The market ended 2010 on a strong note, with our benchmark Vanguard 500 (VFINX) fund jumping 6.67% - good to deliver a 14.91% return for 2010. Foreign stocks, as measured by the iShares MSCI EAFE Index ETF (EFA), were up 8.3%, but underperformed the US market with a 8.25% return for 2010 – December saved international stocks from a negative year. Our Conservative portfolio was up 1.37% while our Aggressive portfolio was up 2.58% in December. For the year, Conservative was up 7.58% while Aggressive gained 9.84% - a solid return considering our significant bond allocations.
Bonds ended the year on a sour note, with Vanguard Total Bond Index (VBMFX) down 1.15% in December. The real slide was in longer term investment grade bonds, notably government, federal and state debt. This slide started in late August and reversed most of the gains of the year, sending longer term bond prices down just over 10% from the peak. By the end, longer term government bonds still delivered a roughly 8% total return in 2010 with the total bond index gained just over 5% for the year.
The strongest areas in December were financial sector funds, up about 9.6%, natural resource funds up around 9.5%, and foreign funds, up around 9% depending on the area of focus. We have stakes in financial and foreign funds. The weakest areas included China funds, up just over 1% as investors grappled with the rising prices and government solutions to the problem in China, and Utilities funds, which we own, up just 4.18%.
High yield bonds did well with a near 2% return last month, followed by foreign and emerging market bond funds up 1.3% and 1.1% respectively (this while longer term US government bonds slid 3.3% followed closely by muni bonds, notably so-called ‘high yield’ muni bonds which were down about 2.3% for the month as investors grew skittish around state government indebtedness).
Given the recent weakness in longer term bonds as interest rates head up and the recent strength in stocks (which sends dividend yields down) longer term bonds are looking better relative to the stock market than they did earlier in the year.
This month individual fund performers:
Our bond funds did well relative to the bond market index.
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The market ended 2010 on a strong note, with our benchmark Vanguard 500 (VFINX) fund jumping 6.67% - good to deliver a 14.91% return for 2010. Foreign stocks, as measured by the iShares MSCI EAFE Index ETF (EFA), were up 8.3%, but underperformed the US market with a 8.25% return for 2010 – December saved international stocks from a negative year. Our Conservative portfolio was up 1.37% while our Aggressive portfolio was up 2.58% in December. For the year, Conservative was up 7.58% while Aggressive gained 9.84% - a solid return considering our significant bond allocations.
Bonds ended the year on a sour note, with Vanguard Total Bond Index (VBMFX) down 1.15% in December. The real slide was in longer term investment grade bonds, notably government, federal and state debt. This slide started in late August and reversed most of the gains of the year, sending longer term bond prices down just over 10% from the peak. By the end, longer term government bonds still delivered a roughly 8% total return in 2010 with the total bond index gained just over 5% for the year.
The strongest areas in December were financial sector funds, up about 9.6%, natural resource funds up around 9.5%, and foreign funds, up around 9% depending on the area of focus. We have stakes in financial and foreign funds. The weakest areas included China funds, up just over 1% as investors grappled with the rising prices and government solutions to the problem in China, and Utilities funds, which we own, up just 4.18%.
High yield bonds did well with a near 2% return last month, followed by foreign and emerging market bond funds up 1.3% and 1.1% respectively (this while longer term US government bonds slid 3.3% followed closely by muni bonds, notably so-called ‘high yield’ muni bonds which were down about 2.3% for the month as investors grew skittish around state government indebtedness).
Given the recent weakness in longer term bonds as interest rates head up and the recent strength in stocks (which sends dividend yields down) longer term bonds are looking better relative to the stock market than they did earlier in the year.
This month individual fund performers:
Our bond funds did well relative to the bond market index.
It was a hard month to beat the S&P 500 in stock funds. Even our best performers missed the index.
Our worst performers in December missed the market by a wider margin: