Portfolio Strategy for April 28 (SAMPLE ISSUE)

The past week saw a stronger U.S. dollar relative to many currencies and the weakening of some commodity prices. After months of poor performance, stocks appear to be firming up. Risk appetite may be returning, driving investors out of the so-called safe haven of bonds into equities. The theme for the next several weeks is likely to be “rotation”.

Action for This Week

The Strategic Performance and Ex-U.S. model portfolios should be rebalanced at the open tomorrow (Monday) according to percentages indicated on their respective pie charts. The Conservative Retirement portfolio should be rebalanced at the open on May 1, 2008; we will calculate the allocation for the month of May after the close on April 30, 2008.

Performance of InVivo Model Portfolios

The table shows the performance of our model potrfolios on a total return basis as of the close on April 25, 2008.

InVivo Strategic Performance Portfolio

This model portfolio is rebalanced weekly, at the open on the first trading day of each week. Performance characteristics since portfolio formation indicate that this model is suitable for both trading accounts and aggressive retirement accounts. Returns posted are for trading accounts using 50% margin or 1:1 leverage. Unleveraged retirement accounts experience half the gains and losses. For details, please refer to Chapter 8 of Build Your Own Portfolio: The Satellite Portfolio.

To implement this portfolio strategy, your account must be able to buy and sell the equivalent of the following five exchange traded funds:

  1. VXF: Vanguard Extended Market ETF
  2. EEM: MSCI Emerging Markets Index Fund
  3. TLT: Lehman 20+ Year Treasury Bond Fund
  4. GSG: S&P GSCI(TM) Commodity Indexed Trust
  5. FXF: CurrencyShares Swiss Franc Trust

InVivo Conservative Retirement Portfolio

This model portfolio is rebalanced monthly, at the open on the first trading day of each month. Performance characteristics since portfolio formation indicate that this model is suitable for retirement accounts where rebalancing frequency and investment choices are limited by the administrator. Returns posted are for cash accounts. For details, please refer to Chapter 8 of Build Your Own Portfolio: The Core Portfolio.

To implement this portfolio strategy, your account must be able to buy and sell the equivalent of the following four exchange traded funds:

  1. SPY: SPDR S&P 500 ETF
  2. EFA: MSCI EAFE Index Fund
  3. IEF: Lehman 7-10 Year Treasury Bond Fund
  4. TIP: Lehman TIPS Bond Fund

InVivo Ex-U.S. Portfolio

This model portfolio is rebalanced weekly, at the open on the first trading day of each week. This portfolio is provided for those wish to avoid U.S. stocks and Treasury bills/notes/bonds; as such, higher volatility of returns than either the Strategic Performance or Conservative Retirement portfolios can be expected. Performance characteristics since portfolio formation indicate that this model is only suitable for cash accounts; do not use leverage. Returns posted are for cash accounts.

To implement this portfolio strategy, your account must be able to buy and sell the equivalent of the following six exchange traded funds:

  1. IEV: S&P Europe 350 Index Fund
  2. EEB: Claymore/BNY BRIC ETF
  3. EWC: MSCI Canada Index Fund
  4. EWW: MSCI Mexico Index Fund
  5. GSG: S&P GSCI(TM) Commodity Indexed Trust
  6. FXF: CurrencyShares Swiss Franc Trust

Historical Allocation for the Strategic Performance Portfolio

Our asset allocation algorithm is dynamic. The proportion of the portfolio’s assets allocated to each asset class changes over time in response to market conditions.

“Risky” assets (in the context of CAPM) are weighted against “less risky” assets in a way that reduces volatility of returns, particularly to the downside. In the case of the Strategic Performance Portfolio, cash (in the form of Swiss Francs) and U.S. Treasury bonds tend to dominate while U.S. equities, international equities and commodity exposure ensures diversification. GSG, a commodity-related ETF, gains in periods of unanticipated inflation while FXF hedges this U.S. Dollar-denominated portfolio.

Historical Allocation for the Conservative Retirement Portfolio

Again, our dynamic asset allocation algorithm simultaneously weights “risky” assets against “less risky” assets in a way that reduces volatility of returns, particularly to the downside. In the case of the Conservative Retirement Portfolio, U.S. Treasury bonds and U.S. Inflation-Protected securities tend to dominate while U.S. equities and international equities ensure diversification. Because fund selection is extremely limited in most employer-matched retirement plans, we use TIP to protect the portfolio against unanticipated inflation rather than commodity-related ETFs.

Historical Allocation for the Ex-U.S. Portfolio

Again, our dynamic asset allocation algorithm simultaneously weights “risky” assets against “less risky” assets in a way that reduces volatility of returns, particularly to the downside. In the case of the Ex-U.S. Portfolio, cash (in the form of Swiss Francs) tends to dominate while international equities and commodities ensure diversification. In the future, we may add an international Treasury Bond ETF such as BWX (SPDR Lehman International Treasury Bond) to further reduce volatility of return.

The Fine Print

This publication (the “Report”) is for your information only and is not intended as an offer, or a solicitation of an offer, to buy or sell any investment or other specific product. Certain services and products are subject to legal restrictions and cannot be offered worldwide on an unrestricted basis.

Recipients should consider the Report as only a single factor in making an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments.

The securities mentioned in this report may not be suitable for all types of investors; it does not take into account the investment objectives, financial situation or specific needs of any particular client of InVivoAnalytics.com. Furthermore, some investments may not be readily realizable since the market in the securities is illiquid and therefore valuing the investment and identifying the risk to which you are exposed may be difficult to quantify. Futures and options trading is considered risky. Some investments may be subject to sudden and large falls in value and on realization you may receive back less than you invested or may be required to pay more. Changes in foreign exchange rates may have an adverse effect on the price, value or income of an investment.

All information and opinions expressed in this document were obtained from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to its accuracy or completeness. All information and opinions as well as any prices indicated are subject to change without notice. All estimates, opinions and recommendations expressed herein constitute judgments as of the date of this report and are subject to change without notice. Nothing in this report constitutes legal, accounting or tax advice.

Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, model portfolios and indices do not represent actual trading. Also, since the trades have not actually been executed, the results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Past performance of an investment is no guarantee for its future performance.

This report may provide addresses of or contain hyperlinks to third-party Internet websites. InVivoAnalytics.com has not reviewed the linked Internet website of any third party and takes no responsibility for the contents thereof. Each such address or hyperlink is provided solely for the recipient’s convenience and information. Recipients who choose to access such third-party web sites or follow such hyperlinks do so at their own risk.

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