[Copernicus]

Welcome to the effiecient market theory and its effects. With the exception of the above noted complex strategies, eg. covered calls, other derivatives, hedge funds etc. it is difficult to beat the indices, especially after the transaction costs of an actively traded portfolio.

Large, sophisticated investors, such as pension funds, are beginning to move away from traditional equity investments and replace them with "portable alpha" funds, basically funds of hedge funds. They have been successful at beating the indices during the bull market, but I wonder how well they have fared the last few weeks. Portable alpha managers claim to reduce volatility, but increase the mean return..ie raising but shortening a bar graph of probable returns. In the relatively stable markets up until now, Ive generally seen return improvements of 2-3% per year in up periods, and 1/2 to 1% less losses in down periods. The question is how do they fare during the roller coaster ride.

Oh...I also agree with the above that political leanings would not affect those general principles. However, political leanings may affect your decision to move in or out of the market for substantial portions of your portfolio. eg, I dont think a Democratic victory in '08 if full priced into the market yet, but will be around the time of the early primaries. I will be out of the market in a big way at that point, or, more accurately start taking hedged short positions unless something big happens between now and then to reduce the likelihood of a Democratic sweep.