Which model portfolio is right for you?

If you are looking at the models for the first time a natural question is which one is right for you? We can offer you some guidelines or suggestions that might help you choose.

Mendocino, Hatteras and Halifax are our three original models. They were started January 1, 2002. All of the other models are newer. You can look for date of origin on their individual portfolio descriptions.

The minimum investment for Mendocino and Hatteras is $500,000 each.

Mendocino is designed primarily for retirement accounts including IRA, Roth IRA, SEP-IRA, 401k, Profit Sharing, Defined Benefit or any other type of ERISA account. Hatteras is primarily for taxable accounts like individual accounts, trust accounts, or joint (community property) accounts.

The objectives of both models are the same. Both portfolios use a broad spectrum of asset types and classes to achieve their two stated objectives:

Achieve competitive total return with below average portfolio volatility; and positive investment returns over a 12 month period in almost any investment climate. They should be considered balanced portfolios and are managed as if they are the entire investment portfolio of a prudent investor.

Halifax is managed to mimic the performance of Mendocino and Hatteras, but it accepts smaller investments. The account minimum is $250,000. Halifax can accept taxable or tax deferred accounts.

Hatteras, Mendocino and Halifax are all considered “balanced portfolios” because at any given time they may contain stocks, bonds, cash and securities representing commodities. They have no fixed formula and may not have all these asset classes all the time, but they have the flexibility to do so.

Fresnel was designed for investors who are willing to accept more concentration of assets in order to attempt to outperform our more balanced models. For example, from time to time it has held as few as five positions. Fresnel can be significantly over weighted to one or more asset classes at the discretion of the manager. There have been times when it has been allocated entirely to gold and cash. There is no fixed asset allocation strategy.

The New World features “all green” investment choices. By that we mean that we are focusing on the stocks and/or bonds of companies that would be considered environmentally friendly. Alternative energy, biotech and pharmaceutical companies have been staples of the portfolio so far. The New World is also available to either retirement accounts or personal taxable accounts. The minimum investment is $250,000. The New World is restricted from investing in tobacco, defense, guns and firearms, mining, and oil and gas exploration.

The Pt. Reyes model is for investors seeking current income, protection of capital and low volatility. It invests primarily in fixed income instruments (bonds) to achieve this goal and is limited to an allocation of no more than 20% common stocks.  We have committed to investors that during 2009 it will own no stocks. Our most risk adverse clients are currently using Pt. Reyes as their safe haven. The minimum investment is $250,000. The model is suitable for taxable or tax deferred investments.

Lastly we have the Key West model. This is suitable for two kinds of investors: Those with accounts $150,000 or more; and those looking for a model with no allocation to individual equities. The Key West model is invested in Exchange Traded Funds (ETF's) and Bonds, and suitable for taxable and tax deferred investments.

We hope this short guide helps. If you have questions about the models feel free to email paul@5TWealth.com or lee@5TWealth.com.