What goes up, also goes down, unless your money manager

has designed a risk reduction strategy that works.

LANCASTER, PA. -- Mutual fund managers are acting as if there are only 20 worthy companies in which to invest. The members of the Society of Asset Allocators and Fund Timers (SAAFTI) recognize something most investors do not - mutual fund managers are paid on how well their performance compares to the indices against which their mutual funds are evaluated, NOT necessarily on what is good for the shareholders.

"Mutual funds have become closet indexers of the top 20 performing high tech stocks," says David Lucca, new president of SAAFTI, and principal of Rhoads Grunden Lucca, a money management firm with offices in Dallas, TX and Lancaster, PA. Lucca says, “Stocks that zoom up together also zoom down together, providing no defense for the shareholder.”

Lucca and his fellow members of SAAFTI believe that “When it’s all said and done, no one in mutual funds is watching and protecting the client’s money. Investors have been terribly served over the last three years by mutual funds that give little attention to downside protection. Equally at fault,” says Lucca, “are financial advisors who have succumbed to the lure of portfolio optimization, which makes large assumptions based on historical investment returns then abdicates investment decisions to computer models. The end result has been that investors’ money is either highly concentrated in just a few stocks with large risks, or they have had poor performance while computer models have been out of sync with the markets these past two years.”

“Investors know the difference between risk diversification and poor performance," says Lucca. Active managers are the first ones to know when an investment is performing poorly and active managers can take steps to protect against that poor performance.

Such strategies may include moving out of the market entirely when the advisor, using fundamental and technical signals, detects rising risk levels.  Risk diversification strategies can also include investing in funds that are not entirely committed to the top 20 equity stocks.

Active and dynamic asset allocators use a variety of indicators to understand where the market is likely to go, depending far less on the history of where it has been. SAAFTI members practice a variety of management techniques designed to protect on the downside and participate on the upside of any market swings.

Lucca's firm manages over $80 million in assets using four model portfolios of no-load mutual funds, each with different investment objectives to meet clients’ needs.

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