Janet Schlarbaum, Mark Schlarbaum Portfolio Diversification

Posted by: Janet Schlarbaum

By: Keith Mcgregor

Investing in Gold has done very well in spite of the chaotic backdrop of this years markets and it is predicted to do even better. Gold is in a bull market because its core fundamentals are so outstanding.

The gold bullion price is driven by supply and demand. Each year the world’s gold mines produce only 2,500 metric tonnes of gold. The best estimates indicate that the whole planet buys 4,000-5,000 metric tonnes of gold a year. Hence global demand exceeds supply by 60% to 100% annually creating structural shortage situation. Banks are no longer selling enough gold to make up for global demand above the amount of gold mined each year.

With this in mind gold is forecast to reach $1500 to $2000 dollars in the foreseeable future. Some analysts believe that this could be a soon as the next 12 to 18 months. Fund managers have identified 5 significant factors which will drive the price of gold bullion up even higher:

* The decline of the dollar * More inflation in the future * Investors will seek greater safety in gold * Higher oil prices * Boom in demand for commodities and precious metals

In March 2008 Bloomberg reported that “gold…may be the best performing financial asset this years as inflation and slow growth erode the value of the worlds major currencies, bond and stocks.” ” Gold …may gain at least 24% this year as the Federal reserve Chairman Ben.S.Bernanke prioritizes cutting interest rates…”

Higher US interest rates would justify long-term dollar strength and with it, a falling long-term gold price. The US housing market has fallen by more than 12% in the last year alone. In reaction to this the FED is trying to soften the impact by allowing homeowners to extend their mortgages to longer periods at lower rates. The future of the dollar appears to be an index of lower highs and lower lows where as gold should see and opposite pattern with higher highs and higher lows.

Posted by: Janet Schlarbaum

Submitted By: John Kaighn

There has been a great deal of press in recent years given to portfolio diversification, in particular to the use of hedge funds as a means of alternative investment strategy. Many times these funds are referred to as vehicles to use for diversification, because they are not linked to traditional investments, such as stocks and bonds. However, on a closer inspection, it becomes evident hedge funds, while using sophisticated tools such as derivatives, controlling purchases in companies, merger arbitrage and venture capital, are still very much connected to traditional investments, and also remain illiquid, expensive and prone to risk.

Are these investments suitable for your portfolio? The answer depends on your appetite for risk, tolerance for illiquidity and overall investment goals. In the past, these funds were marketed to very high net worth individuals, but recently, this unregulated asset class has been marketed to a larger group of investors, in order to increase market performance during times of low returns. Some fee-based Financial Advisors have been recommending them, to increase returns in portfolios, where the advisory fee is deducted from quarterly returns, and paid directly by the client. Many hedge funds have had lackluster performance recently, and this can lead managers to increase the risk, in order to increase the return for the year. Accurate data has only been collected on hedge funds for about 10 years. This doesn’t give much information on which to ” base an analysis, so you need to exercise caution in interpreting such results”, according to Vikas Agarwal, of the J. Mack Robinson College of Business at Georgia State University.

After the technology bubble burst in 2000, there was a rotation out of tech into real estate, energy, natural resources, bonds and emerging markets. Long term holders of real estate and these other asset classes saw huge gains, and mutual funds in these asset classes were the market leaders since the tech bust. Last year, investors began to move money out of real estate as the sector cooled rapidly. In my opinion, the idea is not to switch asset classes and try to time these these rotations, but rather to attempt to build a portfolio, which holds positions in all of these asset classes.