October was strong for stocks and weak for bonds. The Conservative portfolio was up 1.76%, not bad given its large bond stake. Stocks are just a 30% allocation here, so investors shouldn’t expect big upward movement just because stocks are hot.
If you liked the Pictet International Small Company (PISRX) fund’s big 5.75% return in September, you’ll be even happier this month. The fund almost doubled it for a whopping 10.65% 1 month return. The fund is now up over 23% in three months – more than the Nasdaq. Frankly, this is too big a move for fund in a conservative portfolio, but we have the rest of the portfolio safe enough to balance the riskier Pictet allocation. Small cap stocks like those in the Pictet fund are cruisin for a bruising. They just can’t keep up numbers like this much longer.
Other winners in October were the Northern Income Equity fund, up 3.37%, and the Vanguard Dividend Growth fund, up just shy of 5% and in line with the broader market. The Northern Income Equity fund is a convertible bond fund, not a stock fund, and tends to move more with the general level of the stock market than with bonds.
Shorter term bonds had a rough month as fears the fed will raise rates on the heels of better-than-expected economic growth numbers. The Vanguard Short Term Corporate fund fell .24%, which shows that short term bonds are anything but risk free in the short term. Still, longer term bonds fell over 2% for the month on inflation and interest rate fears. Frankly we’d like to see rates swoop up so we can move out on the yield curve and capture some more income. We’re tired of low rates and we’re sure anyone in money markets these last few years feels the same way.
The American Century International bond fund fell 1.1% - the portfolios worst performer.
Junk bonds moved against the bond tide and had a positive month. While junk (or high yield) bonds are interest rate sensitive (fall when rates rise), they are also responsive to the strength in the economy. A strong economy means fewer defaults by corporate America, which means investors are taking less risk in Junk bonds. As this “risk premium” falls and investors are more willing to buy junk bonds yielding less, junk bonds rally in price. Last month the Vanguard High Yield Corporate fund (VWEHX) was up 1.45% thanks to positive news on the economy. We feel there is still risk in the economy, and are no longer comfortable overweighting junk bonds at these relatively low current yields.
October was strong for stocks and weak for bonds. The Aggressive Growth portfolio, which is 70% in stocks, managed to keep pace with the broader market due to some above average stock funds. We’re happy about this because we’re taking less risk then a broad equity index right now, but keeping pace with market performance. The portfolio was up 5.22% for the month.
In the above average camp was the Artisan International Small Cap fund (ARTJX), up 7.3%, the Bridgeway Ultra Small Company Market fund (BRSIX), up 9.27%, the SSgA Emerging Markets fund (SSEMX) up 6.57%, the Gabelli Global Telecom (GABTX) fund, up almost 7%, and the T. Rowe Price Japan fund, up 8.87%. Japan remains hot, and we’re getting a little concerned over prices, not the local economy, which we think is back for real this time.
Moreover most of our bonds didn’t fall with the broader bond market weakness because investors were even more Ga-Ga over high risk debt. Junk bonds moved against the tide in bonds and had a positive month. While junk (or high yield) bonds are interest rate sensitive (fall when rates rise), they are also sensitive to the strength in the economy. A strong economy means fewer defaults by corporate America, which means investors are taking less risk in Junk bonds. As this “risk premium” falls and investors are more willing to buy junk bonds yielding less, junk bonds rally in price. Last month the Northeast Investors fund (NTHEX) was up 1.95% thanks to positive news on the economy. We feel there is still risk in the economy, and are not comfortable over weighting junk bonds anymore at these relatively low current yields. This is a solid, lower risk choice – the managers share our risk aversion and are keeping much of the portfolio in cash. They were a little early on that one, but better early than late.
The Vanguard Short Term Corporate fund fell .24%, which shows that short term bonds are anything but risk free in the short term. Still, longer term bonds fell over 2% for the month on inflation and interest rate fears. Frankly we’d like to see rates swoop up so we can move out on the yield curve and capture some more income. We’re tired of low rates and we’re sure anyone in money markets these last few years feels the same way.
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October was strong for stocks and weak for bonds. The Conservative portfolio was up 1.76%, not bad given its large bond stake. Stocks are just a 30% allocation here, so investors shouldn’t expect big upward movement just because stocks are hot.
If you liked the Pictet International Small Company (PISRX) fund’s big 5.75% return in September, you’ll be even happier this month. The fund almost doubled it for a whopping 10.65% 1 month return. The fund is now up over 23% in three months – more than the Nasdaq. Frankly, this is too big a move for fund in a conservative portfolio, but we have the rest of the portfolio safe enough to balance the riskier Pictet allocation. Small cap stocks like those in the Pictet fund are cruisin for a bruising. They just can’t keep up numbers like this much longer.
Other winners in October were the Northern Income Equity fund, up 3.37%, and the Vanguard Dividend Growth fund, up just shy of 5% and in line with the broader market. The Northern Income Equity fund is a convertible bond fund, not a stock fund, and tends to move more with the general level of the stock market than with bonds.
Shorter term bonds had a rough month as fears the fed will raise rates on the heels of better-than-expected economic growth numbers. The Vanguard Short Term Corporate fund fell .24%, which shows that short term bonds are anything but risk free in the short term. Still, longer term bonds fell over 2% for the month on inflation and interest rate fears. Frankly we’d like to see rates swoop up so we can move out on the yield curve and capture some more income. We’re tired of low rates and we’re sure anyone in money markets these last few years feels the same way.
The American Century International bond fund fell 1.1% - the portfolios worst performer.
Junk bonds moved against the bond tide and had a positive month. While junk (or high yield) bonds are interest rate sensitive (fall when rates rise), they are also responsive to the strength in the economy. A strong economy means fewer defaults by corporate America, which means investors are taking less risk in Junk bonds. As this “risk premium” falls and investors are more willing to buy junk bonds yielding less, junk bonds rally in price. Last month the Vanguard High Yield Corporate fund (VWEHX) was up 1.45% thanks to positive news on the economy. We feel there is still risk in the economy, and are no longer comfortable overweighting junk bonds at these relatively low current yields.
October was strong for stocks and weak for bonds. The Aggressive Growth portfolio, which is 70% in stocks, managed to keep pace with the broader market due to some above average stock funds. We’re happy about this because we’re taking less risk then a broad equity index right now, but keeping pace with market performance. The portfolio was up 5.22% for the month.
In the above average camp was the Artisan International Small Cap fund (ARTJX), up 7.3%, the Bridgeway Ultra Small Company Market fund (BRSIX), up 9.27%, the SSgA Emerging Markets fund (SSEMX) up 6.57%, the Gabelli Global Telecom (GABTX) fund, up almost 7%, and the T. Rowe Price Japan fund, up 8.87%. Japan remains hot, and we’re getting a little concerned over prices, not the local economy, which we think is back for real this time.
Moreover most of our bonds didn’t fall with the broader bond market weakness because investors were even more Ga-Ga over high risk debt. Junk bonds moved against the tide in bonds and had a positive month. While junk (or high yield) bonds are interest rate sensitive (fall when rates rise), they are also sensitive to the strength in the economy. A strong economy means fewer defaults by corporate America, which means investors are taking less risk in Junk bonds. As this “risk premium” falls and investors are more willing to buy junk bonds yielding less, junk bonds rally in price. Last month the Northeast Investors fund (NTHEX) was up 1.95% thanks to positive news on the economy. We feel there is still risk in the economy, and are not comfortable over weighting junk bonds anymore at these relatively low current yields. This is a solid, lower risk choice – the managers share our risk aversion and are keeping much of the portfolio in cash. They were a little early on that one, but better early than late.
The Vanguard Short Term Corporate fund fell .24%, which shows that short term bonds are anything but risk free in the short term. Still, longer term bonds fell over 2% for the month on inflation and interest rate fears. Frankly we’d like to see rates swoop up so we can move out on the yield curve and capture some more income. We’re tired of low rates and we’re sure anyone in money markets these last few years feels the same way.