Asset Allocation for 3rd Quarter 2015

We are making a few changes to the asset allocation of our model portfolio by reducing the allocation to TIPS and High Yield Bonds to 3% and increasing the allocation to Short-Term Bonds and Long/Short Bonds to 5%. In addition, the allocation to TIPS and High Yield Bonds should be in funds of the short term variety. Also, since our Dynamic Rebalancing System is calling for returning our allocation to International Bonds to its target, this is a good time to rebalance the entire Fixed Income side of the portfolio, while leaving an overweight to equities.

We are replacing Wasatch Long/Short (FMLSX) with Boston Partners Global Long/Short (BGRSX), replacing Lazard Emerging Markets Equity (LZOEX) with Driehaus Emerging Markets Growth (DREGX) and reducing some of our liquid alternative mutual fund by removing Eagle MLP Strategy (EGLAX) and Arbitrage Event-Driven (AEDFX). On the ETF side of the house we are making wholesale changes to somoe of the liquid alternative ETFs by replacing PowerShares S&P 500 Downside Hedge (PHDG), ProShares RAFI Long/Short (RALS) and Barclays S&P 500 Dynamic Veqtor ETN (VQT) with Credit Suisse Long/Short Equity ETN (CSLS), First Trust Long/Short Equity ETF (FTLS), and First Trust CBOE® S&P 500 VIX®Tail Hedge ETF (VIXH).

If you need more information about which funds to include in these allocations, check our Favorite Mutual Funds list, Favorite ETFs , Model Mutual Fund Portfolios, or Model ETF Portfolios.
Asset Allocation July 2015

ETF Investment Portfolios July 2015

Here are our favorite Exchange Traded Fund – ETF Investment Portfolios for July 2015.

ETF / Fund Name  Allocation% ReturnAllocation
ETF Investing PortfolioTickerClass4/1/20153 Mo1 Yr7/1/2015
Money Market FundMM2%0.00.12%
iShares Barclays 1-3 Year Credit BondCSJSTB8%0.10.78%
PIMCO Total Return ETFBONDITB6%(2.1)3.26%
iShares Barclays 0-5 Year TIPS BondSTIPIPB8%0.6(2.0)8%
iShares Core Total US Bond Market ETFAGGITB6%(1.8)1.86%
SPDR BarCap ST High Yield Bond ETFSJNKHYB3%0.3(1.8)3%
SPDR Barclays International Corporate BondIBNDGB4%0.9(16.3)4%
PowerShares Emerging Markets Sovereign DebtPCYEB3%(1.2)(0.3)3%
PowerShares Nasdaq 100QQQLCG3%1.615.23%
SPDR S&P DividendSDYLCV3%(1.9)4.43%
SPDR S&P MidCap 400MDYMCC3%(1.1)6.13%
WisdomTree MidCap EarningsEZMMCC3%(1.3)4.03%
iShares Core S&P Small-Cap ETFIJRSCC3%0.26.63%
WisdomTree SmallCap EarningsEESSCC3%0.53.63%
iShares Russell Microcap IndexIWCMIC2%3.18.52%
iShares MSCI ACWI ex US IndexACWXIntl4%0.3(5.6)4%
SPDR S&P International Small CapGWXIntl4%5.6(2.1)4%
iShares MSCI Emerging Mkt Min Vol IndexEEMVEE4%(1.3)(1.6)4%
WisdomTree Emerging Mkts Small Cap DivDGSEE2%(1.1)(7.1)2%
iShares Dow Jones US Real EstateIYRRE6%(9.3)3.06%
First Trust Long/Short Equity ETFFTLSL/S8%(0.6)0.08%
Morgan Creek Global Tactical AAGTAAHdg4%(3.5)(3.6)4%
Janus Velocity Volatility Hdgd Lg Cp ETFSPXHHdg4%1.22.14%
Proshares Managed Futures StrategyFUTSCom4%(2.8)0.04%
Portfolio Return / Value100%(0.8)0.5100%
ETF and Mutual Fund PortfolioTickerClass4/1/20153 Mo1 Yr7/1/2015
Money Market FundMM0.00.1
Baird Short-Term BondBSBSXSTB4%0.00.85%
iShares Barclays 3-7 Year Treasury BondIEIIGB4%(0.6)2.34%
iShares Barclays 0-5 Year TIPS BondSTIPIPB4%0.6(2.0)3%
Metropolitan West Total Return BondMWTRXITB6%(1.5)1.76%
Wells Fargo Short Term High Yield BondSTHBXHYB4%0.41.53%
Dreyfus International BondDIBAXGB6%(3.4)(5.1)6%
Payden Emerging Markets Bond AdviserPYEWXEB4%(0.5)(1.2)4%
SEIX Floating Rate High Income **SAMBXFRB4%0.81.94%
Metropolitan West Unconstrained BondMWCRXAB4%(0.1)1.05%
Parnassus Core EquityPRBLXLCC2%(0.4)4.52%
PowerShares Nasdaq 100QQQLCG2%1.615.22%
SPDR S&P DividendSDYLCV2%(1.9)4.42%
WisdomTree MidCap EarningsEZMMCC2%(1.3)4.02%
Congress Mid Cap GrowthCMIDXMCG2%(0.5)13.12%
WisdomTree MidCap DividendDONMCV2%(3.4)3.82%
WisdomTree SmallCap EarningsEESSCC2%0.53.62%
iShares S&P SmallCap 600 GrowthIJTSCG2%0.99.52%
Aston/Silvercrest Small CapASCTXSCV2%(0.8)4.52%
Westcore Micro Cap OpportunityWTMIXMIC2%0.14.22%
FMI InternationalFMIJXIntl4%(2.0)4.84%
Wasatch International OpportunitiesWAIOXIntl4%3.24.74%
Harding Loevner Emerging MarketsHLEMXEE2%0.3(6.9)2%
Driehaus Emerging Markets Small CapDRESXEE2%3.04.82%
Harding Loevner Frontier Emerg MktsHLMOXEE2%1.3(11.0)2%
AMG Managers Real Estate SecuritiesMRESXRE4%(9.7)5.64%
Third Avenue Real Estate ValueTVRVXRE2%(1.6)3.72%
Invesco Balanced-Risk Allocation**ABRZXHdg5%(2.8)(0.3)5%
Diamond Hill Long-Short **DIAMXL/S5%1.02.35%
Hancock Horizon Quant Long/Short **HHQAXL/S5%(0.6)7.05%
AQR Managed Futures StrategyAQMNXMF5%(8.4)14.85%
Portfolio Return / Value100%(1.2)2.9100%
Easy ETF PortfolioTickerClass4/1/20153 Mo1 Yr7/1/2015
Money Market FundMM2%0.00.12%
iShares Barclays 1-3 Year Credit BondCSJSTB10%0.10.710%
iShares Barclays 0-5 Year TIPS BondSTIPIPB8%0.6(2.0)8%
iShares Barclays Intermediate Credit BondCIUITB10%(1.0)1.210%
PowerShares International Corporate BondPICBITB10%0.1(12.1)10%
SPDR S&P DividendSDYLC6%(1.9)4.46%
PowerShares Nasdaq 100QQQLC6%1.615.26%
WisdomTree MidCap EarningsEZMMC10%(1.3)4.010%
WisdomTree SmallCap EarningsEESSC8%0.53.68%
PowerShares Intl Dividend AchieversPIDIntl12%(0.9)(8.8)12%
iShares MSCI Emerging Mkt Min Vol IndexEEMVEE6%(1.3)(1.6)6%
iShares Dow Jones US Real EstateIYRRE6%(9.3)3.06%
Proshares Managed Futures StrategyFUTSMF6%(2.8)0.06%
Portfolio Return / Value100%(1.1)(0.3)100%

Mutual Fund Portfolios July 2015

Here are our favorite Mutual Funds Investment Portfolios for July 2015.

Fund Name  Allocation% ReturnAllocation
No Load Mutual Fund PortfolioTickerClass4/1/20153 Mo1 Yr7/1/2015
Money Market FundMM2%0.00.12%
Baird Short-Term BondBSBSXSTB4%0.00.85%
American Century Short Dur Infl Prot BondAPOIXIPB4%0.3(2.0)3%
Metropolitan West Total Return BondMWTRXITB4%(1.5)1.74%
Wells Fargo Short Term High Yield BondSTHBXHYB4%0.41.54%
SEIX Floating Rate High Income **SAMBXFRB4%0.81.94%
Dreyfus International BondDIBAXGB6%(3.4)(5.1)6%
Payden Emerging Markets Bond AdviserPYEWXEB4%(0.5)(1.2)4%
Metropolitan West Unconstrained BondMWCRXUB4%(0.1)1.04%
BlackRock Global Long/Short CreditBGCAXL/S B4%(0.6)(0.6)4%
Parnassus Core EquityPRBLXLCC3%(0.4)4.53%
RidgeWorth Large Cap Value EquitySTVTXLCV3%(0.2)1.63%
Scout Mid CapUMBMXMCC3%(2.0)2.43%
Congress Mid Cap GrowthCMIDXMCG3%(0.5)13.13%
Hodges Small CapHDPSXSCG3%(0.6)0.63%
Aston/Silvercrest Small CapASCTXSCV3%(0.8)4.53%
Westcore Micro Cap OpportunityWTMIXMIC2%0.14.22%
FMI InternationalFMIJXIntl4%(2.0)4.84%
Wasatch International OpportunitiesWAIOXISC4%3.24.74%
Harding Loevner Emerging MarketsHLEMXEE2%0.3(6.9)2%
Driehaus Emerging Markets Small CapDRESXEE2%3.04.82%
Harding Loevner Frontier Emerg MktsHLMOXEE2%1.3(11.0)2%
AMG Managers Real Estate SecuritiesMRESXRE4%(9.7)5.64%
Third Avenue Real Estate ValueTVRVXRE2%(1.6)3.72%
Invesco Balanced-Risk Allocation**ABRZXHdg4%(2.8)(0.3)4%
Merger FundMERFXHdg4%(0.7)(0.7)4%
Diamond Hill Long-Short **DIAMXL/S E4%1.02.34%
Hancock Horizon Quant Long/Short **HHQAXL/S E4%(0.6)7.04%
AQR Managed Futures StrategyAQMNXMF4%(8.4)14.84%
Portfolio Return / Value100%(1.1)2.0100%
Fidelity Investments PortfolioTickerClass4/1/20153 Mo1 Yr7/1/2015
Cash ReservesFDRXXMM2%0.00.12%
Limited Term BondFJRLXSTB6%(0.2)1.08%
Intermediate GovernmentFSTGXIGB6%(0.5)1.56%
Strategic Real ReturnFSRRXIPB6%(0.4)(5.6)6%
Total BondFTBFXITB6%(1.4)1.66%
High IncomeSPHIXHYB6%0.0(0.4)4%
Floating Rate High IncomeFFRHXFRB6%0.51.06%
New Markets IncomeFNMIXEMB6%1.5(3.4)6%
Mega Cap StockFTQGXLCG12%0.14.212%
Low Priced StockFLPSXMCC10%2.57.110%
Small Cap Discovery*FSCRXSCC8%0.75.68%
International GrowthFIGFXIntl8%0.71.98%
International Small CapFISMXISC6%5.41.96%
Real Estate IncomeFRIFXRE8%(2.8)2.68%
Real Estate InvestmentFRESXRE4%(9.4)5.04%
Portfolio Return / Value100%0.12.1100%
Easy Mutual Fund PortfolioTickerClass4/1/20153 Mo1 Yr7/1/2015
Money Market FundMM2%(1.1)0.12%
Baird Short-Term BondBSBSXSTB10%0.00.810%
American Century Short Dur Infl Prot BondAPOIXIPB6%0.3(2.0)6%
Metropolitan West Total Return BondMWTRXITB12%(1.5)1.712%
Dreyfus International BondDIBAXGB10%(3.4)(5.1)10%
Parnassus Core EquityPRBLXLC12%(0.4)4.512%
Congress Mid Cap GrowthCMIDXMC12%(0.5)13.112%
Aston/Silvercrest Small CapASCTXSC10%(0.8)4.510%
FMI InternationalFMIJXIntl12%(2.0)4.812%
Harding Loevner Emerging MarketsHLEMXEE6%0.3(6.9)6%
AMG Managers Real Estate SecuritiesMRESXRE8%(9.7)5.68%
Portfolio Return / Value100%(1.7)2.8100%
Fidelity NTF Mutual Fund PortfolioTickerClass4/1/20153 Mo1 Yr7/1/2015
Money Market Fund (Cash Reserves)FDRXXMM2%0.04,7972%
Baird Short-Term BondBSBSXSTB4%0.09,6634%
Fidelity Intermediate Government IncomeFSTGXIGB4%(0.5)9,6674%
Fidelity Strategic Real ReturnFSRRXIPB4%(0.4)9,5604%
Metropolitan West Total Return BondMWTRXITB6%(1.5)14,3646%
Wells Fargo Short Term High Yield BondSTHBXHYB4%0.49,8444%
Eaton Vance Floating RateEVBLXFRB4%0.39,7924%
Dreyfus International BondDIBAXGB4%(3.4)9,2624%
Fidelity New Markets IncomeFNMIXEB4%1.59,8104%
BlackRock Global Long/Short CreditBGCAXL/S B4%(0.6)9,6944%
Parnassus Core EquityPRBLXLCC2%(0.4)4,7392%
Fidelity Focused StockFTQGXLCG2%0.15,0312%
RidgeWorth Large Cap Value EquitySTVTXLCV2%(0.2)4,6972%
Scout Mid CapUMBMXMCC2%(2.0)4,9792%
Baird MidCap InvBMDSXMCG2%(0.4)4,9852%
Fidelity Low-Priced StockFLPSXMCV2%2.55,0032%
Fidelity Small Cap Discovery *FSCRXSCC2%0.74,9232%
Rice Hall James Small CapRHJMXSCG2%3.95,3032%
Aston/Silvercrest Small CapASCTXSCV2%(0.8)4,9612%
Westcore Micro Cap OpportunityWTMIXMIC2%0.14,8702%
Fidelity International GrowthFIGFXIntl6%0.715,4286%
Wasatch International OpportunitiesWAIOXIntl4%3.210,4154%
Harding Loevner Emerging MarketsHLEMXEE2%0.34,8782%
Driehaus Emerging Markets Small CapDRESXEE2%3.05,1482%
Harding Loevner Frontier Emerg MktsHLMOXEE2%1.34,7112%
Fidelity Real Estate IncomeFRIFXRE4%(2.8)9,5684%
Third Avenue Real Estate ValueTVRVXRE4%(1.6)9,7244%
Grant Park Multi Alternative StrategiesGPANXHdg4%(3.1)9,4274%
Boston Partners Global Long/ShortBGRSXL/S E6%4.014,7146%
AQR Managed Futures StrategyAQMNXMF6%(8.4)14,3066%
Portfolio Return / Value100%(0.4)244,262100%
* Funds Closed to New Investors. If you do not already own this fund, you may choose another fund in the same category for your portfolio.
** Loaded funds that are available from some brokers, usually Schwab and sometimes Fidelity, without a load fee.

Mutual Fund, ETF, and Financial Markets Update July 2015

Volatility kicked up a notch in the second quarter of 2015 thanks to concerns about the economy of China, and possible defaults in Greece and Puerto Rico. The result was not good news for stocks or bonds. June’s losses essentially wiped out gains earlier in the quarter in the stock market which finished slightly above the flat line with a gain of 0.1%. The expectation that the FED will finally raise interest rates this year took bonds down (1.7%) for the quarter. Rising rates were also a significant factor in the big loss for Real Estate in the form of REITS which fell (10.0%) over the last three months. Aided by a falling US Dollar, oil rebounded for major gains and international stocks and bonds held on to positive returns this quarter. Small Cap growth stocks added 2.0% this quarter while Mid Cap value stocks went in the opposite direction falling (2.0%) over the last three months.

Investment Returns as of June 2015

Investment Returns as of June 2015

It was an unusual quarter for financial markets as the uncertainty did not result in the typical flight to quality. Instead interest rates rose, which caused a fall of (9.6%) by iShares Barclays 20+ Year Treasury Bond (TLT). While rising rates often help the US dollar, you could not tell that from PowerShares DB US Dollar Index Bullish (UUP), which fell (3.4%). Smaller continued to be better as iShares Russell Microcap Index (IWC) picked up 3.1% while Large Cap ETF PowerShares Nasdaq 100 (QQQ) gained 1.6%. Given those two returns it is surprising that SPDR S&P MidCap 400 (MDY) actually lost (1.1%).

iShares MSCI Brazil Index (EWZ) turned out to be our best performing country ETF with a gain of 6.4% while iShares MSCI Malaysia Index (EWM) was the one to avoid as it lost (7.7%). Commodities turned up in June with PowerShares DB Agriculture (DBA) picking up 5.5% while SPDR S&P Biotech (XBI) was the top sector with a gain of 12.0%. On the other end of the spectrum, iShares FTSE NAREIT Real Estate 50 (FTY) lost (9.7%).

The fall in the US Dollar hurt international funds that are hedging against the dollar like PIMCO Foreign Bond (USD-Hedged) (PFODX) which lost (4.1%). On the other hand, that help unhedged funds like Fidelity New Markets Income (FNMIX) which picked up 1.5%. Some of our better domestic equity mutual funds were Rice Hall James Small Cap (RHJMX) which added 3.9%, Fidelity Low-Priced Stock (FLPSX) which gained 2.5% and Fidelity Focused Stock (FTQGX) which returned 0.1%. The falling dollar was good news for investors in

International stocks as Fidelity International Growth (FIGFX) added 0.7%, Wasatch International Opportunities (WAIOX) returned 3.2% and Driehaus Emerging Markets Small Cap (DRESX) grew by 3.0%. International Real Estate took a much smaller hit than domestic REITs as Third Avenue Real Estate Value (TVRVX) lost only (1.5%). In the alternatives space Boston Partners Global Long/Short (BGRSX) gained 4.0% while Aspen Managed Futures Strategy (MFBPX) gave back less of its 2014 gains than most Managed Futures funds with a drop of (5.2%).

Our Favorite Mutual Funds, Favorite ETFs, Mutual Fund Portfolios, ETF Investment Portfolios,, and Favorite Fidelity Funds have been updated through June 2015.