In light of the continued downturn in global stock markets, we are reducing our equity exposure by 20 percent across all of our investment models. We are doing this to both protect our gains and to invest the money where we believe it is likely to perform relatively well during what we expect to be a turbulent period in the markets. Our primary concern at this point is the possibility of a highly correlated period of panic selling.
The money we are taking out of stocks will be reinvested to provide relative safety. Our plan is to allocate half of the money to the PIMCO Total Return fund, which we often use when we have cash from the sale of investments. PIMCO Total Return has a long track record of outpacing inflation. By keeping the money in a separate share class of Total Return, we maintain its buying power until we are ready to put it to work in a more compelling long-term investment opportunity. The remainder will be split between two PIMCO emerging markets bond funds already in the models, one of which is denominated in local currencies and one of which is denominated in U.S. dollars. These three bond funds have held up well as global stock markets have fallen over the past couple of weeks.
These portfolio changes will bring our stock exposure down to less than 60 percent, a significant underweighting to equities.
Over the next three days we will be making similar moves in your workplace retirement accounts and other accounts that are not part of our Strategic Portfolio. And, of course, we will pay close attention to the markets, always considering what our potential moves could be.
If you have any questions or concerns, please contact me. As always, thank you for your continued trust and confidence.
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