Insightful Investing

For the third month in the last four, stocks had a difficult time, so it should not surprise anyone that our best funds used some degree of hedging to reduce risk. PIMCO Foreign Bond (PFODX) topped our charts this month with a gain of 3.0%, while Hussman Strategic Growth (HSGFX) and Invesco Balanced-Risk Allocation (ABRYX) each picked up 2.4%.

Among those funds that play it straight up, all of our Emerging Bond funds each picked up just over 2% in August. The only equity funds that managed to come out on the positive side of the ledger were Westcore International Frontier (WTIFX) which gained 0.8% and and Fidelity Real Estate Income (FRIFX) which was up 0.5%. While all of our US stock funds lost money this month, Forester Value (FVALX), which lost -1.5%, and Scout Mid Cap(UMBMX), which lost -2.3%, held up the best.
Once again, there was a considerable range of returns for ETFs in August.

Several Emerging Market Stock ETFs had strong months, including iShares MSCI Chile Index (ECH), which gained a leading 7.5%, and iShares MSCI Malaysia Index (EWM), which picked up 6.4%. A fearful market also pushed up precious metals, with iShares Silver Trust (SLV) up 6.6% and SPDR Gold Shares (GLD) up 6.0%.

The PowerShares S&P 500 BuyWrite (PBP) was the top domestic stock ETF with a loss of only -0,3% this month, and in a way you could call this a ‘hedged’ fund too. As expected its covered call strategy provides a cushion against minor drops in the stock market. For those ETFs that contain only stocks, the SPDR Dow Jones Industrial Average (DIA) was just ahead of our other Mid Cap and Large Cap ETFs by dropping on -3.9% in August.

It should not be surprising that the leading Bond ETF in a down month for the stock market was iShares Barclays 7-10 Year Treasury (IEF) which was up 3.3%. Interesting, Emerging Market Bonds were not far behind as PowerShares Emerging Markets Sovereign Debt (PCY) picked up 2.8% and iShares JPMorgan USD Emerging Markets Bond (EMB) gained 2.6%.

Our September 2010 Mutual Fund Portfolios, ETF Investment Portfolios, and Best Fidelity Funds have been updated through August 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.

There was no follow through by the financial market from last month’s bounce as stocks made it three out of four on the downside. Small Cap Stocks took the biggest hit, falling -7.5% while the overall market dropped only about -4.5%. Last month’s leaders held up better than most with International Stocks down only -3.0% and REITs losing only 1.2%.

Most categories of bonds picked up between 1.0% and 3.0% in August, with the exception of Short Term Bonds and High Yield Bonds which finished just above break-even for the month.