Insightful Investing

The best performance in April came from a couple of our REIT funds with Neuberger Berman Real Estate (NBRFX) up 3.3% and Cohen & Steers Realty Shares (CSRSX) up 3.1% in April of 2012. Next in line was PIMCO Foreign Bond (Unhedged) (PFBDX) which picked up 2.4% and PIMCO Real Return (PRRDX) which added 2.1%. This month turned out to be a good one for International Small Cap stocks which have had a difficult year. The leaders of the pack were Wasatch International Growth (WAIGX) which picked up 1.8% and Harding Loevner International Small Company (HLMSX) which gained 1.2%. On the down side of things, Oakmark International (OAKIX) lost 4.7%, Adirondack Small Cap (ADKSX) fell 3.9%, and Guggenheim L/S Commodities Strategy (RYLFX) dropped 3.3% this month.

The movement in the finacial markets was a little more for some of our ETFs with Bonds and Real Estate leading the way. iShares Barclays 20+ Year Treasury Bond (TLT) gained 4.6%, iShares Dow Jones US Real Estate (IYR) added 2.6%, SPDR Dow Jones Global Real Estate (RWO) returned 2.4%, PowerShares Emerging Markets Debt (PCY) was up 2.1%, and iShares Barclays TIPS Bond (TIP) increased by 2.0%. The only significant positive move for equity ETFs was iShares FTSE China 25 Index Fund (FXI), earning 3.4% in April.

Commodities had a difficult month, which is reflected by our ETFs more than our Mutual Funds. While iShares Silver Trust  (SLV) took the worst hit in this category, with a drop of 3.8%, PowerShares DB Agriculture (DBA) also had a difficult time with a fall of 2.9%. The most significant loss came from the Emerging Markets as iShares MSCI Brazil Index (EWZ) fell 6.5%, while surprisingly, the next in line were a couple of old world economies as iShares MSCI Japan Index (EWJ) lost 3.2%, and iShares MSCI Germany Index (EWG) gave back 3.1%. Several sector ETFs had a tough time in April as well, with iShares S&P Global Timber & Forestry Index (WOOD) dropping 2.8%, iShares Dow Jones US Technology (IYW) losing 2.6%, and Financial Select Sector SPDR (XLF) falling 2.4%.

Once again, we reiterate that it is time to rebalance your portfolio to its target asset allocation at the beginning of this month. After significant gains over the past 7 months, stocks are running out of steam, so this is a good time for you to take some profits.

Our May 2012 Mutual Fund Portfolios, ETF Investment Portfolios, and Best Fidelity Funds have been updated through April 2012. The Mutual Funds in our Mutual Fund Portfolios are chosen from our Best Mutual Funds. The ETF’s in our ETF Investment Portfolios are chosen from our List of 100 Best Exchange Traded Funds. The investment performance history of our mutual fund portfolios and ETF investment portfolios are tracked on our investment portfolio performance page.

After a strong 6 month bounce, which in hindsight looks eerily similar to a year ago, stocks took a breather in April. While all categories of stocks fell during the month, nothing was hurt by more than 2%. Interestingly, REITs were the contrarian play this month, bucking the trend with a gain of 2.9% possibly due to news that home prices seem to be bottoming out in many markets. Looking at bonds, on the other hand, you could see signs that there was some degree of flight to quality as Long Term Bonds were up 4.3%. This time the bad news originated in Spain, clearly indicating that the debt crisis in Europe may continue to haunt US markets for some time to come.

At the beginning of this month our Active Asset Allocation strategy signaled that it was time to rebalance your portfolio to its target asset allocation. After a Fall and Winter that brought stock investors returns in excess of 25%, it is time to take some profits with the expectation that stocks are not likely to do much between now and the US elections.

While we are not making any changes to our Asset Allocations this quarter, it is a good time to start thinking about rebalancing your portfolio to your targets for each asset class.

We have made significantly more additions than subtractions to our mutual fund list this quarter, mostly in an effort to provide additional choices in some asset classes that had limited availability of good funds. One reason for this is that Wells Fargo Advantage Growth (SGROX) and Wasatch Emerging Markets Small Cap (WAEMX) have both closed to new investors, which is too bad because they have been excellent performers.

PIMCO Emerging Markets Bond (PEMDX) and Westcore Micro Cap Opportunity (WTMIX) have both been moved up to our model portfolios from our List of Best Mutual Funds, while Yacktman Focused (YAFFX) has replaced the Yactman Fund (YACKX) because it has recently become available for no transaction fee at Fidelity. On the other hand, Dreyfus International Bond (DIBRX) has been replaced by PIMCO Foreign Bond (Unhedged) (PFBDX) because it is no longer available to retail investors without additional fees.

Bond Fund additions to our Best Mutual Funds List this quarter include American Century Short Duration (ACSNX), Harbor High Yield Bond (HYFIX), American Century High Yield (ABHIX), and PIMCO Senior Floating Rate (PSRDX).

On the stock side of the house, we had added Dreyfus Appreciation (DGAGX), ASTON/Montag & Caldwell Growth (MCGFX), Aston/Montag & Caldwell Mid Cap Growth (AMCMX), FMI Focus (FMIOX) , Artisan Small Cap Investor (ARTSX), Adirondack Small Cap (ADKSX). We now also include Oakmark International (OAKIX), Wasatch International Growth (WAIGX), and Harding Loevner Emerging Markets (HLEMX) on our List of Best Mutual Funds.

To round out the changes to our List of Best Mutual Funds, Pyxis Long/Short Equity (HEOZX) and Guggenheim L/S Commodities Strategy (RYLFX) are new names Highland Long/short Equity and Rydex L/S Commodities Strategy.

Asset Allocation April 2012