Morningstar Advisor - October/November 2009 - 15

Advisor Profile Investing in the Moment By Ilana Polyak A clear view of the present is the only thing that Richard Bregman thinks can guide his investment decisions. A few years ago, Richard Bregman was on a family trip to Costa Rica when he and his son, Michael, went out on a WaveRunner. Twenty minutes after setting out on the Pacific Ocean, they hit a swell and the vehicle tipped over. Michael managed to swim away injury-free, but Bregman’s right foot was lodged in the WaveRunner’s sideboard. When he wiped out, he fractured his ankle, which required two surgeries to repair. “The chances of having an accident like that were so slim,” Bregman, chief executive officer of MJB Asset Management, says from his midtown Manhattan office. “I’m sure somewhere I could find the statistical analysis of what the probability of breaking your ankle while riding a WaveRunner are and it would minuscule, but it doesn’t change the fact that I had two screws in my ankle and I spent three months on crutches.” Once-in-a-lifetime events are just that. But they do happen. Yet investment analysis focuses on the vast majority of times when things go as expected. That could leave clients vulnerable to risk and derail a welllaid financial plan decades in the making, Bregman believes. Take 2008’s final quarter when all asset classes—bonds, stocks, foreign stocks, natural resources, real estate, everything—fell in tandem. “In the financial world, we call this systemic risk,” Bregman says. “But individuals experience this as the scary unknown.” Since the tech bubble burst in 2000, Bregman has been thinking about how to shelter his clients from risk, realizing that many of them simply can’t stomach it. He found that the standard one-liners he had used to counsel about the nature of markets and staying the course rang hollow after two years of stock declines. “We’re talking about someone’s retirement. We’re talking about someone’s ability to send their kids to college,” he says. “Anyone can lose 40% on their own. They don’t need me to lose it for them and collect a 1% fee.” His clients began to flee. As his assets under management shrank, Bregman began to think about his business in a different way. Even as the next bull market took off in 2003, Bregman began using hedging strategies. At the time, there were few open-end mutual funds that did these strategies, so he began with just the Merger Fund MERFX and Gabelli ABC GADVX. Today, his portfolios carry a slew of funds employing strategies such as long-short, market neutral, options, and futures. Art of Money Management at odds with those who espouse a buy-andhold strategy. But since markets turned brutal last fall, other planners have started to wonder if they could do better by taking a more active role in money management. To Bregman, buy-and-hold is just one way of managing money. When he was studying for his chartered financial analyst certification in the late 1990s, he was exposed to investment ideas, such as arbitrage pricing theory, other than Modern Portfolio Theory, the cornerstone of many financial-planning practices. He also learned stock analysis. He came to the conclusion that no one way of investing makes sense all the time. Bregman borrows from all these schools of thought. He calls his money management style “investing in the moment.” Proving Its Mettle Bregman begins each client’s investment plan with a one-third allocation each to stocks, bonds, and alternatives. Depending on his view of where the markets are at any given moment, he makes adjustments. While he follows the market constantly, he doesn’t trade frequently. But he evaluates whether or not to do so all the time. At the end of 2007, for example, Bregman thought that stocks were trading at peak price/ earnings ratios and were too frothy for Bregman’s skepticism about the wisdom of investing through thick and thin used to put him MorningstarAdvisor.com 15
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Morningstar Advisor - October/November 2009

Table of Contents for the Digital Edition of Morningstar Advisor - October/November 2009

Morningstar Advisor - October/November 2009
Contents
New on MorningstarAdvisor.com
Letter from the Editor
Contributors
How Do You Use Behavioral Finance in Your Practice?
Investing in the Moment
Investment Briefs
How the Best Large-Cap Managers Rise Above the Rest
Don’t Give Up on Stocks Just Yet
Makeup of the Mind
A Top-Down Approach
In Practice: Patterns of Investor Irrationality
A Call for Nudges
The Furious Comeback of Emerging Markets
Junk-Bond Pioneer
Four Picks for the Present
Consumer Staples Hold Up in the Kitchen
Familiarity Can Breed Bad Investment Decisions
Leave the ‘Junk Rally’ Behind and Look for Quality at a Reasonable Price
Mutual Fund Analyst Picks
50 Most Popular Equity ETFs
Undervalued Stocks
New at Morningstar
Meet the New Boss, Same (School) as the Old Boss
Morningstar Advisor - October/November 2009 - Morningstar Advisor - October/November 2009
Morningstar Advisor - October/November 2009 - Cover2
Morningstar Advisor - October/November 2009 - 1
Morningstar Advisor - October/November 2009 - 2
Morningstar Advisor - October/November 2009 - Contents
Morningstar Advisor - October/November 2009 - 4
Morningstar Advisor - October/November 2009 - 5
Morningstar Advisor - October/November 2009 - New on MorningstarAdvisor.com
Morningstar Advisor - October/November 2009 - 7
Morningstar Advisor - October/November 2009 - 8
Morningstar Advisor - October/November 2009 - Letter from the Editor
Morningstar Advisor - October/November 2009 - Contributors
Morningstar Advisor - October/November 2009 - 11
Morningstar Advisor - October/November 2009 - How Do You Use Behavioral Finance in Your Practice?
Morningstar Advisor - October/November 2009 - 13
Morningstar Advisor - October/November 2009 - 14
Morningstar Advisor - October/November 2009 - Investing in the Moment
Morningstar Advisor - October/November 2009 - 16
Morningstar Advisor - October/November 2009 - 17
Morningstar Advisor - October/November 2009 - 18
Morningstar Advisor - October/November 2009 - Investment Briefs
Morningstar Advisor - October/November 2009 - 20
Morningstar Advisor - October/November 2009 - 21
Morningstar Advisor - October/November 2009 - How the Best Large-Cap Managers Rise Above the Rest
Morningstar Advisor - October/November 2009 - 23
Morningstar Advisor - October/November 2009 - 24
Morningstar Advisor - October/November 2009 - 25
Morningstar Advisor - October/November 2009 - 26
Morningstar Advisor - October/November 2009 - Don’t Give Up on Stocks Just Yet
Morningstar Advisor - October/November 2009 - 28
Morningstar Advisor - October/November 2009 - 29
Morningstar Advisor - October/November 2009 - Makeup of the Mind
Morningstar Advisor - October/November 2009 - 31
Morningstar Advisor - October/November 2009 - A Top-Down Approach
Morningstar Advisor - October/November 2009 - 33
Morningstar Advisor - October/November 2009 - 34
Morningstar Advisor - October/November 2009 - 35
Morningstar Advisor - October/November 2009 - 36
Morningstar Advisor - October/November 2009 - 37
Morningstar Advisor - October/November 2009 - 38
Morningstar Advisor - October/November 2009 - 39
Morningstar Advisor - October/November 2009 - In Practice: Patterns of Investor Irrationality
Morningstar Advisor - October/November 2009 - 41
Morningstar Advisor - October/November 2009 - 42
Morningstar Advisor - October/November 2009 - A Call for Nudges
Morningstar Advisor - October/November 2009 - 44
Morningstar Advisor - October/November 2009 - 45
Morningstar Advisor - October/November 2009 - 46
Morningstar Advisor - October/November 2009 - 47
Morningstar Advisor - October/November 2009 - The Furious Comeback of Emerging Markets
Morningstar Advisor - October/November 2009 - 49
Morningstar Advisor - October/November 2009 - 50
Morningstar Advisor - October/November 2009 - 51
Morningstar Advisor - October/November 2009 - 52
Morningstar Advisor - October/November 2009 - 53
Morningstar Advisor - October/November 2009 - 54
Morningstar Advisor - October/November 2009 - Junk-Bond Pioneer
Morningstar Advisor - October/November 2009 - 56
Morningstar Advisor - October/November 2009 - 57
Morningstar Advisor - October/November 2009 - Four Picks for the Present
Morningstar Advisor - October/November 2009 - 59
Morningstar Advisor - October/November 2009 - 60
Morningstar Advisor - October/November 2009 - Consumer Staples Hold Up in the Kitchen
Morningstar Advisor - October/November 2009 - 62
Morningstar Advisor - October/November 2009 - 63
Morningstar Advisor - October/November 2009 - Familiarity Can Breed Bad Investment Decisions
Morningstar Advisor - October/November 2009 - 65
Morningstar Advisor - October/November 2009 - Leave the ‘Junk Rally’ Behind and Look for Quality at a Reasonable Price
Morningstar Advisor - October/November 2009 - 67
Morningstar Advisor - October/November 2009 - Mutual Fund Analyst Picks
Morningstar Advisor - October/November 2009 - 69
Morningstar Advisor - October/November 2009 - 70
Morningstar Advisor - October/November 2009 - 71
Morningstar Advisor - October/November 2009 - 50 Most Popular Equity ETFs
Morningstar Advisor - October/November 2009 - 73
Morningstar Advisor - October/November 2009 - Undervalued Stocks
Morningstar Advisor - October/November 2009 - 75
Morningstar Advisor - October/November 2009 - 76
Morningstar Advisor - October/November 2009 - 77
Morningstar Advisor - October/November 2009 - 78
Morningstar Advisor - October/November 2009 - New at Morningstar
Morningstar Advisor - October/November 2009 - Meet the New Boss, Same (School) as the Old Boss
Morningstar Advisor - October/November 2009 - Cover3
Morningstar Advisor - October/November 2009 - Cover4
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