Obama: Feeling Our Financial Pain?

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Not only their largest fund holding, the Vanguard FTSE Social Index fund was also the Obama's worst performer, down 52% from the start of 2008, for a loss of up to $182,000. The Obamas also had between $100,000 and $250,000 in the Vanguard Wellesley Income Fund (VWINX). Because this fund consists of 60% bonds, which are less volatile than stocks, the Obama's losses were limited. The fund has fallen almost 18% in the past 15 months, possibly taking a bite of $17,900 to $44,750 out of the Obama portfolio.

The S&P 500 is down 9% since Jan. 20, when Obama took office. The broad index fell 40% in the eight years that George W. Bush was President.

Trusts Provide Privacy

Now that Obama has taken over the White House, he may choose to follow Bush's example by setting up a trust to handle his investments. By keeping a politician's investments secret, a trust can shield them from charges of conflicts of interest.

But, by hiding investments from the public as well as the politician, so-called "blind trusts" can also frustrate watchdogs who want more disclosure and transparency, says Bill Allison, a senior fellow at the Washington, (D.C.)-based Sunlight Foundation, which advocates for more government transparency. "The fear is that they're not truly blind," Allison says.

The advantage of the Obama's strategy—of diversification among mutual funds that hold thousands of stocks—is that it's harder to claim any individual company has a undue influence because the President is an investor, Allison says.

Portfolio "for an Old Lady"

A conservative investing approach—with lots of cash and Treasuries—may have benefited Obama in the past couple years. However, it wouldn't be the long-term strategy suggested by most financial advisers. Cathy Pareto, of Cathy Pareto & Associates in Coral Gables, Fla., warns the Obama's approach would be "hammered by inflation."

"This is the portfolio, frankly, for an old lady. This is not a normal portfolio for someone their age," like gold or commodity funds, she said.

Ironically, it's this threat of inflation that has been a frequent topic of Obama's critics. They say federal spending and liquidity from the Federal Reserve—designed to end the current economic crisis—are increasing the chances of runaway price increases. Like many other investors, the President will have to hope that efforts to jolt the U.S. economy back to life don't bring some nasty unintended consequences.

Steverman is a reporter for BusinessWeek's Investing channel.