Good afternoon, we hope this note finds you well.  Earlier today, we sent a newsletter to all clients regarding the current market environment, our outlook, and strategy moving forward.

We believe it is also important to follow up with our smaller clients, as they have been disproportionately affected by the challenges we faced in 2016.

Historically, our small aggressive accounts enjoyed returns which outperform our larger portfolios and our composite as a whole.  The reason for this outperformance is because our smaller portfolios hold a smaller number of positions with larger weights.  For instance, a large portfolio may hold 20 to 30 stocks while a small portfolio may hold 5 to 10.  Having fewer positions allows for higher returns when our stock selections outperform, however when our selections decline this strategy can lead to larger portfolio declines.

As mentioned in our newsletter, the S&P 500 has risen a mere 1% over the last 18 months.   What’s more is the market has declined on two occasions during this period; in the third quarter of 2015 and again in the fourth quarter of 2015.  This second decline, led to the worst January in history for equity markets.  During both of these instances, we raised cash in an attempt to preserve capital and then re-entered the market.  Since the last market bottom in mid-February, the market has experienced a tepid recovery, remaining range bound and unable to meaningfully break above all-time highs.

Another factor which led to our small portfolios underperforming relates to the FINRA regulations requiring a minimum net equity of $105,000 to trade with outside brokers.  What this means is that we are unable to buy or sell securities with brokers other than Fidelity if the market value of your account is less than $105,000.  This rule prevented smaller portfolios from purchasing individual short term high yield bonds and preferred stocks as these securities were purchased with outside brokerage partners.

Markets presently remain concerned about rising interest rates, high equity valuations, the election outcome, and slow economic growth throughout all economies globally.  Due to this, we acted this week to minimize further losses in small accounts by increasing the cash weight to 30%.  Further, we pared down weights of the growth stocks we presently hold.  Finally, we added a High Yield exchange traded fund, which pays a 5.5% dividend in an effort to increase income.

As always, we are available should you wish to discuss your portfolio or our current strategy in more detail.

Best Regards,

The Haven Wealth Group Team






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