Fund Tune-Up

9/16/2013


If you wish to own a diversified collection of high-potential funds, consider our recommended portfolios below. If you want to fill out a portfolio with some especially promising picks, look no further than the five funds listed.


5 top picks
Artisan International ($28; ARTIX)
T. Rowe Price New Horizons ($45; PRNHX)
T. Rowe Price Value ($33; TRVLX)
Thompson Bond ($12; THOPX)
Vanguard Selected Value ($27; VASVX)


Our Growth Portfolio, geared toward long-term investors, is up 18.4% for the year through Sept. 10. The Conservative Portfolio, designed for investors at or near retirement, has gained 16.2%. In comparison, the growth benchmark has returned 17.2%, and the conservative benchmark is up 11.5%.

We use benchmarks to establish a baseline for asset allocation and to gauge relative performance.  Our benchmarks use three index funds: Schwab International Index ($19; SWISX) (27% of the growth benchmark, 25% of the conservative benchmark), Vanguard Total Bond Market ($10; VBMFX) (6%, 30%), and Vanguard Total Stock Market ($43; VTSMX) (67%, 45%).

Compared to their benchmarks, both of our fund portfolios are overweight U.S. stocks, partly because the asset class has outperformed recently on expectations for an improving economy and decent earnings growth. The Growth Portfolio holds roughly 69% in U.S. equities, with 19% in foreign stocks and 12% in bonds and cash. The Conservative Portfolio contains 59% U.S. stocks and 18% international, with about 23% in bonds and cash.

As classified by Morningstar, large-company stocks account for 57% of the Growth Portfolio and 61% of the Conservative Portfolio — both well below their benchmarks. Outsized positions in midcap and small-cap stocks partly reflect the Dow Theory's bullish primary trend, which supports a more aggressive stance. Notably, both portfolios tilt toward growth stocks rather than value stocks.

While we don't want to mess with success, we always look to improve performance. In April and June we fine-tuned the portfolios. This month, we are increasing stock exposure slightly and dropping Vanguard Total International Stock ($16; VGTSX) from both portfolios, though it remains on our recommended list. Investors should redeploy its 4% position in standouts Artisan International ($28; ARTIX) and Wasatch International Growth ($28; WAIGX). If you seek to build a fund portfolio, we suggest following the target weights in the table below.

FUND PORTFOLIO STATISTICS
------- Total Return -------
Annualized
----- Since -----
----- Asset Allocation -----
------ Stock Exposure ------
------- Style Exposure -------
YTD
(%)
2003
(%)
2008
(%)
U.S.
Stocks
(%)
Int'l
Stocks
(%)
Bonds
& Cash
(%)
Large-
Cap
(%)
Midcap
(%)
Small-
Cap
(%)
Value
(%)
Blend
(%)
Growth
(%)
Growth Portfolio
18.4
10.5
4.0
69
19
12
57
27
16
22
34
44
Benchmark
17.2
9.0
3.8
66
27
7
77
16
7
33
34
33
                         
Conservative
Portfolio
16.2
9.5
5.0
59
18
23
61
25
14
20
34
45
Benchmark
11.5
8.2
4.3
44
25
31
78
15
7
33
34
32

 

OUR RECOMMENDED MUTUAL FUNDS
Year-To-Date *
--- % Of Portfolio ---
 
Fund (Price; Ticker)
Return
(%)
Rank
Conser-
vative
(%)
Growth
(%)
Fund
Rating †
Artisan International ($28; ARTIX)
13.4
A
9
9
97
Dreyfus Midcap Index ($35; PESPX)
21.3
C
0
0
52
Dreyfus Small Cap Stock Index
($28; DISSX)
25.6
B
0
0
88
Fidelity High Income ($9; SPHIX)
2.2
C
5
4
61
Homestead Small Company
($34; HSCSX)
24.2
C
5
8
99
PIMCO Total Return ETF
($104; BOND)
(3.4)
C
6
0
NA
T. Rowe Price New Horizons
($45; PRNHX)
35.6
A
9
9
99
T. Rowe Price Value
($33; TRVLX)
24.6
A
8
9
95
Thompson Bond ($12; THOPX)
0.8
A
6
0
93
Vanguard 500 Index ($156; VFINX)
19.7
C
6
7
74
Vanguard Dividend Growth
($20; VDIGX)
19.7
C
12
12
94
Vanguard GNMA ($10; VFIIX)
(3.9)
C
0
0
78
Vanguard Growth Index
($43; VIGRX)
18.8
D
11
11
82
Vanguard Inter.-Term Tax-Exempt
($14; VWITX)
(4.1)
B
0
0
70
Vanguard Selected Value
($27; VASVX)
28.0
A
5
7
100
Vanguard Short-Term Invest.-Grade
($11; VFSTX)
(0.5)
C
0
0
82
Vanguard Total Bond Mkt. Index
($10; VBMFX)
(3.8)
C
0
0
25
Vanguard Total Int'l Stock Index
($16; VGTSX)
8.1
E
0
0
28
Vanguard Wellesley Income
($25; VWINX)
3.9
B
0
0
97
Vanguard Wellington ($37; VWELX)
11.9
B
6
9
94
Wasatch International Growth
($28; WAIGX)
20.3
B
7
8
100
Wells Fargo Advantage Discovery
($33; STDIX)
31.6
A
5
7
95

* Year-to-date ranks through Sept. 10from Morningstar, comparing performance among funds with same objectives. A = top 20%; B = next 20%; C= middle 20%; D = next 20%; E = bottom 20%.
Fund ratings are percentile ranks based on our fund-rating system.


Current Hotline

Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at individualstockreports.com