A short term correction would not be surprising in a market that has seen the S&P Index rise 600 points since November 2012. If, a correction develops, we will work to identify a buying opportunity. We are generally 85 to/ 90% invested in our portfolios and view a correction as a health restoring event and a precursor to further gains.
Previous Calls
Sound Investments stays invested with the trends, and have outlined some of our calls over the years:
In the fourth quarter of 2001, our client letter suggested high yield bonds with interest rates of 8%. We continued to recommend these investments over the next several years. They did very well, averaging over 12.31%, according to Morningstar from 2002 to 2004. For those who held these bond funds for ten years, they were well rewarded with an average return of approximately 6.96% compared to the S&P 500 of approximately 3.2% as per Morningstar Reports.
In the first quarter of 2003, our client letter started to focus on international funds.
In the fourth quarter of 2003, we actively discussed the devaluation of the dollar, and we were steering investments to the international area.
By the first quarter of 2004, we openly questioned the potential for gain in the U.S. and attached an article, “Why Legendary Investors Were Holding Cash”. By the second quarter of 2004, we were busy adding to our international positions. In the fourth quarter of 2004, we continued to view internationals as a good bet.
All through 2005, 2006, and 2007 we stayed with international funds. We held a number of top international funds, and according to Morningstar, the foreign funds increased on average over 25% per year from 2003 to 2006.
By the third and fourth quarters of 2007, we talked about taking profits. In fact, we mentioned the odds were growing of an economic recession, and the markets would not be so hot in 2008.
In the second quarter of 2008, we discussed the volatility and bear market rallies. We were cognizant of the situation, and had significant cash positions by September of 2008 when the market declined over 40% on the S&P 500.
Beginning in 2009, we began discussing the potential for a recovery rally and were cautiously upbeat, and continued to think the market tug-of-war would be won by the bulls, which it was. By 2009 we were fully invested in both Domestic and International funds as well as Bond funds. In 2011 we were forcing on Domestic equities as they were outperforming International equities. In 2012 and 2013 excellent results were achieved. Currently in 2014 we have starting to allocate International funds again as they offer better values and shorting up the term of the Bond funds as we expect interest rates to rise. See our quarterly reports for more details and charts.