For the month of July the Conservative portfolio slipped 1.25%. our worst showing of any of our model portfolios. The culprit: one of the lousiest months on record for bonds (the conservative portfolio is bond heavy). Most of the punishment was in longer-term government bonds, which were down almost 10% for the month. We don’t own much of these types of bonds, so the damage was somewhat blunted for us.
Our biggest hit was from the Harbor bond fund, down 3.72% for the month. Fund manager Bill Gross had been warning the best years are behind us in bonds, but even he can’t hide from the a sharply rising yield curve.
We finally lost some ground in the American Century International Bond fund, which was hit on two fronts: a rising US dollar and falling bond prices (rising yields). The fund slipped 3.43%.
Utility stocks were weak last month, bucking the upward trend is equities. One possible reason is utility stocks are primarily bought for their dividend yield, which was high a few months ago but is not lower as prices have gone up. That coupled with rising bond yields tempting investors played a roll in the softness in prices.
Saving the portfolio was the SSgA Tuckerman Active REIT, up 5.52%. Too bad it was just 5% of the portfolio.
At the end of July we made changes to the portfolio. The moves were designed to lower the overall risk and get out of some areas that have appreciated significantly.
We dropped the real estate fund entirely. While we love the diversification real estate offers, we think rising rates will be the straw that breaks the camel's back in the real-estate mini-bubble. Before the sale, the SSgA Tuckerman Active REIT was up 23.2% since we added it last October. This is the first time we have not had a real estate allocation in this model portfolio.
We lightened up on our convertible bond allocation; reducing the 10% we had in Northern Income Equity down to 5%. A slightly overblown stock and convertible market should keep this category weak to below average going forward.
We sold the entire holdings in the FMI Sasco Contrarian Value fund as we lowered overall equity exposure. We were not enamored with this fund of late.
Junk bonds have been good to us, but we dropped half the position and took it from 10% to 5% at the end of the month. The spread over treasuries is getting a little low for our liking, and too many fund investors have hopped into junk bonds of late.
We’ve had a spectacular run in international bonds, but cut back slightly in our allocation to the American Century International Bond fund from 25% to 20%. We don’t expect the dollar to continue falling going forward or bond prices to rise, the two reasons we’re up over 25% in the fund. If there were more compelling places to invest we’d sell more, but the pickings are slim right now.
We added some international stock exposure here with the Pictet International Small Company fund (PTSCX) which became 10% of the portfolio.
Moving forward we’re going to have an above target allocation to shorter-term corporate bonds for the time being, and we just added the Vanguard Short Term Corporate fund to fit the bill. The move should give us some income while reducing risk.
For the month of July the Growth portfolio was up 1.72%. Bonds slipped while stocks moved up. Most of the punishment was in longer-term government bonds, which were down almost 10% for the month. We don’t own much of these types of bonds, so the damage was blunted for us.
Our worst fund was the one that has been our star performer since we started the portfolio, up an astounding 21% since April 2002 even after dropping 3.75% last month. The Fidelity New Markets Income fund invests in emerging market debt, an area that has been hot but could probably stand for some cooling off. Part of the fall was from the dollar gaining strength amidst strong economic signals.
Utility stocks were weak last month, bucking the upward trend is equities. One reason for the negative pressue is that utility stocks are primarily bought for their dividend yield, which was high a few months ago but is not lower as prices have gone up. That, coupled with rising bond yields, played a roll in the softness in prices. The American Century Utility income fund was our weakest link, down 3.54%.
Small cap stocks continued to outperform, helping lift the top performing Royce Value fund up 5% for the month.
Our strongest holding for the second month running was the T.Rowe Price Japan fund, up a solid 5.89%. It may be too early to tell, but it’s looking like August may be big for Japan again. Right when everybody finally bailed out on Japan earlier this year for good, it comes roaring back. We’re sticking around to see how far it can go. So far, the economy there is showing some good signs.
At the end of July we shifted the portfolio around. The moves were designed to lower the overall risk and get out of some areas that have appreciated significantly.
We’ve made a bundle in emerging market bonds, but its time to take some chips off the table. We cut the position in half, from 10% to 5% of the portfolio.
Micro-cap stocks have been the hottest area of the market, and the Bridgeway Ultra Small Tax Advantaged fund (now called Bridgeway market fund) has been our strongest fund, up 35.3% since we placed it in the portfolio. The fund is getting too large, and too much money is chasing micro cap performance, so we cut back on the allocation to just 5% from 20%.
We increased our exposure to the FMI Common stock fund, raising it to 15% from 10%.
Moving forward we’re going to have an above target allocation to shorter-term corporate bonds for the time being, and we just added the Vanguard Short Term Corporate fund to fit the bill. The move should give us some income while lowering risk.
July 2003 performance review
For the month of July the Conservative portfolio slipped 1.25%. our worst showing of any of our model portfolios. The culprit: one of the lousiest months on record for bonds (the conservative portfolio is bond heavy). Most of the punishment was in longer-term government bonds, which were down almost 10% for the month. We don’t own much of these types of bonds, so the damage was somewhat blunted for us.
Our biggest hit was from the Harbor bond fund, down 3.72% for the month. Fund manager Bill Gross had been warning the best years are behind us in bonds, but even he can’t hide from the a sharply rising yield curve.
We finally lost some ground in the American Century International Bond fund, which was hit on two fronts: a rising US dollar and falling bond prices (rising yields). The fund slipped 3.43%.
Utility stocks were weak last month, bucking the upward trend is equities. One possible reason is utility stocks are primarily bought for their dividend yield, which was high a few months ago but is not lower as prices have gone up. That coupled with rising bond yields tempting investors played a roll in the softness in prices.
Saving the portfolio was the SSgA Tuckerman Active REIT, up 5.52%. Too bad it was just 5% of the portfolio.
At the end of July we made changes to the portfolio. The moves were designed to lower the overall risk and get out of some areas that have appreciated significantly.
We dropped the real estate fund entirely. While we love the diversification real estate offers, we think rising rates will be the straw that breaks the camel's back in the real-estate mini-bubble. Before the sale, the SSgA Tuckerman Active REIT was up 23.2% since we added it last October. This is the first time we have not had a real estate allocation in this model portfolio.
We lightened up on our convertible bond allocation; reducing the 10% we had in Northern Income Equity down to 5%. A slightly overblown stock and convertible market should keep this category weak to below average going forward.
We sold the entire holdings in the FMI Sasco Contrarian Value fund as we lowered overall equity exposure. We were not enamored with this fund of late.
Junk bonds have been good to us, but we dropped half the position and took it from 10% to 5% at the end of the month. The spread over treasuries is getting a little low for our liking, and too many fund investors have hopped into junk bonds of late.
We’ve had a spectacular run in international bonds, but cut back slightly in our allocation to the American Century International Bond fund from 25% to 20%. We don’t expect the dollar to continue falling going forward or bond prices to rise, the two reasons we’re up over 25% in the fund. If there were more compelling places to invest we’d sell more, but the pickings are slim right now.
We added some international stock exposure here with the Pictet International Small Company fund (PTSCX) which became 10% of the portfolio.
Moving forward we’re going to have an above target allocation to shorter-term corporate bonds for the time being, and we just added the Vanguard Short Term Corporate fund to fit the bill. The move should give us some income while reducing risk.
For the month of July the Growth portfolio was up 1.72%. Bonds slipped while stocks moved up. Most of the punishment was in longer-term government bonds, which were down almost 10% for the month. We don’t own much of these types of bonds, so the damage was blunted for us.
Our worst fund was the one that has been our star performer since we started the portfolio, up an astounding 21% since April 2002 even after dropping 3.75% last month. The Fidelity New Markets Income fund invests in emerging market debt, an area that has been hot but could probably stand for some cooling off. Part of the fall was from the dollar gaining strength amidst strong economic signals.
Utility stocks were weak last month, bucking the upward trend is equities. One reason for the negative pressue is that utility stocks are primarily bought for their dividend yield, which was high a few months ago but is not lower as prices have gone up. That, coupled with rising bond yields, played a roll in the softness in prices. The American Century Utility income fund was our weakest link, down 3.54%.
Small cap stocks continued to outperform, helping lift the top performing Royce Value fund up 5% for the month.
Our strongest holding for the second month running was the T.Rowe Price Japan fund, up a solid 5.89%. It may be too early to tell, but it’s looking like August may be big for Japan again. Right when everybody finally bailed out on Japan earlier this year for good, it comes roaring back. We’re sticking around to see how far it can go. So far, the economy there is showing some good signs.
At the end of July we shifted the portfolio around. The moves were designed to lower the overall risk and get out of some areas that have appreciated significantly.
We’ve made a bundle in emerging market bonds, but its time to take some chips off the table. We cut the position in half, from 10% to 5% of the portfolio.
Micro-cap stocks have been the hottest area of the market, and the Bridgeway Ultra Small Tax Advantaged fund (now called Bridgeway market fund) has been our strongest fund, up 35.3% since we placed it in the portfolio. The fund is getting too large, and too much money is chasing micro cap performance, so we cut back on the allocation to just 5% from 20%.
We increased our exposure to the FMI Common stock fund, raising it to 15% from 10%.
Moving forward we’re going to have an above target allocation to shorter-term corporate bonds for the time being, and we just added the Vanguard Short Term Corporate fund to fit the bill. The move should give us some income while lowering risk.