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During this steep and vigorous decline the blog swing portfolio has had about a 20% decline depending on how you measure the top and where we are now. I thought this was a good time to review how I balance risk and what my expectations are. In a post I made last October I described how the swing portfolio plays a role in my overall portfolio strategy. As you can see from that post, swings only make up about 25% of my exposure during times like we have now. You can also see that the total portfolio is made up of a couple of segments. These segments have the ability to turn to cash fairly quickly. Unlike the swing segment which will continue to trade through bear markets and corrections because halting it in bear markets had a negative overall effect on long term performance, based on my backtested results. Returns for this system have been very good to me and this pullback is entirely consistent with my expectations (although maybe not your own). The ETF segment rolled to cash on June 8th, with my last holding being the gold ETF. The Modified IBD type system also went to cash, around that time, when we had two down weeks trading below a weekly trendline (as I mentioned in previous posts). The emini systems I trade intra-day have little correlation to market direction and when going good provide a nice cushion during negative stock return environments. I have even traded some of the core agricultural commodities and forex to diversify further. So even though the swing portfolio may be down 20% it only represents about 25% overall of my trading account. Thus the swing portfolio only contributed about a 5% negative return to the overall portfolio. These are rough numbers and can be larger or smaller based on my own models and "feel". The following points are key to wealth creation and safety in my opinion. 1. Use systems that have backtested solidly based on your expectations and risk. 2. Preserve capital during negative trading environments 3. Use sound money management to be able to continue the fight in the future. 4. Discipline, Discipline, Discipline This blog is about the swing system I use but maybe I can open up the scope a bit show you how these other portfolio modules are used. I hope this answered some of the questions that you may have had. Dave Johnson dayvejohnson@gmail.com

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