Model Mutual Fund and ETF Portfolios: Value and Small Stocks Impact Returns

by James B. Cloonan

Model Mutual Fund And ETF Portfolios: Value And Small Stocks
Impact Returns Splash image

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.

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.

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James B. Cloonan is founder and chairman of AAII.


Rodney from Idaho posted over 2 years ago:

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?

Dan from Hawaii posted over 2 years ago:

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?

Matthew from Wisconsin posted over 2 years ago:

I too noticed that the portfolio seems heavy in small & mid caps.

Tom from Texas posted over 2 years ago:

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.

James from Illinois posted over 2 years ago:

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

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