Model Mutual Fund and ETF Portfolios: Value and Small Stocks Impact Returns
by James B. Cloonan
Once again, the past quarter saw the market change direction dramatically. This time, happily, the change was strongly to the upside.
As can be seen in Tables 1 and 3 on pages 30 and 31, both the Model Mutual Fund Portfolio and the Model ETF Portfolio outperformed their benchmarks year-to-date as of January 31, 2012.
In this article
- Performance Determinants
- No Portfolio Changes
- Looking Ahead
- Model Mutual Fund Portfolio: Selection Rules
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However, the turn to the upside was not strong enough to overcome the weak third quarter of last year. Both model portfolios underperformed for 2011, as shown in Tables 2 and 4.
Figures 1 and 2 give a graphical representation of the portfolios’ performances compared to their benchmarks.
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Discussion
I am surprized that your model mutual fund portfolio is so heavy to small and midcap funds. This seems different from most other investment advice. Could you explain this?
posted about 1 year ago by Rodney from Idaho
I have been using an upgrading system (NoLoad Fund X) in the past and it performed well until the '08 "crash", and doesn't seem to
work well now with the market not going anywhere, but constantly changing. Any advise/comments?
posted about 1 year ago by Dan from Hawaii
I too noticed that the portfolio seems heavy in small & mid caps.
posted about 1 year ago by Matthew from Wisconsin
Should we expect to underperform in these 2 portfolioes most of the time when large cap and growth stocks are in style? It looks that way to me.
posted about 1 year ago by Tom from Texas
Thanks for your comments. Given that individuals do not have assets they need within four years invested in stocks, I believe investments should be long-term oriented. In the long run, micro-cap stocks outperform small stocks which outperform midcaps which outperform large caps; giant caps are the worst of all. I believe in going for the greates gain. We mix them up a bit to reduce shorter term volatility. Micro-cap stocks, the best of all (see performance of the Shadow Stock portfolio in the April Journal), don't work as well in mutual funds because of poor liquidity in down markets when funds must sell because investors are getting out when they should be getting in. James Cloonan
posted about 1 year ago by James from Illinois
