b, 457, etc.) and will be making trades next week to reduce or eliminate securities that do not meet our risk/reward objectives and to reflect the asset allocation model changes described above.
As a result there will be numerous transactions in your accounts. We have reviewed each of these trades with the objective of rebalancing your household portfolios across all accounts to the new models described above (again the objective is to better define where risk exists in portfolios and to manage it more precisely). We have also reviewed all trades, making sure that we eliminated or reduced trading costs and took into consideration capital gains or losses (next year capital gains tax rates are scheduled to go up).
We will execute the sells early next week to raise cash for the buys that we will execute the following day. To be as transparent as possible, on Monday, we will be loading up on your client portal a customized rebalance report that shows all of the trades we will be executing in all of your accounts. As a reminder we use exclusively no load funds. There may be some transaction costs if we are executing trades using closed end funds or ($8). If we are using institutional funds, like Vanguard, Blackrock or Pimco, the transaction fee is $25. The reason we use these funds is because the fund’s lower expense ratio typically covers the $25 transaction fee in 3 months or less (depending on the size of the trade). If any fees, or taxable gains or losses will be generated, they are summarized on the rebalance report.
In summary, we are executing these trades to increase the probability that you will achieve the Required Rate of Return (RRR) in your financial plan with the least amount of risk possible. If you have any questions please call.
As always, thank you for your business and may 2012 be better than 2011.
Don Duncan MBA CPA CFA™ CFP® Neil LeFort, MBA J.D. CPA
Michael Meyers MBA CFP® Patty Shipinski Office Manager
Adam Glassberg CFP® Ryan Pace Jr. Financial Planner