Insightful Investing Newsletter April 2006

1st Quarter 2006 Market Recap

The stock market started 2006 strong, as Small Cap stocks lead the charge with a 14% return in the first quarter. Real Estate topped that by bringing home a 15% gain for the quarter. So much for the much anticipated demise of those two asset classes. While Large Cap stocks finished in the money for the quarter, a 4.2% return was well behind the leaders. A falling dollar continued to help international stocks bring home over 9% for American investors.

Value stocks continue to outperform growth stocks, another trend that the media has been calling for an end to for quite sometime. While we expect that to happen eventually, we will not be making any changes until we there is a confirmation that the trend has reversed course.

Bonds continue to struggle, but in spite of the continued tightening of interest rates by the Fed they really did not react very much, falling less than 1% for the quarter. High Yield bonds on the other hand continue to hold up well, averaging a gain of just over 2.5% for the quarter.

1st Quarter 2006 Fund Review

Of the funds on our recommended list at the beginning of the year, Cohen & Steers Realty Shares (CSRSX) and Royce Value Plus (RYVPX) returned over 15% in the first quarter. While all of our Real Estate funds gained at least 13% for the quarter, Kinetics Paradigm (WWNPX) almost went from worst to first by also returning more than the number that not so unlucky number, almost twice the gain of the average Mid Cap fund. That just shows you that one bad quarter is no reason to drop a fund from your portfolio. On the other hand, two bad quarters knocked several funds from our list.

Julius Baer International Equity (BJBIX) led our strong performing International funds, bringing home just shy of the magic number for this quarter, 13%. Harris Insight Equityh (HIEQX) was our best performing Large Cap fund, returning a more than respectable 7.5%.

A positive return was hard to achieve for most bond funds this quarter, except for those with a considerable allocation to High Yield bonds. That being said, it should not surprise you that Fidelity Capital & Income (FAGIX) and Westcore Flexible Income (WTLTX) both earned more than 3% for the quarter to lead the fixed income categories.

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