Insightful Investing

With another good quarter in the financial markets it was hard to go wrong if you were invested in stock funds during the 3rd quarter of 2009. Cohen and Steers Realty Shares (CSRSX) led the way with another stellar quarter, that returned 28% for investors. Turning to Equities, Westcore Select (WTSLX), Fidelity Small Cap Discovery (FSCRX), and Fidelity Small Cap Value (FCPVX) each earned 20% in the last 3 months.

International Funds also had a good quarter. Fidelity International Discovery (FIGRX) brought home 19%, just ahead of last quarters winner Lazard Emerging Markets (LZOEX) which returned 18%.

Nothing new on the bond side of the house, except that the returns were not as high as last quarter. Once again, Fidelity High Income (SPHIX) led the way by adding 13.3% for the quarter while Fidelity New Markets Income (FNMIX) was a close second by being up 12.7%. A return of 8.5% helped TCW Total Return Bond (TGLMX) top our list of broader bond funds.

Our October 2009 Mutual Fund Portfolios, ETF Investment Portfolios, and Best Fidelity Funds have been updated through September 2009. The investment performance history of our mutual fund portfolios and ETF investment portfolios are tracked on our investment portfolio performance page.

Asset Allocation for 4th Quarter 2009

For the 4th quarter we are reducing our Short Bond exposure and adding those dollars to International Equities to balance out our equity assets.

Asset Allocation October 2009

Real Estate continued the incredible recovery it started last quarter, this time picking up a gain of 35%. Amazingly, adding that to its 29% gain last quarter, still leaves REITs down by almost 30% for the last 12 months.

Overall, the returns of the US stock market in the 3rd Quarter, were almost a carbon copy of the second. The difference this quarter was that Value Stocks started picking up some of the ground they have lost so far this year to Growth Stocks. While Mid Cap Value led the pack with a gain of 24% in the last three months, Mid Cap Growth stocks are still leading the American market with a return of 37% so far in 2009.

You could say that the laggards this quarter were International and Emerging Market Stocks, but that is only if you are talking relative to how well they performed last quarter. A 20% gain by these stocks is not exactly a poor performance. This is, in fact, significantly better than the 16% returned by domestic Large Cap Stocks.

With the economy showing signs of recovery, High Yield Bonds led interest sensitive asset classes by gaining 14%, a full 10 percentage points more than the 4% returned by Broad Bonds.

The big dilemma facing investors right now is that in the last 6 months the stock market has provided some of its best returns in the last 75 years, yet even with that, stocks in general have been essentially flat over the last 10 years A well diversified portfolio, on the other hand, like those described on the Insightful Investing web site, would have returned an average of at least 7% per year in the last decade. While that might not sound like much, your portfolio would have more than doubled during that time, while an investment in just stocks would have left you just where you started.

Investment Returns September 2009