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Saturday, July 26, 2014

Weekly Update 7 26 2014

Words for the week care, caring.

"Without a sense of caring, there can be no sense of community." Anthony J. D'Angelo

"From caring comes courage." Lao Tzu

"People with handicaps teach me that being is more important than doing, the heart is more important than the mind, and caring together is better than caring alone." Henri Nouwen

"The closest thing to being cared for is to care for someone else." Carson McCullers

"Excellence is the Result of Caring more than others think is Wise, Risking more than others think is Safe, Dreaming more than others think is Practical, and Expecting more than others think is Possible." Ronnie Oldham

"Never be so busy as not to think of others."  Mother Teresa


Caring is one of the most important aspects to being a Trusted Financial Advisor.
The problem for the investor is that, even if the person is very caring, there are different standards of care adhered to by advisors. It depends on the platform in which they work.

There are basically three different platforms.
  1. 1.   Brokers sell on commission. They are usually offer investments directly connected to where the Brokerage Company has selling agreements. The company and the broker get paid on the different investment products they offer. Also they might get incentive pay for offering certain investment products. They are held to a Suitability Standard. Most likely they will not hold themselves out as a fiduciary.
  2. 2.    Fee Based Advisors are often brokers working for commission and sometimes receive fees for managing investments or financial planning. They also get paid differently based on the products they offer or the way they provide advisory services to you. Usually they are held to a Suitability Standard and will not hold themselves out as a fiduciary. Also they might get incentive pay for offering certain investment products. They are supposed to disclose to the investor any conflicts of interest.
  3. 3.   Fee only Registered Investment Advisors never receive commissions. They always are under a Fiduciary Standard by law. They must avoid conflicts of interest and in most cases act under prudent investor guidelines.
So what is the big deal? Why is it important to know this about standards of care?

David Serchuk writes in Forbes "Suitability: Where Brokers Fail".
"While suitability offers investors some sort of protection, it falls short in some important ways. For starters, it doesn't require brokers to find the best products, only ones that are ostensibly suitable for you. If an underwhelming house brand security lines up with the vague outlines of what is considered suitable they can still push it, even if it costs more to own, or underperforms peer securities."
"In other words, mere suitability alone falls short of what the fiduciary standard brings to the table. Here are some key differences. Whereas the suitability requirement is about as far as most mainstream investment houses will go, when your financial planner is considered a fiduciary they have the legal obligation to put you in only the very best products they can, and to act in your own best interest, not their own. Becoming a fiduciary, also, takes a lot more work than becoming your typical broker. You have to fulfill a certification process that requires you to uphold prudent investment guidelines and practices as delineated by state regulators. Simply put most mainstream stock brokers do not meet this standard."


A recent article in Financial Advisor Magazine tells of how regulators are concerned over brokers' activities.
"One issue of concern was brokerages that sell pricey share classes of mutual funds and variable annuities. Goodman cited "an explosion" of so-called "L-shares," a type of mutual fund shares held in variable annuities that have short surrender periods, but higher upfront costs. A surrender period is the number of years that investors must wait in order to withdraw money from an annuity, or cash it in without a penalty. It is often seven years, but can be three or four years for L-shares, according to marketing literature."

"The SEC was interested to know whether investors were aware of the fees they pay for different types of share classes and whether these charges were appropriate for the investors buying them, Goodman said."

"We want to make sure these share classes aren't being chosen or marketed based on the higher commissions they generate," Goodman said."


WHAT DOES IT REALLY MEAN
TO BE A FIDUCIARY?
According to The Investment Adviser Association's
Standards of Practice, "As a fiduciary, an investment advisor has an affirmative duty of care, loyalty, honesty and good faith to act in the best interests of its clients."
The Investment Adviser Association goes on to define what these fiduciary duties are as they relate to the advisory relationship. These generally include the duty to:
  • At all times place the interests of clients first;
  • Have a reasonable basis for its investment advice;
  • Seek best execution for clients' securities transactions where the advisor directs such transactions;
  • Make investment decisions consistent with any mutually agreed upon client objectives, strategies, policies, guidelines and restrictions;
  • Treat clients fairly;
  • Make full and fair disclosure to clients of all material facts about the advisory relationship, particularly regarding conflicts of interest; and
  • Respect the confidentiality of client information.

The Unified Prudent Investor Act has a list of factors which must be considered in making investment decisions, including "general economic conditions," "possible effect of inflation or deflation," "the expected total return from income and the appreciation of capital," and, "other resources of the beneficiaries."  The Advisor, acting as a Fiduciary under the Prudent Investor Act, must take tax consequences of investment decisions into account.  There is a positive obligation to diversify assets "unless the trustee reasonably determines that, because of special circumstances, the purposes of the trust are better served without diversifying." The trustee's obligations are significant, requiring sophisticated approaches to investment that really take into account the right risk to return ratio for the particular trust.
In addition, a Fiduciary Investment Advisor's performance is measured by the performance of all the assets together.  Thus taking the truly holistic approach to investment practices.

At Marrs Wealth Management we take great care to analyze investment offerings that we use to build portfolios.
Below are a list of funds with ten criteria that we use to analyze investments. This is a beginning point of looking at investments.
We don't get paid more or less for using any particular investment. We receive no third party money or incentives to invest in any one area.
We only look at what is best for you the investor. Prudently building portfolios that will add long term benefits to individual financial goals.
Below is what we have termed our Stability Rating.
The identity of the attached investments is withheld, not because they are a secret, the list is available by request.
It is important to remember that past return is not guarantee of future performance. That this is for information only and should not be construed as an offer to buy or sell any security. Past Return is no guarantee of future return.

  • All metrics are benchmarked to the S & P 500 Index.
  • The purpose of using the S & P 500 Index as a benchmark to all investments is to measure risk/return metrics and low correlation of assets as related to the capital market base.
  • It is always very important to review the investment metrics against the most closely related benchmark category to each investment as well.
75% of our clients' investments are in Exchange Traded Funds, Institutional Level Mutual Funds, and Individual Securities.
On average we reduce internal costs by approximately $1,800.00 per client in relation to individuals investing in retail shares of mutual funds. Average client assets equals $800,000. 




Maintaining a risk profile consistent with your goals, expectations and risk tolerance is of utmost importance.

Losses can outweigh high returns and be extremely difficult to recover from over time. 


Inexpensive investment providers have done a great job of focusing investors to cost, and investments that track market weighted indices, while completely ignoring the costs of steep downturns in the investments performance.
Many have bought into the fable that you cannot do any better that only keeping costs low and tracking market returns are viable investing options.

The SPY SPDR S & P 500 tracking ETF has averaged approximately 5.5% annualized return from July 2000 to July 2014.

We target an annualized return of between 6% and 8% depending on goals and risk measurements.
We target Risk, Beta and Standard Deviation to about 50% of the S & P 500 Index.
We are constantly evaluating and monitoring the investments and portfolios of our clients. 


It may be time to find a competent advisor who will invest prudently with your best interest in mind? 



The S and P 500 index ended even with where it started last week.
The 10 year Treasury Yield index trended down last week.
-  .60%
The US Dollar index was up last week. +.66%
The CRB Commodities index trended up last week. + .31%
The Gold Index trended down last week - .62%
Inflation Linked Bonds trended up last week + .12%
The US Aggregate Bond Index trended down last week. - .07%
The International Aggregate Bond Index trended down last week. - .45%
The New York Composite Index ended even with where it started last week.
The Dow Jones World Index trended up last week + .31%

The NCREIF Index is aggregated and reported quarterly and is a total return broad representation including rents and appraisal of non-traded Commercial Real Estate.

2014 2nd qtr + 2.91%

Year to date gold, real estate and inflation linked securities lead. Stocks are outperforming bonds.


Many investors take the wrong approach looking primarily at recent return and average percentage rates. Overall risk measures and managing downside risk play an increasing role in end results.

Investors instead should be focused on managing Dynamic Beta exposure, evaluation Active Share, Sharpe ratios, Treynor ratios, Sortino ratios and Alpha.

The above is for informational purposes only and not an offer or recommendation to buy or sell. Past performance is no guarantee of future return. All decisions about investments should be made within parameters of risk, time frame, financial position and overall asset allocation.

Monday, July 21, 2014

Weekly Update 7 19 14

Words for the week, life planning.

"There are only two ways to live your life. One is as though nothing is a miracle. The other is as though everything is a miracle."  Albert Einstein

"Sometimes the questions are complicated and the answers are simple." Dr. Seuss

"I'm not afraid of death; I just don't want to be there when it happens."  Woody Allen

"The fear of death follows from the fear of life. A man who lives fully is prepared to die at any time."  Mark Twain

"May you live every day of your life."  Jonathan Swift

Financial planning really should be more life planning. Setting priorities and goals. Revisiting and readjusting through life's changes.
To write a financial plan has limited value! Working lifelong with a Financial Advisor has inestimable value, if they are truly helping you to work towards your best outcome. If they are a fiduciary towards you and your entire financial life.


Fred Reisch writes; ERISA imposes the fiduciary standard and "prudent man rule"-including that duty of loyalty-as well as the prohibited transaction rules to regulate the decision makers' conduct.
Wouldn't it be best if everyone in the room were required to put the participants first in making recommendations and decisions? ... Arguably, it would be. ...
Many advisers are fiduciaries, but many are not. How can a plan committee tell the difference? It's fairly easy. If an adviser says in writing that he, or the firm, is a fiduciary, then the adviser is. If the adviser doesn't provide such a written statement, then he, or the firm, isn't (or at least the adviser doesn't think so). The moral of that story is, if you want to ensure your adviser puts the interests of the participants first, just as you are required to do, then get it in writing."

http://www.plansponsor.com/mobile/magazinearticle.aspx?id=6442498449&sname=

As a fee only Registered Investment Advisor we serve as fiduciary to our clients. Our interest is as closely as possible aligned with the best interest of the individuals we advise. We avoid any conflicts of interest that might diminish trust and replace serving in the best interest of others.

There are many other risks to a person's financial life than investment risk. This past week the Supreme Court ruled that Inherited IRA accounts were not considered retirement plans. The result is Inherited IRA's are not protected from creditors.

One may want to establish a trustee relationship as a part of designating beneficiaries of their IRA's.
Other considerations in naming a beneficiaries IRA to a Trusteed IRA may be, ability for minor beneficiaries to inherit, to establish some control on how fast the IRA can be distributed or establish who may be named as eventual beneficiary of he account.

Marrs Wealth Management can work with a partner Administrative Trustee and serve as a Directed Fiduciary Investment Advisor for your heirs Trustee IRA.

Other life concerns may arise around many different issues.

Some recent articles in Trusts and Estates Magazine surround, diminished capacity planning, trustee considerations and taxation issues.

It may be time for you to consider additional reasons to review with your adviser and attorney, issues in planning other than investment decisions.  




 The S and P 500 index trended up last week + .54%
The 10 year Treasury Yield index trended down last week.
-         1.43%
The US Dollar index was up last week. .48%
The CRB Commodities index trended up last week. + .12%
The Gold Index trended down last week - 2.13%
Inflation Linked Bonds trended down last week - .12%
The US Aggregate Bond Index trended up last week. + .05%
The International Aggregate Bond Index trended down last week. - .11%
The New York Composite Index trended up last week.
+ .45%
The Dow Jones World Index trended up last week + .44%

The NCREIF Index is aggregated and reported quarterly and is a total return broad representation including rents and appraisal of non-traded Commercial Real Estate.

2014 1st qtr + 2.21%

Year to date gold and inflation linked securities lead. Stocks are outperforming bonds. 



 Many investors take the wrong approach looking primarily at recent return and average percentage rates. Overall risk measures and managing downside risk play an increasing role in end results.

Investors instead should be focused on managing Dynamic Beta exposure, evaluation Active Share, Sharpe ratios, Treynor ratios, Sortino ratios and Alpha.

The above is for informational purposes only and not an offer or recommendation to buy or sell. Past performance is no guarantee of future return. All decisions about investments should be made within parameters of risk, time frame, financial position and overall asset allocation.

Monday, July 14, 2014

Weekly Update 7 12 14

Words for the week inflationary and stagnant.

“Pain has its own noble joy, when it starts a strong consciousness of life, from a stagnant one.” John Sterling

“Happiness consists in activity. It is running steam, not a stagnant pool.” John Mason Good

“The best thing to do is stare it in the face and move on. We have to face our fears and plow through. I think taking chances takes a lot more courage than staying stagnant and doing what's safe and comfortable.” Terri Clark 

“Inflation is the one form of taxation that can be imposed without legislation.” Milton Friedman

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.” Alan Greenspan

“Every time the Fed implements 'quantitative easing,' a.k.a. printing more money, two things go up: taxes and inflation. When taxes and inflation go up, more jobs are lost.” Robert Kiyosaki

“By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” John Maynard Keynes

“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.” Vladimir Lenin

I wrote several columns on “Operation Twist” when the Federal Reserve Board reinstituted the policy it had undertaken in the early 1960’s.
 In those installments I referred back to the monetary policies of easing that took place culminating in a high of the Dow Jones Industrial Average in early 1966.
Then followed a time where the Gold Standard for U.S. currency was abandoned and a long period of what was labeled stagflation through the 1970’s. An unpopular war was coming to an end and there were massive demonstrations against the government.
Samuel Clemens, better known as Mark Twain, is quoted as saying: “history does not repeat but it does rhyme.”

If you invested in the S & P 500 index in January 1966 and held through January 1975 your return would be -22%; -2.76 % annualized. If you held on to the S & P 500 Index until January 1982 your annualized return would have been 1.44% annualized over seventeen years. In 1982 you would have realized double digit inflation and interest rates. Yes, there were a lot of peaks and valleys throughout that time.

Why am I revisiting this? Though forecasts for growth have been high, the last several quarters have been readjusted severely lower than expected and initially reported. Fourth quarter GDP was finally revised to zero growth and first quarter down to a negative (2.9%). Many are expecting a strong come back, still forecasting positive 3% growth in 2014. We will see?
At any case, most agree this is a very weak of recovery.

Also, a trove of analysts are pointing to an increase in inflation. I will point to a few of the recent writings. Below are just a few of the columns from the past week.


On July 7th Donald Lingerfelt wrote a column titled “Inflation and Recession” He writes: “By properly defining inflation, these points become obvious. By not accurately defining the term, the cause is obscured, and the inflator can redirect the blame. It can claim that it is fighting inflation as hard as it can, when it is the cause of inflation. The government even makes people believe that we need inflation, which is a damnable lie.”
He goes on; “I contend that we are now and have been in a recession for the last 6 years. Robert Blumen believes that the current recession has really began in 2000, so I think that I am conservative in this estimate. The market continues to climb because the government is printing money like there is no tomorrow. There is so much money in the system that the "rich" cannot find enough places to invest. They are buying real estate, stock, and collectibles as fast as possible while the rest are suffering. The bubbles in these areas are widely recognized. What is happening is that we are "eating our seed corn," or consuming our collective savings rather than producing more, making the pie larger. The pie is not growing at the present time but is shrinking. The economy is not expanding. To stop the bubble and the recession we must raise interest rates and correct the market. We must stop expanding the money supply. We should have been in the summer cyclical correction by now and the fact that we are not is evidence of the inflationary efforts of our leaders.”
Then he writes; “since inflation is not rising prices but an increase in the money supply, we know who is to blame. The current situation is not the normal one. Prices in general are not rising as they normally would because the excess funds are going into the real estate and stock market bubbles. We must watch for cracks in these areas, knowing that when they do crack we must exit quickly or suffer loss. They will eventually pop because they must, and this is really the healthy thing for the economy. That's why they call it a 'correction'. When will it happen? No one can know, but stay alert.”




Albert Sung writes under the name Katchum on October 6th a piece titled “5 Signs of Inflation Presenting Themselves at Your Door”

He points to Global Inflation and Global Monetary Expansion.


Massive expansion of the money supply cannot be denied.


Jay Taylor writes on July 8th in his “Inflation-Deflation Watch”
Telling us all indicators point to growing inflation. 




George Dorgan writes on July 7th a column titled “A Little History of Wages, Inflation, Treasuries, and the Fed- and What We Have Learned From It.”
He shows how wage inflation has contributed to recessions on the past.  

Jesse Colombo wrote a piece for Forbes titled, “These 23 Charts Prove That Stocks Are Heading for a Crash.” http://onforbes.es/1m6pBmt

Colombo highlights a number of issues include he points out the problems in the labor market and reported numbers on unemployment.
He also points to the relative gap between GDP and growth in the stock market.




John Mauldin in his “Outside the Box” quotes Charles Gave.

Gave writes; “Every US recession that I can recall was preceded by a fall in long rates, and I doubt the next will be much different. As such, do not expect the next US downturn to arise from the Federal Reserve pushing rates higher, an overvalued dollar or even mal-investments. Expect it to result from a decline in the income of the working poor. Early warning signs are likely to show up in the shopping aisles of stores such as Walmart, average driving miles, and the price of houses at the cheaper end of the market. I suspect the lesson that will eventually be learnt is that in a modern industrialized economy there are few worse things a central bank can do than deliberately attack the spending power of the poor.”
Mauldin writes; “And that income decline has been drastic since 2000, and particularly since 2010. Charles has created what he calls a “Walmart CPI,” which tracks the prices of rent, food, and energy (the things the poor must spend nearly all their income on); and he uses it to demonstrate the effects of negative real rates on the poor. Since 2000 there has been more than a 15% increase in the ratio of the Walmart CPI to standard US CPI.”
“We can expect this deadly combination of rising prices for necessities and declining incomes to affect the stock market, too, says Charles: Pretty much every equity bear market in the US over the last 30 years has occurred against the backdrop of the working poor experiencing a decline in living standards (the one exception was 1987 when the market was reacting to over valuation).”
“There is a clear relationship between periods of rising prices for essential items and negative real rates. Such a policy undermines the dollar as a store of value. As a result, investors seek alternatives such as gold, oil and agricultural land (see The High Cost Of Free Money). Boiled down, the impact for low earners is an abnormal rise of the Walmart CPI vs the US CPI. Put another way, negative real rates amounts to the Fed imposing a regressive tax on the poor although it lacks the authority to collect taxes.”

Finally Manning and Napier in their “July 2014 Perspective” say;

“On inflation, the headline index accelerated to a 2.1% year-over-year pace during May. This is the fastest reading on annual inflation since October 2012. Growth in the core measure which excludes food and energy prices also quickened on a year-over-year basis to 2% from 1.8% in April. The annual advance in both headline and core CPI metrics has hastened in each of the past three months.”

Whether growth will continue to accelerate is yet to be seen. Also whether we will see growing inflationary pressures, it seems we may.
Stagflation is an environment where managers can actively find pockets of value, in commodities, real estate and even in stocks. However buy and hold index investors may find very little long term satisfaction.
It may be a good idea to find active managers, tactical allocation strategies, alternative assets and inflation protected securities in place of typical allocations of stocks and bonds?


The S and P 500 index trended down last week - .90%

The 10 year Treasury Yield index trended down last week.
-         3.15%
The US Dollar index was down last week. -.05%
The CRB Commodities index trended down last week. – 3.15%
The Gold Index trended up last week + 1.29%
Inflation Linked Bonds trended down last week - .41%
The US Aggregate Bond Index trended up last week. + .54%
The International Aggregate Bond Index trended down last week. - .03%
The New York Composite Index trended down last week.
-         1.52%
The Dow Jones World Index trended down last week – 1.54%

The NCREIF Index is aggregated and reported quarterly and is a total return broad representation including rents and appraisal of non-traded Commercial Real Estate.

2014 1st qtr + 2.21%

Year to date gold and inflation linked securities lead. Stocks are outperforming bonds.




It pays to stay diversified and not chase prior winners!


Many investors take the wrong approach looking primarily at recent return and average percentage rates. Overall risk measures and managing downside risk play an increasing role in end results.

Investors instead should be focused on managing Dynamic Beta exposure, evaluation Active Share, Sharpe ratios, Treynor ratios, Sortino ratios and Alpha.


The above is for informational purposes only and not an offer or recommendation to buy or sell. Past performance is no guarantee of future return. Decisions on making any investment should be made only subsequent to a thorough professional analysis of the overall individual financial picture and the goal for the investments.


Tuesday, July 1, 2014

Weekly Update 6 28 2014

Words for the week paying forward, giving back.

Remember that the happiest people are not those getting more, but those giving more.

Kindness in words creates confidence. Kindness in thinking creates profoundness. Kindness in giving creates love.

Any man who can drive safely while kissing a pretty girl is simply not giving the kiss the attention it deserves.

Happiness... consists in giving, and in serving others. Henry Drummond

"It is better to light a candle than to sit and curse the darkness." Confucius


Let us not be satisfied with just giving money. Money is not enough, money can be got, but they need your hearts to love them. So, spread your love everywhere you go. Mother Teresa


Physical exertion and giving of ourselves is something ingrained in us as a means to good health and feeling well!

Did you know that was a fact?

In most recent July 2014 Rotarian magazine an article by Laurence Gonzales entitled, PHILANTHROPY AND THE BRAIN; WHY DOING GOOD FEELS GOOD; the case is laid out. Giving of our time and resources to others releases oxytocin and dopamine. These two powerful mood enhancements energize us and give us feelings of pleasure.
Giving is built into our DNA!

Giving actually makes us feel good. It is an essential part of overall wellbeing. The same is true of physical activity. Hard work and physical exertion produce a lot of the same feelings.

Quoting Gonzales; "When we help someone out, we are rewarded with micro expressions that enter our emotional system below the horizon of consciousness. We know it feels good, but because we can't it to consciousness, we can't say why."

Today I am congratulating and celebrating our Client Service Director, Judy Mersman. Judy a week ago received the Governors Award as Volunteer of the Year.

Now I know all of our clients love and appreciate Judy.
For you who are not clients yet, you are missing out on her enthusiasm for helping others.

video


Also we are celebrating being voted best Financial Planner in Story County. Thank you for your show of approval     



Did you also know we manage a Donor Advised Fund.

Anyone can contribute and you could qualify for a Federal tax deduction and an Iowa state tax credit. We manage the investments and from the fund you give to an Iowa Charity up to five percent of your balance.

The fund is administered through the Story County Community Foundation and the greater Des Moines Area Community Foundation.    




This week I added inflation linked bonds to our weekly and year to date charts. Year to date commodities, gold and inflation linked bonds outpace stocks, traditional bonds, and the US dollar.

The Federal Reserve has typically over shot targets for inflation expectations. 

The last time anything close to the duration and depth of easing undertaken currently by the Federal Reserve Board was implemented took place in the early to mid- 1960's.

The result; building and eventually out of control inflation. In the 1970's called stagflation. We may look closer at inflation next week. 

All of this points to the need to have allocations and manage allocations to real estate, commodities, currencies and other hard assets that have differing levels of sensitivity to rising inflation.

It is important to note that one cannot rely on traditional bonds as a safe haven. Risk is latent in fixed income given the current interest rate environment and the over three decades drop in interest rates. 



The S and P 500 index trended down last week -.10%
The 10 year Treasury Yield index trended down last week.
- .67%
The US Dollar index was down last week. -.42%
The CRB Commodities index trended down last week. - .67%
The Gold Index trended up last week + .09%
Inflation Linked Bonds trended up last week + 1.39%
The US Aggregate Bond Index trended up last week. + .36%
The International Aggregate Bond Index trended up last week. + .68%
The New York Composite Index trended down last week.
- .40%
The Dow Jones World Index trended down last week - .37%

The NCREIF Index is aggregated and reported quarterly and is a total return broad representation including rents and appraisal of non-traded Commercial Real Estate.

2014 1st qtr + 2.21%

Year to date gold and commodities lead. Stocks are outperforming bonds.




Many investors take the wrong approach looking primarily at recent return and average percentage rates. Overall risk measures and managing downside risk play an increasing role in end results.

Investors instead should be focused on managing Dynamic Beta exposure, evaluation Active Share, Sharpe ratios, Treynor ratios, Sortino ratios and Alpha.

The above is for informational purposes only and not an offer or recommendation to buy or sell. Past performance is no guarantee of future return. All decisions about investments should be made within parameters of risk, time frame, financial position and overall asset allocation.





Sunday, June 22, 2014

weekly update 6 21 2014

Words for the week Path Finding and Trail Blazing.

  "If you do not expect the unexpected you will not find it, for it is not to be reached by search or trail." Heraclitus

"You're right on the money with that. We're all like detectives in life. There's something at the end of the trail that we're all looking for." David Lynch

"In a word I was a pioneer, and therefore had to blaze my own trail." Major Taylor


"If you want to have a better performance than the crowd, you must do things differently from the crowd." Sir John Templeton

The rarest thing in investing is going a different direction, blazing your own trail.

One of the key points in the active passive debate is that a majority of active managers underperform the index they are benchmarked against.
Overlooked is the fact that these are closet index funds with higher fees than an index fund.
They are handicapped by fees and their intent to manage to a benchmark.

However if you look at a manager who is truly adding value and risk adjusted return to their fund you need to pay attention to active share.

Sarah Max in a Barron's article January, 2013 writes; It also adds a new wrinkle to the passive-versus-active debate at a time when active managers have, for years, struggled to beat the market. "There is a tendency to paint all active shares with the same brush, but we need to make a distinction between funds that are truly active and funds that are truly not," says Cremers. "Funds with high active share actually do outperform their benchmarks." The 2009 study found that, between 1990 and 2003, funds with active share of at least 90% -- meaning that no more than 10% of their portfolios mimicked the benchmark -- outperformed by 1.13 percentage points after fees. Funds with active share below 60% consistently underperformed by 1.42 percentage points."


Another way to blaze a trail is investing in other asset classes. Non-traditional investments could add to a portfolios returns.

Non-traditional assets such as commodities could add value but most people, again, look to traditional index products to access their exposure to commodities.

Other atypical commodity indexes such as the continuous commodity index may be a better choice.
Since 2006 the CCI (continuous commodity index) has outperformed the more traditional CRB by a total of over 65%.

The CCI has also outpaced the S and P 500 index.




From Investopedia; "The Continuous Commodity Index has been around since 1957 as a means to track the overall performance of the commodities markets and to offer a way for investors to trade a diversified group of commodities under one contract.
What is the Continuous Commodity Index?
The Continuous Commodity Index (CCI) is a broad grouping of 17 different commodity futures, which is a benchmark of performance for commodities as an investment. The CCI is one of many revisions of the original CRB Index that was developed in 1957.
The CCI is equally weighted with 17 commodity futures. Each commodity represents 5.88 percent of the index. Over the years, some commodities have been changed to give a better representation of the overall performance of commodities.

Commodities Included in the Continuous Commodity Index:
Crude Oil : 5.88 %
Heating Oil: 5.88
Natural Gas: 5.88
Energies: 17.64 %

Corn: 5.88 %
Soybeans: 5.88
Wheat: 5.88
Grains: 17.64 %

Lean Hogs: 5.88 %
Live Cattle: 5.88
Livestock: 11.76 %

Coffee: 5.88 %
Cocoa: 5.88 "



There are, more importantly, some tactical commodity or alternative products that gain exposure to commodities which may add additional value and overall return to your portfolio.

You cannot invest directly to an index. This is not a recommendation to buy or sell any investment. Past performance is no guarantee of future return.



At Marrs Wealth Management we enhance portfolios through proven active managers, atypical index products and alternative investment strategies.
We are always actively looking for ways to bring added value and risk managed strong performing investments to our clients. 



The S and P 500 index trended up last week + 1.38%
The 10 year Treasury Yield index trended up last week.
 + .77%
The US Dollar index was down last week. -.26%
The CRB Commodities index trended up last week. .95%
The Gold Index trended up last week + 2.99%
The US Aggregate Bond Index trended up last week. + .09%
The International Aggregate Bond Index trended up last week. + .39%
The New York Composite Index trended up last week.
+ .1.49%
The Dow Jones World Index trended up last week + 1.01%

The NCREIF Index is aggregated and reported quarterly and is a total return broad representation including rents and appraisal of non-traded Commercial Real Estate.

2014 1st qtr + 2.21%

Year to date gold and commodities lead. Stocks are outperforming bonds. 


Many investors take the wrong approach looking primarily at recent return and average percentage rates. Overall risk measures and managing downside risk play an increasing role in end results.



Investors instead should be focused on managing Dynamic Beta exposure, evaluation Active Share, Sharpe ratios, Treynor ratios, Sortino ratios and Alpha. 



The above is for informational purposes only and not an offer or recommendation to buy or sell. Past performance is no guarantee of future return. All decisions about investments should be made within parameters of risk, time frame, financial position and overall asset allocation.