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December 2012 Performance Review

January 3, 2013

Happy New Year! 2012 is in the can and what an exciting year it was. First we had the ongoing fears of a global meltdown caused by a European collapse. Then the fiscal cliff was going to bring the economy down a notch. Or twelve.

So how did the market fare amidst all this anxiety? The S&P 500 was up just over 15%. Things were even better in Europe. Our Europe fund Vanguard European ETF (VGK) was up 21.64% for the year, our best performer. Next best was Royce Financial Services (RYFSX), up 20.72% for 2012.

What’s the takeaway? Investing in markets that seem poised to plummet can be more rewarding than investing when things seem safe. Sadly many investors bailed out of stock funds in recent years. Good news on the bad news front: most every serious financial problem facing America was just kicked down the road.

We beat the indexes for the month and came very close to surpassing them for the year (the Conservative portfolio was up 8.48% in 2012, the Aggressive was up 13.85%). We should have taken our risk level up a little during the darkest days of 2012. We were taking measurably less risk than the S&P 500 in 2012. 

For December, the Conservative Powerfund Portfolio was up 0.36%. Our Aggressive Powerfund Portfolio was up 1.18%. Benchmark Vanguard index funds for December: Vanguard 500 Index (VFINX) up 0.90%, Vanguard Total Bond Market (VBMFX) down 0.21%, Vanguard International Index (VTMGX) up 3.85%. Vanguard Emerging Markets Stock Index (VEIEX) up 5.84%.

The best performing stock fund categories last month were funds investing in Latin America, up 8.70%, Japan, up 5.70%, and emerging markets, up 5%, China Region, up 4.70%, Miscellaneous Sector, up 4.50%. The worst performing non-short funds included precious metals funds, down 3.20%, and commodities funds, down 2.5%. Utilities – which had a bad year relative to market dragging on our returns – were only up 0.46% in December.

On the stock side we had a majority of funds beat the market, but our longer term bond focus hurt us on the bond side in a month of rising rates – as seen in a 2.81% drop in BLV. Higher risk mortgage bonds and corporates did well pushing DLTNX and MWTRX above the bond indexes even with rates climbing.

Stock Funds1mo %
[Benchmark] Vanguard Emerging Markets Stock Index (VEIEX)5.84%
iShares MSCI Japan Index (EWJ)5.65%
Vanguard European ETF (VGK)4.32%
Vanguard Europe Pacific ETF (VEA)4.25%
[Benchmark] Vanguard International Index (VTMGX)3.85%
Satuit Capital Micro Cap (SATMX)3.74%
Royce Financial Services Fund (RYFSX)2.88%
Scout International Discovery (UMBDX)2.86%
Vanguard Telecom Services ETF (VOX)1.78%
Jensen Value J (JNVSX)1.67%
PRIMECAP Odyssey Growth (POGRX)1.30%
Vanguard Value ETF (VTV)1.27%
Homestead Value Fund (HOVLX)0.92%
[Benchmark] Vanguard 500 Index (VFINX)0.90%
American Century Utility Income (BULIX)-0.25%
PowerShares DB US Dollar Index (UUP)-0.50%
Health Care Select SPDR (XLV)-0.89%
PowerShares DB Crude Oil Dble Short (DTO)-5.14%
Bond Funds1mo %
Metropolitan West Total Return (MWTRX)0.35%
Doubleline Total Return Bond (DLTNX)0.25%
American Century Core Plus (ACCNX)0.02%
[Benchmark] Vanguard Total Bond Index (VBMFX)-0.21%
American Century Government Bond (CPTNX)-0.29%
Vanguard Long-Term Bond Index ETF (BLV)-2.81%
Vanguard Extended Duration Treasury (EDV)-3.74%