Below are a few frequently asked questions as well as answers, regarding wealth management, financial planning and the financial industry.

Q: Are my portfolios positioned to endure another economic downturn? If not, how do we ensure that they are?

A: We are long-term investors, not market-timers. We look for long-term bargains and do not try to time the markets. We must allow for our portfolios to fall during downturns in order fully participate in the long-term benefits of our wealth management. Because of market cycle fluctuations, the money we manage should be viewed as long-term money. As for retired clients who take income from their portfolios, they need to understand our goal is long-term growth of income, not short-term market timing. That said, a normal by-product of favoring investments with higher-than-average dividends, cash flow, balance sheets and price-to-value fundamentals in normal market downturns generally provides a downside cushion.

Q: What is the impact of the U.S. dollar dropping in value, and how do we protect against it?

A: In addition to inflation, another result we anticipate from the stimulus actions of our government, namely extremely low interest rates and massive borrowing/spending, is downward pressure on the U.S. dollar. This phenomenon also has dual outcomes. A devalued U.S. dollar makes domestic goods and services less expensive to countries with stronger currencies, which should make American businesses more competitive globally and thus stimulate our economy. But for consumers at home, it means that nearly everything we buy will become more expensive due both directly to increasing costs of foreign products/labor and indirectly to increasing prices of purely domestic competing goods and services. Foreign-denominated assets, such as foreign-listed stocks and bonds, directly increase in dollar terms as the dollar falls. FIM Group, however, does not invest in foreign investments merely because we are predicting the direction of currencies. As a matter of fact, we require a higher margin of safety in the prices of the foreign investments we buy specifically because of the added risks currency fluctuations may present. We currently invest in foreign economies and companies that we feel are poised to benefit from local, global and company-specific factors, resulting in our portfolios benefiting from a weakening dollar.

Q: The financial industry has convinced many investors that "markets are efficient," "you can't beat the market" and several other "truths," so why should an investor pay fees for active management?

A: It is indeed true that 80% of the so-called money managers (actually mutual fund managers are the universe used in such studies) under perform the average (i.e., the market indexes). But that does not mean markets are efficient. Nor does it mean that the approaches used by the mediocre managers are anything but mediocre. Mediocrity, plus mutual fund constraints, minus fees equals lackluster performance. No argument here. But what about the other 20%? Using this theory implies that on any Sunday every football team has the same odds of winning as every other team. It implies that Tiger Woods, Roger Federer or the New York Yankees have the same probability of finishing in the top half of the pack as the bottom. The fallacy in this logic seems obvious to most people when talking about sports or other fields, yet some still believe that investment success is random. Tiger, Roger and Mr. Steinbrenner all have systematic competitive advantages.

So do investment managers who employ time-tested techniques and skills such as favoring securities with the qualities mentioned above and avoiding securities that are either overpriced or have headwinds to overcome. Yes, Tiger misses the cut sometimes. Yes, managers with solid long-term performance have periods where they under perform some arbitrary index. But in the long run, time-tested disciplines provide better returns with less downside risk (on average!) than random investing. In the case of FIM Group, we missed the cut in 2008. But we have regained ground lost to most arbitrary benchmarks (such as the S&P 500) in 2009. Nevertheless, one year versus another is not what counts. What counts are long-term results. For readers who have not been with us for more than ten years, I encourage you to ask your FIM Group adviser to show you our ten-year returns for periods ending September 30, 2009, or ten-year periods ending 2008, 2007, 2006, etc. Past performance notwithstanding, we remain forward-focused. We manage in the present, employing the timely strategies such as those described above. But we remain flexible, with our ears to the ground, and willing to change course as conditions warrant.