April 30, 2008
Dear Clients and Friends,
Net Worth Statements
We are in the process of preparing personal net worth statements as of December 31, 2007. It is important to take a snapshot of your overall financial picture once a year. The statements provide important information about assets not listed on the quarterly portfolio holdings report, debt management and ownership of assets. We compare the net worth amount with the previous year in an attempt to understand any material difference.
Please respond to our requests for information in a timely manner. We only need rough estimates of requested values. It is important that we have a reasonable estimate of your December 31st checking and savings balances since we will no longer be asking for this information on a quarterly basis. See below.
Most clients keep only enough cash in local bank accounts to meet immediate needs, knowing that funds can be transferred from Fidelity within two working days. With this in mind, we have decided to discontinue our request of quarterly checking and savings balances from most clients. Advisors will review all clients and decide on a case by case basis whether continuing these requests would result in better service. Please inform us as soon as possible of a cash need that requires a significant withdrawal from your investment accounts so that we can plan accordingly.
Casualty Insurance Reviews
We are in the process of organizing, reviewing and updating information on your Auto, Home and Umbrella insurance policies. We understand that our expertise in this area is limited, requiring us to seek input from practicing insurance professionals. We would like to start by reviewing the casualty insurance needs of those clients most concerned about the adequacy or cost of their present coverage. If you would like to have your concerns addressed as soon as possible, please contact Vincent.
First Quarter 2008 Financial Asset Performance
The Lehman Brothers Aggregate Bond Index was up 2%. The S&P 500 U.S. Stock Index was down 9%. The Russell 2000, a representative index of small companies, was down 10%. Foreign equities, as represented by the MSCI EAFE Index, were down 9%.
We have included a Morningstar table of performance figures for many of the mutual funds in your portfolio plus some comparative market indices noted by the prefix “Idx”.
Our previous newsletter included our investment strategy for 2008 so we will not repeat that discussion here. The first quarter was an unsettling experience for many investors, prompting us to write a separate letter to you in mid January. High quality bonds, cash, and commodities were the safe hiding places as stocks experienced a global selloff in the first quarter.
The diversified approach we have employed in client portfolios tempers the impact of any single asset class (i.e. stocks and high yield bonds in Qtr 1). Newton’s third law of motion states: For every action, there is an equal and opposite reaction. When market excesses are extreme, the correction of those excesses can be just as extreme in the other direction. Some of the managers we employ become opportunists by adding exposure to discounted assets resulting from broad asset class selloffs. Shelby Cullom Davis, founder of the management team of the Clipper Fund, has stated in the past, "You make most of your money in a bear market; you just don't realize it at the time."
A growing and diversified global economy, as well as the tools available today to central bankers, should buffer major shocks such as the one we are experiencing now, and enable continued productivity increases. The best way to participate in a global economy is to maintain a well diversified global portfolio. We have and will continue to prudently add more diversity to client portfolios as opportunities arise.
Annual Delivery of Privacy Statement
We are committed to maintaining the confidentiality, integrity and security of the personal information entrusted to us. The SEC requires delivery of the enclosed copy of our Privacy Statement on an annual basis.
Ivy Asset Strategy Fund Share Conversion
We are now able to use the institutional share class of Ivy Asset Strategy fund (0.89% expense ratio). We have begun the process of converting all Class A shares (1.12% expense ratio), purchased without a sales load, to the Institutional class shares. This share class will save clients 23 basis points (0.23%) a year in fees. This is not a taxable event. You should receive notice from Fidelity when this change occurs in your account. The benefit from being able to use institutional share classes for some of your mutual fund holdings should not be overlooked. These are real savings that add up to higher average returns over time.
New Castle County Delaware School Property Tax Credit
There is a tax credit for owners of a principal residence in the county who are age 65 as of July 1st. This credit could provide a reduction of 50% of your school tax bill up to a maximum of $500. For further information, contact the Assessment Division at 302-395-5520. You must process an application as soon as possible before tax bills are sent in July.
Residents of other states and counties should contact their local property tax office to inquire about any tax rebates they may be entitled to.
We continue to work daily to earn your trust and confidence.
Vincent A. Schiavi, CFP®, CPA/ PFS Ravi P. Dattani, CFP®, CPA President Vice-President