Fund Portfolios Fine-Tuned For Second Half
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
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.