While I didn’t think it would happen so quickly, the S&P 500 is down for the year (though at the close of today it’s likely to be back up).  It’s not down by much, a little more than a tenth of a percent, but down it is.  Today on what is likely one of the slower trading days of the year, and busiest shopping day of the year, I thought I’d recap my portfolio performance as we near the home stretch.  While I have been detailing the exact performance of my IRA, I don’t do this with my other accounts which are two taxable brokerage accounts, and one 401k account.

My OptionsXpress is my “play” account in which I separate my speculation from my investing as Benjamin Graham advises to do in his book the Intelligent Investor.

I’ve been fortunate in that, while this recent market downturn has definitely put a sizeable dent in my portfolio, I have not been as hard hit as the market as a whole.  On the flip side when the market was up higher, I wasn’t doing as well either. Going forward, I hardly believe all the downside risk has been priced in.  Some journalists like to speak of subprime as one of the greatest financial disasters of this century.  I think journalists often like to sensationalize.  I believe the economy and our institutions well come out fine in the long run. Yet, in the short run, we are still months/years away from seeing the full effect on the economy.  I wouldn’t be suprised if a large financial institution failed. The effects of foreclosures and lower consumer spending all loom ahead.  The chances of an economic recession in the next year or two I believe are very good.

While I’m not the type of investor to move everything into cash, or into just defensive sectors like Defense and Healthcare, I also think that certain amount prudence should always in order.  In my 401k, I shifted 15% of my assets into TIPS which in the current interest rate environment has worked well.  In my primary brokerage account(E*Traede), I purchased puts on the Nasdaq 100 (QQQ) to hedge my exposure in that sector.  That too has worked well, even though I purchased the puts early before the top we saw in October.

Despite personally making some active investment moves, I’m still primarily a steady passive index fund investor and believer in good asset allocation.  I’m comfortable making active moves based on my own risk tolerance and interest in the economy, but I would probably advise most people against trying to “time the market.”