Insightful Investing

Contrary to popular belief, October can be a good month for stocks. While this year it was not quite as strong as September, twelve months like this one would certainly make a great year. Dreyfus Opportunistic Small Cap (DSCVX) topped our charts this month with a gain of 6.0%, while Scout Mid Cap (UMBMX) picked up 5.6%. Next in line were a couple of specialty funds. Cohen and Steers Realty Shares (CSRSX) returned 5.3% and newcomer Rydex L/S Commodities Strategy (RYLFX) added 5.2% this month. Wasatch Emerging Markets Small Cap (WAEMX) and Harding Loevner International Small Company (HLMSX) each added 4.7% to lead our international funds this month.

A strong stock market is usually a good sign for High Yield Bonds, and this October was no exception. Fidelity High Income (SPHIX) gained 2.9% and Artio Global High Income (BJBHX) picked up 2.6%. A few funds that performed well in the falling market this August, thanks to the use of hedging, had minor losses this month.

Several ETFs had even better months than our best Mutual Funds. The PowerShares Nasdaq 100 (QQQQ) was our best domestic equity ETF with a gain of 6.3%, followed closely by stocks from the other end of the market cap spectrum as the iShares Russell Microcap Index (IWC) picked up 5.7% in October.Internationally, the stock market bounce back was lead by iShares MSCI Mexico Index (EWW), which gained a leading 8.6%, and iShares MSCI Germany Index (EWG), which picked up 8.3%.

A strong stock market was helpful for our top Bond ETFs in October as SPDR Barclays Capital High Yield Bond ETF (JNK) gained 2.9% and iShares Barclays TIPS Bond ETF (TIP) picked up 2.5% this month.

The real winners this month were a couple of Sector ETFs. iShares Silver Trust (SLV) gained 13.4%, and ELEMENTS Rogers International Commodity Agriculture ETN (RJA) picked up 11.3% in October.

Our November 2010 Mutual Fund Portfolios, ETF Investment Portfolios, and Best Fidelity Funds have been updated through October 2010. The Mutual Funds in our Mutual Fund Portfolios are chosen from our 50 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.

Stocks started the month off with a bang and really never looked back as October, the month that most people think is the worst for investors, was almost as strong as September, the month that historically actually has been the worst month for investors. Microcap Growth stocks were the place to be as they gained a nice 6.7% this month, while Emerging Market Equities were actually the laggards since they only picked up 2.9%.

It was a relatively quiet, yet positive month for most bonds, with High Yield Bonds and TIPS both picking up 2.6% in October. That being said, a continuing appetite for riskier assets by investors, sort of like a ‘flight from quality’ popped the intermediate term bubble in Long Term Government bonds, which fell 4% this month.

After a strong run by stocks and bonds over the last two years, it is time for you to consider rebalancing your portfolio. Before doing that, take a look at our asset allocation pie charts to assure yourself that your choice of targets leaves you comfortable with the level of risk you are taking. Then go ahead and pull the trigger to realign your portfolio before the start of the holiday season.