Insightful Investing

The turmoil in the financial markets, both in the United States and overseas, proved to be a difficult environment for our Stock Funds in July, while most of our Bond Funds had good results. Topping our performance list was Fidelity Inflation-Protected Bond (FINPX) which gained 3.6%, Dreyfus International Bond (DIBRX) which picked up 3.2% and Payden Emerging Markets Bond (PYEMX) which earned 2.7%.

Only a couple of our US stock fund managers protected their investors equity in July as FBR Large Cap (FBRPX) picked up 0.3% and Royce Micro-Cap (RYOTX) added 0.1%. On the other hand, most of our International funds had positive results for July, led by Wasatch Emerging Markets Small Cap (WAEMX) which jumped 4.7% and Driehaus Emerging Markets Growth (DREGX) and earner of 3.1%

Other than commodities, July was not a very eventful month for ETFs. After suffering significant losses in the second quarter of 2011, iShares Silver Trust (SLV) bounced back strongly by gaining 14.8% for the month. Also picking up steam was SPDR Gold Shares (GLD) which earned 8.4%, PowerShares DB Commodity Index (DBC) with 4.6% gain, and PowerShares DB Energy (DBE) with a 2.5% return.

While most stock ETFs lost money in July, a few gained some ground. iShares MSCI Singapore Index (EWS) earned 4.7%, iShares MSCI Japan Index (EWJ) picked up 2.7%, and PowerShares Nasdaq 100 (QQQ) added 1.7%.

All of our Bond ETFs had positive returns in July. The iShares Barclays TIPS Bond (TIP) ETF gained 3.9%, iShares Barclays 7-10 Year Treasury (IEF) earned 3.2%, and PowerShares Emerging Markets Sovereign Debt (PCY) added 2.1%.

Our August 2011 Mutual Fund Portfolios, ETF Investment Portfolios, and Best Fidelity Funds have been updated through July 2011. 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.

The battle between the President and Congress over the Federal Debt Ceiling hampered stocks in July
as the overall stock market dropped 2.3% this month. Small Cap stocks were hit the most, falling 3.6%, while large cap stocks lost only 2.0%. Growth stocks continued to outperform Value stocks as the former lost only 1.2%, while the latter dropped 3.3%. Interestingly, REITS continue to show strength by gaining 1.6% in July.

Apparently the turmoil in the United States was a little more stressful on financial markets than the sovereign debt issues overseas. International Stocks fell only 1.4%, with Emerging Equities dropping an even smaller 0.4%.

The bad news for stocks turned out to be good news for bonds, in spite of the concerns about potential downgrades of US Treasuries by bond ratings agencies. While bonds in general were up 1.6%, TIPS were up 3.9% and Long Government Bonds were up even more.

Commodities were the beneficiaries of the economic turmoil around the world as the flight to safety helped them to bounce back significantly July, with Gold reaching record highs over $1,600 per ounce.