Editor’s Note: The Brexit referendum—Britain’s decision to leave the European Union—ushered in the largest single-day loss in world market history. Over $2 trillion in value disappeared from the markets in less than 24 hours.
It unleashed a tsunami of fear worldwide. Panicked investors sold out at the worst possible moment…
But not Palm Beach Research Group subscribers.
In fact, had they only watched their investment portfolios—and not seen any other news—they wouldn’t have even known anything unusual was afoot.
That’s because—unlike most investment newsletters, hedge funds, and brokerage houses—we place radical risk management at the forefront of everything we do.
In the piece below, The Palm Beach Letter’s chief equities analyst, Greg Wilson, explains how a key component of our risk-management strategy—intelligent asset allocation—forms the foundation of your fiscal independence.
It provides freedom from unchecked risk. Freedom from uncontrollable fear. Freedom from endless second-guessing.
Happy Independence Day.
Don’t ignore the No. 1 most important factor to your wealth
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From Greg Wilson, chief equities analyst, The Palm Beach Letter: Investors lost a record $3 trillion in wealth… in just two days.
It’s the carnage from the United Kingdom’s divorce from the European Union (aka “Brexit”—“Britain” plus “exit”).
And it’s the type of loss that leads to sleepless nights.
But Palm Beach Research Group subscribers are sleeping better than most. That’s because we address a topic most newsletters avoid like the plague: intelligent asset allocation.
It’s not a sexy topic. And it’s impossible to create a one-size-fits-all solution. But it’s too important to ignore.
Why is it so important? Intelligent asset allocation protects you from chaos like the Brexit fallout. It’s the No. 1 most important factor regarding your wealth. And we can prove it to you…
Regular Palm Beach readers know we have two asset allocation models—“Set It and Forget It” and “Asset Accumulation.”
Set It and Forget It is our most conservative model. It’s best for retirees looking to preserve their capital and make safe returns. It’s set up to provide rock-solid 6% annual cash (income) returns on your overall portfolio (in addition to any gains) while providing maximum safety.
(Editor’s Note: The actual percentages allocated to each category below—and specific instruction on how to determine your individual allocation needs—are reserved for paid subscribers only.)
Asset Accumulation is our more “proactive” model. It’s best for someone in the asset-building phase of his life. Someone willing to endure a bit more volatility for greater returns.
This model is designed to produce 9% annual composite returns (gains plus income) on your portfolio while still maintaining a high degree of safety.
Then there’s a third model. It’s not ours, and we don’t recommend it. But it’s the model many investors use. We call it the “Mr. Moon Shot” model.
Mr. Moon Shot says to heck with boring bonds and chaos hedges. It shoots for the moon, for the big stock winners. (Sadly, we should probably call it the “Mr. Everyman” model… since most folks have their retirement accounts almost 100% allocated to equities and equity funds, the riskiest parts of the market.)
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Brexit gives us the perfect situation to test our PBRG models against Mr. Moon Shot…
We constructed three portfolios based on the models above. Then we compared the performance of each, two days after Brexit (allowing for “maximum carnage”).
As you might suspect, Mr. Moon Shot got hammered.
Mr. Moon Shot lost 7% of its assets in just two days. But our more “aggressive” Asset Accumulation model was down just 2.3%. And the Set It and Forget It model lost just 0.5%.
Remember, these results came after the worst single down day for global markets in history.
That’s the power of intelligent asset allocation—never putting all your eggs in one basket.
Each of our models had a portion dedicated to “chaos hedges” and reliable fixed income. And those allocations helped offset the carnage from the stock market.
Now it may be different in the future. Stocks might be up and bonds might be down, or some other combination. The point is we can never know for sure. And the best way to protect ourselves is by using intelligent asset allocation.
In a chaotic world full of potential Brexit-style events, it’s time you made asset allocation a top priority.
All paid Palm Beach Letter subscribers can review our 2016 Asset Allocation Guide right here. Others can begin the journey to their own wealth Independence Day right here.