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No. of Recommendations: 3
Kit,

Your year over year returns compared with the S&P:

Year            KK           S&P
2005 9.2 4.9
2006 7.6 15.8
2007 12.2 5.5
2008 (27.9) (37.0)
2009 25.0 24.7


I've stolen the S&P returns (including dividends reinvested) from BRK's annual report except for 2009 which I got from Google's chart (so, no divi's reinvested in the 2009 figure). It was the simplest way for me to get the S&P's returns is all.

My observations on your port:

* Beat the S&P in 4 out 5 years.

* Handily beat the market in the awful 2008.

* Lagged in 2006 but made up for it in 2007.

Overall, I'd say that you are beating the market and assuming less risk in the process. Perfect. Don't change a thing. You are doing fabulous!!!


And that brings me to cashing out when things look like they are not going to do well. Not sure I wish to see another setback to zero. When the market won't buy anything, it doesn't matter what you have or how much work you have done.


But, you didn't set back to zero. You lost less than the market did in a terrible year that isn't likely to be repeated for another 20 years.

I'm not sure cashing out of everything is the proper course. You might be wrong. Certainly, if you own something that is near fair value, sell some or all of those shares. If you feel really strongly that the market is over bought, reduce the allocation to stocks somewhat by reducing some holdings. Ease in, ease out seems to be a better way to play it to me. Every time I've gone hog-wild on something it's come back to bite me in the a$$. Small changes are better.

You might consider working with target percentages of cash, bonds and stocks. Maybe set a percentage for when "things" seem pricey (say 25/25/50) and a set of percentages for when "things" seem attractive (say 10/15/75). Then, move from one to the other gradually as the market moves.

I don't do options. So, can't comment.

As an employer, I think you'd be wise to offer your employees some choices when it comes to their money. For example, allow them to put their money into an index ETF like SPY or whatever. And, allow them to continue under your management. But, let them choose. If you keep managing the pool of money and don't allow them some choices, you could be held responsible for less than market returns in the future. Better to allow the employee choices and then they are accountable for their choice, not you.

Rich
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