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Our Disaster Avoidance Strategy has provided an excellent return with reduced downside risk. This strategy is designed so that it stays in the stock market the great majority of the time. It moves funds entirely out of the stock market when the Lowrisk Market Allocation Model deems conditions extremely dangerous. In other words, this strategy aims to ignore the smaller ups and downs of the market and only move out of stocks when conditions are most dangerous. The table below shows the yearly results from using this strategy compared to a buy and hold approach for the SP500. The results are based on buying "the SP500". This can be approximated very closely using stock index mutual funds. The results given below for the SP500 include dividends. The results for the Disaster Avoidance Strategy include dividends for the time when the portfolio is in the stock market and money market interest for the time when the portfolio that is not in the stock market.

Disaster Avoidance Strategy - Yearly Returns

Calender Year	SP500 Return	Disaster Avoidance Strategy
1983	3.2%	3.2%
1984	6.0%	6.0%
1985	31.1%	29.7%
1986	18.6%	17.4%
1987	5.6%	42.6%
1988	16.4%	16.3%
1989	31.3%	30.2%
1990	-3.1%	6.9%
1991	30.0%	29.8%
1992	7.5%	7.4%
1993	10.0%	9.5%
1994	1.3%	0.0%
1995	37.1%	36.5%
1996	22.7%	21.9%
1997	33.1%	31.5%
1998	28.3%	28.3%
1999	20.9%	12.5%
2000	-9.0%	-8.3%
2001	-11.9%	-11.9%

As you can see in the above table, our Disaster Avoidance Strategy has provided an excellent return - equaling or beating "buy and hold" in most years. But that is only half the story. In addition to enhanced returns, an active asset allocation strategy can reduce risk. In the table below we list the yearly maximum drawdown for a buy and hold strategy and for our Disaster Avoidance Strategy. Maximum drawdown is a difficult concept to explain, but is actually very simple. It is simply the largest percentage that your assets dropped at their worst point in a given period (in this case, a calendar year). Even though this strategy spends the great majority of the time in the stock market, the maximum drawdown for the Disaster Avoidance Strategy was less than the buy and hold strategy in most years, and equal to it in the rest.

Calender Year	SP500 Drawdown	Disaster Avoidance Drawdown
1983	-6.4%	-6.4%
1984	-12.7%	-12.7%
1985	-7.7%	-6.3%
1986	-9.4%	-8.4%
1987	-33.5%	-12.1%
1988	-7.6%	-7.1%
1989	-7.6%	-6.9%
1990	-19.9%	-10.4%
1991	-5.7%	-5.5%
1992	-6.2%	-5.3%
1993	-5.0%	-4.3%
1994	-8.9%	-8.7%
1995	-2.5%	-2.4%
1996	-7.6%	-7.0%
1997	-10.8%	-10.2%
1998	-19.3%	-19.3%
1999	-12.1%	-11.1%
2000	-17.2%	-15.7%
2001	-29.7%	-29.7%

The Lowrisk Market Allocation Model and this strategy was publicly announced in February, 1998. The model is built and derived from models we have been developing since 1989. However, the results detailed above are hypothetical in the sense that they were not generated using real money in real accounts.