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PAGE 6B PICKENS COUNTY PROGRESS THURSDAY. MAY 13. 2004
Rotary hears about Special Olympics
Susan Nunn, district coordinator
for Georgia Special Olympics,
spoke to the Jasper Rotary Club
about the upcoming summer games
in Pickens County and the state
games that will be held at Emory
University later in the month of
May. This is one of the highlights
of the Special Olympics year which
has a full calendar of events for the
special athletes of Pickens County.
Lynn Duckett assists Susan in coor
dinating all of the events that occur
each year. On Friday, May 7, 80
athletes will participate in the local
games. Special Olympians Sean
Estes, Heather Payne and Kyle
Brock attended the Rotary meeting
and told about some of their Special
Olympics experiences.
Special Olympians Sean
Estes, Kyle Brock and Heather
Payne with Lynn Duckett at the
Rotary meeting
Susan Nunn speaking to the
Jasper Rotary Club.
Youth Director Dr. Chris Lemieux presents Susan Nunn Jasper
Rotary’s check for $1,000 to fund the Special Olympics trip to
Emory.
Rotary President Lee Shiver and Incoming President David
Hays show off the Rotary District Presidential Award and a 100%
Rotary Foundation Patch for the Jasper club’s banner.
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Money. Matters
Is your investment portfolio
“Off-Balance?”
Submitted by Louise M. Nelson,
CFP
Nelson Planning Group
Is your investment portfolio
“off-balance?”
The investment markets have
gone through another wild year —
fortunately, this time, the volatility
was generally in a positive direc
tion. But the dramatic swing in
stock returns after three bear years,
along with dramatic swings in
some other types of assets, again
raises a question all investors
should answer every year: Do I
need to rebalance my portfolio?
Rebalancing a portfolio involves
periodically readjusting its mix of
assets. Smart investors start by
establishing an initial asset alloca
tion, assigning percentages of the
portfolio to assets such as stocks,
bonds and cash, and perhaps other
types of investments such as real
estate and commodities. The allo
cations are further broken down by
subcategories, such as different
types of stocks and bonds.
The target allocations should be
appropriate for that investor’s
investment goals and financial cir
cumstances, as well as comfort
level with certain types of invest
ments. Someone older with no chil
dren and nearing retirement, for
example, will likely have a differ
ent mix than a family in its early
accumulation years. Smart
investors also readjust the target
allocations to reflect major changes
in their personal financial circum
stances (but not changes in the
markets).
Why rebalance just because a
portfolio no longer matches its
original allocation? Why not just
let it ride — especially if the mar
ket’s going up? Because if you
don’t, you increase the risk that
you won’t achieve your investment
goals. Say you had 55 percent in
stocks and 45 percent in bonds in
the early 1990s. Unless you rebal
anced along the way, by the end of
1999, that mix might have become
“unbalanced” —say, 80 percent in
stocks and only 20 percent in
bonds.
You know what happened next.
This stock-heavy portfolio, espe
cially if it was loaded of tech
stocks, suffered more when the
stock market declined steeply over
the next three years than it would
have had it maintained its original
60/40 balance through periodic
rebalancing.
Now let’s look at your portfolio
in the wake of the big returns of
2003. Large-cap stocks represented
by the Dow and the S&P 500
gained over 28 percent on a total
return basis last year. The tech-ori-
ented Nasdaq climbed a staggering
50 percent in value, and real estate
investment trusts returned over 38
percent. Many international stocks
did well, as did gold and other
commodities. Meanwhile, bonds
stumbled, with the exception of
“junk” bonds, which soared 29 per
cent in 2003, according to the
Lehman Brothers U.S. High Yield
Index.
What impact did these major
market changes have on your port
folio? Did they alter your original
asset allocation? How much did
they alter the mix, and should some
of the investments be rebalanced?
For sake of an example, let’s say
your original portfolio designed ten
years ago was 50 percent stocks,
with allocations to various subcate
gories such as large-cap, small-cap,
growth, value and international.
Another 25 percent was in bonds
(long-term, intermediate, short
term and junk), 10 percent in real
estate through REITs, 5 percent in
gold and 10 percent in cash. Let’s
also assume that mix is still right
for your needs.
Now calculate your current
portfolio mix. Have large caps
grown disproportionate to other
categories of stock? Perhaps of the
25 percent you had in bonds, 5 per
cent was to be in junk bonds. But
after their booming year, they now
represent ten percent. Three out of
the last four years have been very
good for REITs — are they now
overweighted in your portfolio?
What if the real estate market
stumbles in the coming year? Then
the portfolio will take a bigger hit
because you’re too heavy in REITs,
just as it did in 2000-2002 due to
overweighting in stocks.
How much to allow a specific
asset category to shift before read
justing it is up to you, but a com
mon guideline is five percent. To
rebalance, consider directing future
investment funds into those under
represented categories until it’s
back in balance. You also can read
just by selling off some of the over
represented assets (the winners)
and buying the under-represented
(the losers) — selling high and buy
ing low. It is usually better to exe
cute this strategy within tax-
favored accounts to avoid taxes on
gains, but if you need to rebalance
taxable accounts, don’t let tax con
cerns derail you.
If you have questions or com
ments about the information in this
article, please send them to Finan
cial Matters, c/o Nelson Planning
Group, 105 N Main St., Ste. 2,
Jasper, Ga., 30143 or email nelson-
plangr@ ellijay.com.
Securities offered through Coor
dinated Capital Securities. Inc.,
member NASD/SIPC. Coordinated
Capital Securities and Nelson
Planning Group are not affiliated.
This column is produced by the
Financial Planning Association,
the membership organization for
the financial planning community,
and is provided by Louise Nelson,
a local member of the FPA.
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