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The No-Load Fund Investor The No-Load Fund Investor

Highlights of the Current Issue
of The No-Load Fund Investor

From The No-Load Fund Investor, 9/14...

Home Sweet Home

The U.S. stock market was strong in August. The S&P 500 gained 3.8%. The Russell 2000 Index of small stocks did about a percentage point better. Gains in the U.S. market were broad based, and the average diversified stock fund in our database gained about as much as the S&P. On average, the ‘growth’ stock funds we track outpaced the ‘value’ stock funds by 0.8 percentage points, leaving the two styles about even for the past 12 months.

The leading sector in August was healthcare, led by biotechnology. Consumer discretionary also staged a bit of a comeback. With a few notable exceptions in the emerging markets, foreign equities performed worse than U.S. stocks. In fact, the MSCI EAFE Index of stocks from foreign developed markets (so, mainly Western Europe and Japan) actually produced a loss of 0.4% in the month and is barely up for the year. However, helped by emerging market exposure in some cases, the international equity funds in our database produced an average gain of 1.3% in August.

Bonds continue to do all right. The broad U.S. taxable investment-grade bond market gained about 1.2% in August, and is up about 4.7% for the year. Contrary to the expectations of most investors at the beginning of the year, long-term Treasuries have been the best places to be in the fixed-income market. In fact, the leading exchange traded fund (ETF) for such securities, the iShares 20-Plus Year Treasury ETF (TLT), is up a whopping 19% so far this year. And, after a little turbulence in recent months, high-yield U.S. corporate debt has rebounded somewhat.

The Investor’s Purpose

All of us at the Investor have been asked by many people over the years why they should subscribe. We’ve often responded by describing the Best Buys model portfolios. Specifically, we talked about how someone can invest exactly according to the model of their choice, and thereby have a good chance of achieving competitive returns at reasonable risk through a diversified framework, whether they invest via a fund supermarket, in Fidelity, Price or Vanguard funds only, or directly through various fund groups (the Master models).

Frequently, we also mentioned the Performance Comparison tables, which include performance over various periods (as well as other data) for nearly 1,000 no-load funds, as well as our boldface designation signifying that a fund is suitable for purchase consideration, assuming it is appropriate for the current investing environment.

Sometimes, we even explained that how we classify the funds is at least as valuable as whether or not we reward them with boldface status.

Instead of simply categorizing funds solely by their stated investment objective, we do so by overlaying our judgment of a fund’s risk. Just because a fund is called “Growth & Income” or includes the pursuit of dividend income in its prospectus, doesn’t make it so. It might be as risky, or more so, than a “Growth” fund. Similarly, just because a fund has “Balanced” in its name doesn’t mean it offers the kind of risk/reward relationship an investor with a balanced objective would desire and expect.

To learn more about our methods of classifying funds, see the September issue of The No-Load Fund Investor.


Model Portfolios

Sample Model Portfolio from the Current Issue
of The No-Load Fund Investor

Wealth Builder Portfolio

Fund

Obj.

Beta

% Weighting

Price Health Sciences sector 0.98 5%
Price Divsfd Small Cap Gr agg gr 1.33 10%
RiverPark Large Growth growth 1.11 5%
Vangd Total Stock Market Idx growth 1.07 15%
Amer Century MidCap Val growth 0.93 10%
Causeway Int'l Value int'l 1.33 5%
Dodge & Cox Global Stock global 1.28 5%
Artisan Global Sm CP global 1.23* 5%
Artisan Global Opps global 1.20 10%
Vangd U.S. Value gr-inc 1.09 10%
Vangd Equity Income gr-inc 0.84 10%
Fidelity New Markets Inc. bond 0.38 5%
Vanguard Prime Money Market money mkt 0.00 5%
* = Estimated
N = New this month
H = Hold
W = Change in portfolio weighting
D = Deleted this month
Average portfolio beta: 1.02
Average expense ratio: 0.77%
Since January 1, 1988, $10,000 has grown to $151,068


Best Buy Portfolios

 

Wealth Builder

Pre-Retirement

Retirement

Income & Preservation

Cash 5% 10% 15% 20%
Bonds 5% 15% 30% 60%
U.S. Equities 75% 65% 50% 15%
Int'l Equities 15% 10% 5% 5%
Portfolio returns since 1/1/88 through most recent month ($10,000 original investment) $151,068 $135,779 $103,398 $15,140
since 2/1/09
Average portfolio Beta 1.02 0.85 0.60 0.27
Average expense ratio 0.77 0.73 0.61 0.61

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