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July 2010 Performance Review

August 17, 2010

The Conservative Portfolio jumped 3.22% in July.

The slide in stocks that started in late April reversed course abruptly in early July, delivering a sharp 7% rise in the S&P 500 (but still leaving the market down almost 10% from the April peak and about flat for the year with a negative 0.18% total return).

Most major indexes were up almost exactly as much as the S&P 500; the Nasdaq delivered a 6.9% uptick and the smaller cap Russell 2000 gained 6.87%. Foreign stocks got a double boost from a falling US dollar and rebound in stocks, some from a sharper drop on the way down  (best illustrated by our new Vanguard European ETF, which climbed 14.18% for the month).

Bonds were solid, with a 0.94% return in the total bond index. Longer-term treasuries were gained just 0.21% as shorter term rates fell more than longer term rates and as non-government bonds in general did a bit better. High yield (junk) bonds were up just over 3% for the month.

Our two main portfolios, Conservative and Aggressive, delivered returns of 3.22% and 4.28% respectively. Again it’s worth noting that the current Conservative portfolio is riskier than the old Safety has been during its nine-plus year history. Risk adverse investors uncomfortable with the higher risk profile should own more cash and bonds to offset this risk.

HealthCare Select SPDR (XLV) was up a mere 1.31% as healthcare stocks continued to underwhelm. This disappointing performance in the sector has been the case for much of the last year, and during that time this fund has delivered a 4.44% return - almost ten percentage points less than the S&P 500. Even with this bad year, over the last three years this fund has beaten the market by about 3.2% a year.

American Century Utility Income (BULIX) beat the market slightly with a 7.85% return. Like telecom, this is not a sector that has more upside than stocks due to its relatively conservative nature and high dividend payouts. Utility stocks have been underperforming in recently (which is why we bought them) and we expect good upside relative to the S&P 500 for quite some time.

Vanguard Telecom ETF (VOX) climbed 9.14% as out of favor telecom stocks rebounded faster than the market, a bit unusual as these stocks tend have higher dividends and less upside (and downside) than the market.

The Aggressive Portfolio jumped 4.28% in July.

The slide in stocks that started in late April reversed course abruptly in early July, delivering a sharp 7% rise in the S&P 500 (but still leaving the market down almost 10% from the April peak and about flat for the year with a negative 0.18% total return).

Most major indexes were up almost exactly as much as the S&P 500; the Nasdaq delivered a 6.9% uptick and the smaller cap Russell 2000 gained 6.87%. Foreign stocks got a double boost from a falling US dollar and rebound in stocks, some from a sharper drop on the way down  (best illustrated by our new Vanguard European ETF, which climbed 14.18% for the month).

Bonds were solid, with a 0.94% return in the total bond index. Longer-term treasuries were gained just 0.21% as shorter term rates fell more than longer term rates and as non-government bonds in general did a bit better. High yield (junk) bonds were up just over 3% for the month.

Our two main portfolios, Conservative and Aggressive, delivered returns of 3.22% and 4.28% respectively. Again it’s worth noting that the current Conservative portfolio is riskier than the old Safety has been during its nine-plus year history. Risk adverse investors uncomfortable with the higher risk profile should own more cash and bonds to offset this risk.

American Century Utility Income (BULIX) beat the market slightly with a 7.85% return. Like telecom, this is not a sector that has more upside than stocks due to its relatively conservative nature and high dividend payouts. Utility stocks have been underperforming in recently (which is why we bought them) and we expect good upside relative to the S&P 500 for quite some time.

HealthCare Select SPDR (XLV) was up a mere 1.31% as healthcare stocks continued to underwhelm. This disappointing performance in the sector has been the case for much of the last year, and during that time this fund has delivered a 4.44% return - almost ten percentage points less than the S&P 500. Even with this bad year, over the last three years this fund has beaten the market by about 3.2% a year.

Vanguard Telecom ETF (VOX) climbed 9.14% as out of favor telecom stocks rebounded faster than the market, a bit unusual as these stocks tend have higher dividends and less upside (and downside) than the market.

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