Friday Market Update

Posted May 13, 2011 by admin. tags:Tags: , , , ,
Wall Street Street Sign


Written By Nathan White, Paragon’s Chief Investment Officer
 
The markets have been down for the first two weeks of May. This was led by weakness in commodities, which had been on a tear over the last six to nine months. The materials and energy sectors have been hit the worst. We have been using the ups and down to lighten exposure in the materials area because it looks like it has seen its best days on a risk adjusted basis. We also pared back some energy exposure, but might look to re-enter at lower prices if given the opportunity.This is a seasonally tougher time of year for the market. The market is looking tired after the good run we saw and the uncertainty of the impact of QE2 ending. The majority of our models are still bullish, but not with a same degree of conviction as we saw over the last two years. We have built up a cash position in our growth portfolio, Top Flight, to hedge and take advantage of any dips.

Hopefully the market is just entering a consolidation phase wherein any corrections would not become severe as the fundamentals still supporting the cyclical bull market remain intact.

Disclaimer
Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.

 

Living With Uncertainty

Posted May 5, 2011 by admin. tags:Tags: , , ,
Downtown Wall Street

Photo by azureon2

Written by Dave Young, President of Paragon

Stock and bond markets incorporate all the available information at a given point in time when they operate efficiently. We saw other European countries with potential difficulties when sovereign debt problems emerged in Greece early last year. Along the same lines, we also saw an immediate spike in the cost of insuring their debt. The market factored this possibility in even though they had not run into problems yet.

Market analysis spend thousands of hours each year looking at these kinds of issues. Slow forming problems like government debt issues can be analyzed beforehand with enough time and research.

Unpredictable developments that cannot be anticipated such as these:

-The volcanic eruption in Iceland shut down 100,000 transatlantic flights and cost the airline industry $2 billion.

-The explosion of the Deep water Horizon oil rig in the Gulf of Mexico.

-The street protests resulting in changes of leadership in countries in North Africa, leading directly to the current military action in Libya.

-The earthquakes, tsunami, and nuclear-reactor crisis in Japan.

Set Your Risk Tolerance

The only way to handle uncertainty and manage the impact of unforeseen events is to build strict risk controls into your portfolios. While the risk of one-time incidents cannot be eliminated, through diversification and risk management, we hope to limit the damage when negative events such as massive frauds like Enron, sudden bankruptcies similar to Lehman Brothers, volcanic eruptions, oil rig explosions, or earthquakes occur.

Considering this, it might be useful to provide an overview of our approach to risk management and portfolio construction. The first step towards controlling risk is to make sure your individual risk tolerance is set properly.

Your risk tolerance can depend on many factors, such as how close you are to retirement, your goals, or lifestyle needs. It is determined by the returns you need to generate in order to meet your objectives and by identifying how much risk you are comfortable with and can handle. If your risk tolerance is set too low, you will not generate the returns you should. If it is set too high, you will feel pressure to sell your investments if market conditions become difficult, which could cause you to miss out on superior long-term returns.

Once your risk level is set, it helps us identify the mix of stocks, bonds and cash you should hold in your portfolio. It determines how conservative or how aggressive your portfolio should be. The allocation we put together based on your risk tolerance strongly determines how much volatility you will have to endure when unexpected events occur.

Risk tolerance is different for each of our clients because each has different needs. If you have any questions or concerns about your individual risk tolerance, please contact us at 800-748-4451, and we will make sure it is set correctly.

Disclaimer
Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.

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