Mutual Fund Research Newsletter
Copyright 2011 Tom Madell, PhD, Publisher
Apr 2011. Updated Apr. 11, 2011

April 2011 Model Portfolios

Overall Portfolio Allocations

The only changes to our overall stock and bond allocations are slight ones for Aggressive and Conservative risk investors; the allocations remain the same for Moderate Risk investors. This means that we remain quite positive about the outlook for stocks, while mildly negative about bonds.

As our latest research on the previous page suggests, our overall allocations may be best suited to convey our current estimate as to how these broad asset categories will perform over the next 6 to 12 mos.

For Moderate Risk Investors


Current (Last Qtr.)


65% (65%)


30 (30)


5 (5)

For Aggressive Risk Investors


Current (Last Qtr.)


85% (85%)


10 (15)


5 (0)

For Conservative Investors


Current (Last Qtr.)


40% (40%)


45 (50)


15 (10)

Specific Category Allocations

These show our choices of which fund categories, and their accompanying percentage allocations within one's broad stock (as well as bond) portfolio, are likely to be the best places to invest over long-term periods of up to 5 years.

Our research has repeatedly shown that our recommended categories, selected mainly based on undervaluation, tend to outperform categories that are likely overvalued judged in terms of past performance and excessive optimism by the fund-buying public. Such "out-of-favor" categories tend to have good appreciation potential over many years, although not necessarily over periods as short as 6 mos. or even a year.


It should be noted that we have either maintained or cut the allocation to all of the Large Cap categories while generally raising that of the Small and Mid-Cap categories. This is because, according to our previously described research in our site archieves on identifying which categories are most undervalued, the latter categories come out ahead of the former.

Favored Categories

Recommended % of
Stock Portfolio
(last qtr's %)

Our Current
Recommended Fund

Large Growth

22.5% (25%)

Vanguard Growth Idx (C) (See Note 1)
American Century Growth Inv (TWCGX)
Fidelity Growth Company (FDGRX) (A)

International Large Growth

20 (20)

Vanguard Internat. Growth
FTSE All-World ex-US Small-Cap Index (VFSVX) (A) (See Note 2)

Large Blend

12.5 (17.5)

Vang. Large-Cap Idx
Gabelli Asset (GABAX) (A)

Mid-Cap Value

5 (5)

Fidelity Low Price Stock (FLPSX)

Large Value

10 (10)

T Rowe Price Equity Income (PRFDX)
Yacktman (YACKX) (A)
Vanguard Financials ETF (VFH) (A)

Mid-Cap Growth

12.5 (10)

Vanguard Mid-Cap Growth Index (VMGIX)

Small Blend

17.5 (12.5)

Vanguard Small Cap Index

Note 1: We designate some funds as particularly for more conservative investors with (C); those particularly for aggressive investors with (A).
Note 2: Over the last several years, many international investments, except for those with an exposure to emerging markets, have disappointed. While our long time favorite International Large Growth fund, Vanguard International Growth, has done better than the average US stock fund, we think more aggressive investors might want to try a Small/Mid-Cap International fund for better performance.


Favored Categories

Recommended % of
Bond Portfolio
(last qtr's %)

Our Current
Recommended Fund

Interm Term Govt

10% (12.5%)

Vanguard Tot. Bond Market


45 (45)

PIMCO Total Return Instit (PTTRX)
or Harbor Bond Fund (HABDX)

Intermediate Term Muni Bonds

5 (7.5)

Vang. Interm. Term Tax-Exempt


15 (10)

PIMCO Real Return Instit (PRRIX)
or Harbor Real Return (HARRX)


10 (0)

Loomis Sayles Bond Retail (LSBRX)

High Yield

15 (15)

Vang. High Yield

Our Stock Model Portfolio Performance Over the Last 5 Years

Update: Let's take a look at how our Stock Model Portfolio performed over 1, 3, and 5 yr. periods.

First, when we look at how each of our recommended categories did vs. the return on the S&P 500 Index over the last 12 mos., the news is good. Our categories, allocated as we recommended for Apr. 2010, outperformed the Index returning 16.3% vs 15.6%. If instead of using the category averages to check our portfolio's performance one computes the performance of our specific fund choices, the Stock Model Portfolio returned an even better 18.5%, or 2.9% ahead of the Index.

The news for our Stock Model Portfolio's performance if one left it unchanged over the last 3 years is less good. Our categories, allocated as we recommended for Apr. 2008 and not touched since, returned 1.23% vs 2.35% for the Index, a relatively small shortfall. If instead one uses the specific Vanguard and other fund family funds we recommended, there is no longer a shortfall vs the Index but rather an advantage of approximately 0.5%.

Finally, it had to happen. Our quarterly Stock Model Portfolios had outperformed the S&P 500 Index on a buy and hold basis for 25 straight times. But this time, we fell slightly short.

If one merely held our Stock Model Portfolio unchanged for 5 whole years, one would have underperformed the Index by a scant 0.66%. If, however, one held our speific fund choices for the entire 5 year period, the portfolio would have returned 4.05% vs 2.62 for the Index.

For each of the above time periods, the general International Stock fund category did more poorly than the S&P 500 Index, although more narrowly focused international funds, such Emerging Markets, outperformed. Since we had a rather large relative percentage of our portfolio abroad in the more diversified category, this accounts for our category underperformance over 3 and 5 year periods.

For investors who either followed our stock category recommendations, our specific fund choices, or both, the results, then, over the last 5 yrs. have been far less dire than the results achieved over the period by many other investors; the mildly positive results completely avoided the negative returns many investors experienced in stocks over the period.


click here to read the article "Escape Velocity or Stall Speed" by Steve Shefler.