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January 2003 performance review

February 15, 2003

The conservative portfolio was down 0.20% for the month of January. The standout again was the American Century International bond fund (BEGBX) up 2.87% for the month. Remember two months when we said the dollar was about to start working in the favor of international investments again? We're still considering lightening up a bit on our foreign bond positions or moving to a hedged bond fund. 

The second strong area was junk bonds, with the Vanguard High Yield Corporate bond fund (VWEHX) returning around 1.5%. All bonds faired well, with the Harbor Bond fund (HABDX) up .68%.

Over the last few years you have seen bonds move in almost perfectly inverse to stocks - when stocks have a bad month, bonds go up, and vice versa. This has helped diversified portfolio's returns. Don't expect this to happen forever - stocks and bonds can both go up and down together. 

What gains we saw from bonds were rubbed out by losses in stocks. Stock funds are 40% of this fund, and all 4 funds fell, including our real estate fund. Real estate funds have been much stronger than most stock funds these last few years but we have pared them down to almost nothing in recent months as we feel real estate has had its best years for the time being.

The aggressive growth portfolio was down less than 1%. The Fidelity New Markets Income fund (FNMIX) helped yet again up 2.1%. Emerging market bonds have been the strongest bond asset class for quite some time now, even outpacing U.S. Government debt in total return. We're considering easing up on this area, as this fund is up in the deep double-digits over the last year.

Japan suffered more declines, with the T. Rowe Price Japan fund (PRJPX) down over 5%. We have seen some improvements of late in the economy, which hopefully will trickle down to the beaten down stocks, or at least get investors more enthusiastic about investing in Japan.

The beaten down telecom sector is showing some resilience, with the Gabelli Global Telecom fund (GABTX) up around 1% for the month.