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July 2013 Performance Review

August 2, 2013

The June Swoon proved temporary as stocks rebounded to new highs in July. Even previously lackluster foreign stocks joined the party as both U.S. and foreign larger stocks rose just over 5%. Emerging market stocks weren’t in a festive mood though – they continued to underperform returning less than 1% in July. Bonds were mostly flat after sliding in recent months.

Our Conservative portfolio gained 2.70% in July. Our Aggressive portfolio was up 3.47%. Benchmark Vanguard funds for July: 500 Index (VFINX) up 5.07%; Total Bond Market Index (VBMFX) up 0.20%; International Index (VTMGX) up 5.34%; Emerging Markets Stock Index (VEIEX) up 0.97%; Vanguard STAR (VGSTX), a total balanced portfolio up, 3.58%. 

Rising stock prices and rising yields on bonds are starting to make bonds an attractive alternative to stocks, even if over a long period of time stocks should still beat bonds. There have been tremendous gains in stocks since the 2009 low and recently bonds have slid to levels of a few years ago. This economy – as just reported in today’s job figures – is just not strong enough to warrant over-allocating to stocks and dismissing longer-term investment grade bonds, which yield almost 5%. The portfolio volatility reduction makes up for the slight drag on performance of owning bonds compared to stocks – at least while investors are fearful and avoiding longer-term bonds. This applies to municipal bonds for those in the now higher tax brackets.

We lost to Vanguard STAR (marginally) because of a larger than usual cash allocation resulting from a liquidation of one of our international funds shortly before a big rebound in international stocks. Our current stock funds had a good month relative to the S&P 500, but bonds and cash dragged on returns. 

Stock Funds1mo %
Vanguard European ETF (VGK)9.72%
Health Care Select SPDR (XLV)7.64%
Vanguard Europe Pacific ETF (VEA)6.79%
Jensen Value J (JNVSX)6.66%
Vanguard Value ETF (VTV)5.99%
Homestead Value Fund (HOVLX)5.82%
PRIMECAP Odyssey Growth (POGRX)5.78%
Royce Financial Services Fund (RYFSX)5.66%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)5.34%
[Benchmark] Vanguard 500 Index (VFINX)5.07%
Satuit Capital Micro Cap (SATMX)4.37%
Vanguard Telecom Services ETF (VOX)4.25%
American Century Utility Income (BULIX)3.61%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)0.97%
iShares MSCI Japan Index (EWJ)0.45%
PowerShares DB US Dollar Index (UUP)-2.06%
PowerShares DB Crude Oil Dble Short (DTO)-18.24%
Bond Funds1mo %
Metropolitan West Total Return (MWTRX)0.41%
[Benchmark] Vanguard Total Bond Index (VBMFX)0.20%
American Century Core Plus (ACCNX)0.20%
Doubleline Total Return Bond (DLTNX)-0.17%
American Century Government Bond (CPTNX)-0.22%
Vanguard Long-Term Bond Index ETF (BLV)-0.63%
Vanguard Extended Duration Treasury (EDV)-2.78%