Fund Portfolios Fine-Tuned For Second Half

6/15/2009


The Forecasts recommended portfolios have performed admirably in 2009. Through June 9, the Growth Portfolio has returned 10.6%, compared to 6.9% for its passive benchmark portfolio. The Conservative Portfolio has gained 7.8%, versus a 5.2% benchmark return. By comparison, the S&P 500 Index has a total return of 5.7%, and the Barclays Capital U.S. Aggregate Bond Index is up 0.1%. 

With the exception of Dreyfus Small Cap Stock Index ($14; DISSX), we are sticking with the funds that comprise our recommended portfolios. T. Rowe Price New Horizons ($21; PRNHX) is taking the place of Dreyfus in both recommended portfolios. No changes are being made to the allocations.

If you’re building a portfolio, we suggest following the allocations in the table below. If you’re looking for a few top midyear picks, consider the four funds reviewed in this story. Also, keep these points in mind:

Growth funds — funds that invest in companies with strong operating momentum — have outpaced value funds so far in 2009. The best-performing diversified U.S. stock-fund category — midcap growth — has posted a 16.0% gain.

Resist the urge to load up on sector funds, as performance can be fleeting. Natural resources, technology, and communications funds — all of which can be quite volatile — have rallied more than 20% this year.

The average diversified foreign large-cap blend fund has gained 9.2%, while emerging-market funds have soared 35.0%. We encourage investors to have at least 15% of portfolios in foreign stocks.

Bond-fund returns are all over the map. Funds holding corporate bonds and exposed to more credit risk have generally outperformed funds
investing mostly in government bonds. The average high-yield bond fund has jumped 22.1%, while intermediate-term bond funds have
gained 3.8%.

Fidelity Export & Multinational ($16; FEXPX), investing in large-cap growth companies that sell their goods outside the U.S., has rallied 14.4% so far in 2009. The fund is benefiting from an improved outlook for the global economy, while avoiding financials has aided year-to-date returns.


T. Rowe Price New Horizons ($21; PRNHX) focuses on small-cap growth stocks. Partly because of an outsized position in technology (24% of assets on April 30), the fund has gained 17.0% so far this year, versus 13.3% for its category average.


Vanguard International Value ($26; VTRIX) invests in out-of-favor, underpriced foreign stocks. Holdings in emerging economies have boosted returns. The fund, up 11.0% in 2009, ranks among the top 26% of foreign large value funds for year-to-date, three-year, and five-year returns.


Wells Fargo Advantage High Income ($6; STHYX) invests in junk bonds, which pay high interest rates because the bonds are of lower credit quality. The fund, yielding 7.8%, is up 17.1% this year.

Web site revamped
The retooled mutual fund section of www.DowTheory.com now features our fund-ranking system. Fund scores are computed monthly using total returns, expense ratios, tax efficiency, and risk-adjusted performance. Log into the Subscriber Area and use the navigation bar to access the Mutual Funds page. There you will find:

Individual reports and rankings on our 20 favorite funds.
Rankings on nearly 4,000 mutual funds.
Lists of standout funds in 25 categories, selected using our fund-ranking system.
Links to recent mutual-fund articles.

FORECASTS FUND RECOMMENDATIONS
— Year-to-Date —
—— % of Portfolio ——
Fund (Price; Ticker)
Return
(%)
Rank
Conser-
vative
(%)
Growth
(%)
Baron Asset ($39; BARAX)
10.4
D
6
7
Dreyfus Small Cap Stock Index
($14; DISSX)
4.6
E
0
0
Fidelity Export & Multinational
($16; FEXPX)
14.4
B
6
8
Fidelity Leveraged Co. Stock
($18; FLVCX)
27.3
A
0
0
Heartland Select Value
($20; HRSVX)
9.3
C
5
9
Heartland Value Plus
($20; HRVIX)
6.0
C
7
8
Northern Small Cap Value
($10; NOSGX)
(2.0)
E
0
0
T. Rowe Price Int’l Discovery
($30; PRIDX)
24.3
A
5
7
T. Rowe Price New Horizons
($21; PRNHX)
17.0
B
6
8
Vanguard 500 Index
($87; VFINX)
5.7
D
7
7
Vanguard Dividend Growth
($12; VDIGX)
4.5
D
8
10
Vanguard Emerging Mkts. Stock
Indx. ($20; VEIEX)
36.7
B
0
5
Vanguard GNMA ($11; VFIIX)
1.5
B
6
0
Vanguard Inter.-Term Tax Exempt
($13; VWITX)
4.8
D
0
0
Vanguard International Value
($26; VTRIX)
11.0
B
8
9
Vanguard Short-Term Invest.-Grade
($10; VFSTX)
6.7
A
0
0
Vanguard Total Bond Mkt. Index
($10; VBMFX)
0.4
E
20
0
Vanguard Wellesley Income
($18; VWINX)
1.0
E
0
7
Vanguard Wellington ($26; VWELX)
5.4
D
9
10
Wells Fargo Advantage
High Income ($6; STHYX)
17.1
E
7
5
* Rankings through June 9 from Morningstar, comparing performance among funds with same objectives. A = top 20%; B = next 20%; C= middle 20%; D = next 20%; E = bottom 20%. c Closed to new investors.

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