Dightman Captial Group
We manage dynamic investment strategies, as part of a comprehensive planning environment, designed to protect capital in sustained market contractions and grow capital during market expansions.

Protect...Grow...Repeat

Market & Economic Brief

Summer 2010

GLOBAL STOCKS
Stocks generally ended the first half of 2010 under pressure.  The S&P 500 was down -7.5% and the MSCI Developed Country index declined -15.8%.  Q2 earnings reports are expected to be strong but forward guidance is less certain.  Leading companies held up surprisingly well as markets sold off.

WORLD ECONOMY
Leading economic leading indicators produced by ECRI continue to signal a slowdown in the U.S. economy but will need to deteriorate further before signaling another recession.

INFLATION DATA
Broad inflation pressure appears to be contained and interest rates remain very low.

U.S. RESIDENTIAL HOUSING
After a pick-up earlier in the year, home sales appear to have slowed after the expiration of the home buyer credit at the end of April in most U.S. markets.

PLANNING
New conversion rules for ROTH IRA's in 2010 may present a unique planning opportunity.

Potential tax changes in 2011 are reason to review tax strategy in 2010.
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About Index Investing

Index investing has been around for decades, and today it is herald as one of the most efficient ways to invest your money. Well known investors like Warren Buffet, Charles Schwab, John Bogle (founder of Vanguard), and Peter Lynch (famous Fidelity Magellan Fund manager) and many others have publicly endorsed index investing as a very efficient method for investors to expose themselves to stock investments.

Some of the more notable advantages to index investing include:

  • Low Cost
  • Near Market Rate of Return
  • Pure Asset Classification
  • Low Tax Exposure
  • Investment Transparency

THE ROLE OF INDEX INVESTING

The world of index investing has expanded rapidly.  Still, many advisors/consultants are not deploying them fully.  Initially index investments were limited to traditional indexes like the S&P 500 and NASDAQ 100.

Today many exchange traded funds (international, small company, industry sector, investment style, real estate investment trusts, commodity, and other asset-classes) have been introduced, offering tremendous utility for those investors seeking exposure to a broad representation of the investment universe.

OUR APPROACH

For the portfolio manager, the advantages of using indexes can be tremendous. Today the ability to pin point a group of stocks based on dividend yield, market capitalization, industry sector, fundamentals, geographic location, or other characteristics has improved immensely. This capability provides the portfolio manager with the ability to be very specific about what assets are held in the portfolio at any given time.

At Dightman Capital we place our portfolio construction emphasis on determining which indexes should be included and how much weight each one should represent in the portfolio versus which mutual fund or seperate account manager is going to beat their investment benchmark this year (most don't, and those that do rarely repeat).(1)

(1) Journal Of Financial Planning, “The Difficulty of Selecting Superior Mutual Fund Performance” February 2006