Global markets still down - Time to review your portfolio

June 3, 2006

The DJIA has lost over 600 points from its high of 11,709 on May 10, 2006, closing Tuesday at 11,094 after a brief rally last week. Most other markets have also suffered losses during that time, including overseas indexes, and even gold and oil futures.

What it Means:
As we said last week, the summer is usually a time for the stock markets to take a breather. This is especially expected for the Dow, since it is testing its all time high level. What was surprising is that all other indexes, including those which usually go up when stocks go down, such as commodities, also went down. This could be a sign that large investors are taking money off the table, and putting it into cash until the fall, when the market generally tends to revive.

Action Steps:
You should review your portfolio at least annually to make sure your assets are well diversified. Assets should be allocated in three areas:

• large, mid-size and small companies,
• U.S., foreign developed, and emerging markets
• stock, bonds and commodities, including real estate.

The percentage you should have in each depends on your financial goals, and the state of the market. For example, since small cap funds usually do better in the beginning of a bull market, many advisors are suggesting that now would be a good time to decrease allocation in these funds, and increase allocation in large cap funds.

Bottom line: make an appointment today to see your financial advisor, and do your annual review of your portfolio this month.