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Diworsification

Since the market peak of March 2000 stocks have lost money with some brief run-ups, while bonds have largely made money with some brief pullbacks. In statistical terms, the behavior of stocks and bonds over recent years is called low correlation

March 2003 performance review

The Conservative portfolio was up .68% in March. Stocks were up in March, with the S&P 500 and Dow up about 1% and 1.5% respectively. Long-term US government bonds were down about 1.2% in March, but all our bond fund choices were up in this portfolio. We don’t feel longer term US government bonds are the place to be right now. If rates climb fast, our bond fund choices will likely lose money also, just not as badly as we think government bonds will fall. We’re considering investing in a variable rate fund here shortly.

Performance Review

Let’s look back over the last 12 months since we launched the Powerfund Portfolios at what has been going on in the markets and with the 7 model portfolios we follow, and how we have done compared to the market and other benchmarks.

February 2003 performance review

The Conservative portfolio was almost completely flat in February. The positive action was again from bond funds. Bonds were strong on investor's fear of war and stocks across the board, with the portfolio's high yield, foreign, and investment grade U.S. bond funds all up over 1%.

January 2003 performance review

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.

January Effect

According to some January Effect proponents, January has predicted the year's returns over 90% of the time. This is why many investors are nervous these days. January ended down. If the January Effect is true, this means we have a 90% chance of losing money this year in the market.

February 2003 Trade Alert!

The newly retooled Vanguard Dividend Growth fund (VDIGX) has much lower fees than the Strong Dividend Income Fund "Z" (SDVIX) which means more if the dividend income is yours to keep. Since this model portfolio already owned the Vanguard Utilities Income fund, and that fund has converted into a dividend growth fund, we need to sell our dividend fund and replace it with another utilities fund in order to keep the same allocation to utilities and high dividend stocks.

December 2002 performance review

The conservative portfolio was up 1.14% for the month of December, but the positive action was mostly from bond funds this month. The standout was the American Century International bond fund (BEGBX) up an astounding 6.52% for the month. Remember last month when we said the dollar was about to start working in the favor of international investments again? Basically 85% of that return was the result of the US dollar falling.

Bonds Come Back

On the surface, spending money is a great way to jump-start a weak economy. Ever since the government became such a large part of the economy (can you believe we didn't even have an income tax before 1913?) government tax and spend policy (AKA fiscal policy) has been used to "manage" economic growth.

November 2002 performance review

The conservative portfolio was up 2.6% for the month of November, but the positive action was mostly from stock funds in the portfolio, currently 50% of the total after recent increases in its equity allocation. While we felt weakness in stocks have created opportunities for risk averse investors, and we were hesitant to stay in near-zero yield cash positions, we were a bit premature in these moves.