JANUARY 2012 PRO-FOLIO TRADE INSTRUCTIONS
OverviewThe US stock market is showing signs of stabilization-slash-anemic-growth. Most analysts think the short-term (6-12 mo) risk is lower now than it has been in a while. The Eurocrisis continues to evolve - even after the Greek debt holders take a huge haircut, the Portuguese, Irish, and Spanish are next. Europe is going to be a region of slow/no-growth for another couple of years or more.
While these conditions are far short of compellingly positive, they have been enough to trigger the buy signal for US S&P 500, US Real Estate, and Broad Commodities.
As a result of current conditions, Pro-Folio remains on the sidelines for only 1 of our 5 investments. Here are the trade instructions:
The Pro-Folio model evaluates its holdings on a monthly basis. As of the last trading day of January (31st), we have the following trade signals:
SPY - *** BUY *** - PRICE 131.32 THRESHOLD 126.32
EFA - AVOID
IYR - *** BUY *** - PRICE 60.56 THRESHOLD 57.32
DJP - *** BUY *** - PRICE 43.00 THRESHOLD 42.71
IEF - HOLD
For existing investors:
Invest 20% of your total portfolio (in other words, 1/4 of your available cash) in each of the 3 holdings of the Pro-Folio model marked "BUY" as shown above. Keep 20% of your total portfolio in cash or money market funds, and continue to hold 20% invested in IEF (US government bonds).
For new investors:
If you are new to Pro-Folio this month, you should divide your portfolio into 5 equal parts, and invest an equal amount of money in each of the securities shown above marked "HOLD" or "BUY". Because you didn't invest in the IEF component of the model at the time when the buy signal first turned positive, your return on that initial trades may not be reflective of the model's typical expected returns. DO NOT invest in EFA right now. Stand by with that portion of your portfolio in cash, awaiting the buy signal.
While sluggish stability seems to have crept into the markets. US treasury bonds, despite all the debate and worry about our debt ceiling and such, are still considered the safest financial instrument in times of uncertainty, as demonstrated by the recent increases in US bond prices. The world's investors continue to hold a large margin of safety in their portfolios.
Fortunately for us, the Pro-Folio model has proven its worth over 37 years including the 2008 market crash, so we can continue to follow it precisely and expect that the value of our holdings will be preserved.