Stocks were down slightly in September while bonds rebounded strongly. The Conservative portfolio, being mostly bonds, was up smartly, logging in a 2.8% gain for the month. Over the last three months the portfolio was up 2.46%, while over the last year it has risen 17.4%
Leading the charge was the American Century International Bond fund (BEGBX), up 6.65%. This fund, which has returned some 32% since added to the portfolio, benefited from falling interest rates and a falling dollar – the foreign bond investor’s dynamic duo. While we love the diversification benefits of foreign bond investing, if these gains keep up much longer we will have to cut back on our position a bit here. Much of the fall in the U.S. dollar and interest rates has already happened. Our continued position is more reflective of a lack of compelling alternatives than love of foreign bonds right now.
We recently sold off our real estate sector fund holdings, which would have been up last month. Maybe it looks like a bad move now, but in a year from now you’ll see why we did it.
The Pictet International Small Company fund (PISRX) was up a crisp 5.75% for the month, about as much as it was up the month before. That’s a near 12% return since we added this fund to the portfolio just two months ago. Small cap foreign stocks have been as hot as U.S. small cap stocks over the last year, in fact, over the last few months they have been even hotter. Our other small cap foreign pick from our other model portfolios, the Artisan International Small Cap fund (ARTJX), has done equally well and recently closed to new investors after massive inflows. Both of these funds are relatively new offerings, showing that you don’t necessarily have to wait for a fund to age and have a great track record before you can invest. That said, we expect international small cap stocks to cool down. The Pictet fund is the highest absolute risk fund in the portfolio so we have the allocation low.
Our newly added Vanguard Short Term Corporate bond (VFSTX) fund tagged on 1.34%, about as much as you can hope to make in such an investment in a short time period. However, if interest rates rise again it will lose this much or slightly more just as quickly.
Our biggest loser was the Vanguard Dividend Income fund, down .9%. The Dow and S&P500 were both down over 1%. This move is inline with what we expect from this fund – about 85% of the downside risk of those indexes.
Junk bonds were strong, pushing the Vanguard High Yield Corporate fund (VWEHX) to a 2.11% gain. Junk bonds are officially no-longer undervalued as an asset class. There is plenty of risk here, and the current return on these bonds barely rewards investors for it anymore.
The American Century Utility Income fund (BULIX) was up 1.48% in Septermber. Utility stocks, which have under performed the market, have moved closely with interest rates recently. The assumption is higher rates hurt these companies for two reasons – higher debt costs and the dividend income gets less attractive as safe bond alternatives yield more.
Stocks were down slightly in September while bonds rebounded strongly. The Aggressive Growth portfolio managed a gain of 1.85% even though it is primarily in stocks. For the trailing year the portfolio is up 40.5%, and up 9.4% over the last three months.
There were eight funds in this portfolio over the last year. Three were up over 50%, two others were up over 40%. Choosing the right categories to be in was 90% of the game here, in fact some of our fund choices have been somewhat mediocre of late, namely the FMI Common Stock fund and the Northeast Investors fund – both too conservative for a risk fueled market.
Unlike U.S. small cap stocks last month, foreign small cap stocks were not so weak. The Artisan International Small Cap fund (ARTJX) was up 4.62%, continuing a strong return that has carried this fund to a 32% gain since we put it in the portfolio early last year. The fund has recently closed to new investors, and we are recommending the Pictet International Small Company fund (PISRX) for small cap foreign exposure to those who can’t buy the Artisan fund.
Small cap foreign stocks have been as hot as U.S. small cap stocks over the last year. In fact, over the last few months they have been even hotter. Both of our small cap foreign picks are newish funds and have done well, showing that you don’t necessarily have to wait for a fund to age and have a great track record before you can invest. That said, we expect international small cap stocks to cool down.
Our newly added Vanguard Short Term Corporate bond (VFSTX) fund tagged on 1.34%, about as much as you can hope to make in such an investment in a short time period. However, if interest rates rise again it will lose this much or slightly more just as quickly.
Junk bonds were strong, pushing the Northeast Investors fund (NTHEX) up 1.84%. This fund continues to play it safe and underpeform junk bond indexes for it. This strategy will likely help over the next year, but in retrospect we could have used a more risky junk bond fund here.
Emerging market bonds are still pretty hot, with the Fidelity New Markets Income fund (FNMIX) up about 3% last month.
Japan just keeps on chugging along. Our strongest fund this month was the T. Rowe Price Japan fund (PRJPX), up a sharp 7%. This fund is up 24% in the last three months, our top performer in any portfolio.
Putting a damper on the good times was the FMI Common Stock fund (FMIMX), down some 4%. The fund is having a so-so year, mostly the result of being conservative. A 4% one month decline is a bit odd given their fairly low-risk stance. Certain types of lower priced growth stocks had a tough month. Most of the speculation lately is in smaller cap stock than this fund typically invests, plus more speculative fare is in play these days.
September 2003 performance review
Stocks were down slightly in September while bonds rebounded strongly. The Conservative portfolio, being mostly bonds, was up smartly, logging in a 2.8% gain for the month. Over the last three months the portfolio was up 2.46%, while over the last year it has risen 17.4%
Leading the charge was the American Century International Bond fund (BEGBX), up 6.65%. This fund, which has returned some 32% since added to the portfolio, benefited from falling interest rates and a falling dollar – the foreign bond investor’s dynamic duo. While we love the diversification benefits of foreign bond investing, if these gains keep up much longer we will have to cut back on our position a bit here. Much of the fall in the U.S. dollar and interest rates has already happened. Our continued position is more reflective of a lack of compelling alternatives than love of foreign bonds right now.
We recently sold off our real estate sector fund holdings, which would have been up last month. Maybe it looks like a bad move now, but in a year from now you’ll see why we did it.
The Pictet International Small Company fund (PISRX) was up a crisp 5.75% for the month, about as much as it was up the month before. That’s a near 12% return since we added this fund to the portfolio just two months ago. Small cap foreign stocks have been as hot as U.S. small cap stocks over the last year, in fact, over the last few months they have been even hotter. Our other small cap foreign pick from our other model portfolios, the Artisan International Small Cap fund (ARTJX), has done equally well and recently closed to new investors after massive inflows. Both of these funds are relatively new offerings, showing that you don’t necessarily have to wait for a fund to age and have a great track record before you can invest. That said, we expect international small cap stocks to cool down. The Pictet fund is the highest absolute risk fund in the portfolio so we have the allocation low.
Our newly added Vanguard Short Term Corporate bond (VFSTX) fund tagged on 1.34%, about as much as you can hope to make in such an investment in a short time period. However, if interest rates rise again it will lose this much or slightly more just as quickly.
Our biggest loser was the Vanguard Dividend Income fund, down .9%. The Dow and S&P500 were both down over 1%. This move is inline with what we expect from this fund – about 85% of the downside risk of those indexes.
Junk bonds were strong, pushing the Vanguard High Yield Corporate fund (VWEHX) to a 2.11% gain. Junk bonds are officially no-longer undervalued as an asset class. There is plenty of risk here, and the current return on these bonds barely rewards investors for it anymore.
The American Century Utility Income fund (BULIX) was up 1.48% in Septermber. Utility stocks, which have under performed the market, have moved closely with interest rates recently. The assumption is higher rates hurt these companies for two reasons – higher debt costs and the dividend income gets less attractive as safe bond alternatives yield more.
Stocks were down slightly in September while bonds rebounded strongly. The Aggressive Growth portfolio managed a gain of 1.85% even though it is primarily in stocks. For the trailing year the portfolio is up 40.5%, and up 9.4% over the last three months.
There were eight funds in this portfolio over the last year. Three were up over 50%, two others were up over 40%. Choosing the right categories to be in was 90% of the game here, in fact some of our fund choices have been somewhat mediocre of late, namely the FMI Common Stock fund and the Northeast Investors fund – both too conservative for a risk fueled market.
Unlike U.S. small cap stocks last month, foreign small cap stocks were not so weak. The Artisan International Small Cap fund (ARTJX) was up 4.62%, continuing a strong return that has carried this fund to a 32% gain since we put it in the portfolio early last year. The fund has recently closed to new investors, and we are recommending the Pictet International Small Company fund (PISRX) for small cap foreign exposure to those who can’t buy the Artisan fund.
Small cap foreign stocks have been as hot as U.S. small cap stocks over the last year. In fact, over the last few months they have been even hotter. Both of our small cap foreign picks are newish funds and have done well, showing that you don’t necessarily have to wait for a fund to age and have a great track record before you can invest. That said, we expect international small cap stocks to cool down.
Our newly added Vanguard Short Term Corporate bond (VFSTX) fund tagged on 1.34%, about as much as you can hope to make in such an investment in a short time period. However, if interest rates rise again it will lose this much or slightly more just as quickly.
Junk bonds were strong, pushing the Northeast Investors fund (NTHEX) up 1.84%. This fund continues to play it safe and underpeform junk bond indexes for it. This strategy will likely help over the next year, but in retrospect we could have used a more risky junk bond fund here.
Emerging market bonds are still pretty hot, with the Fidelity New Markets Income fund (FNMIX) up about 3% last month.
Japan just keeps on chugging along. Our strongest fund this month was the T. Rowe Price Japan fund (PRJPX), up a sharp 7%. This fund is up 24% in the last three months, our top performer in any portfolio.
Putting a damper on the good times was the FMI Common Stock fund (FMIMX), down some 4%. The fund is having a so-so year, mostly the result of being conservative. A 4% one month decline is a bit odd given their fairly low-risk stance. Certain types of lower priced growth stocks had a tough month. Most of the speculation lately is in smaller cap stock than this fund typically invests, plus more speculative fare is in play these days.