Insightful Investing Newsletter July 2004

2nd Quarter Market Recap

If you just looked at the final numbers, you'd think the 2nd Quarter was relatively flat, but the uncertainty of terrorism and the specter of inflation combined with good corporate earnings resulted in considerable volatility for the markets. For the first time in a while, we have to focus on the quarter's losers rather than its winners. Real Estate's stellar 12% return in the 1st Quarter was cut in half with a loss of almost 6%. Rising interest rates also had a negative impact on Bonds, as they fell 2.5 % this quarter. If it weren't for a good June, the quarter would have been considerably worse for equities.

In the stock market, it wasn't so much a change of leadership that put Large Cap Growth at the top of the packs, as much as it was Small Cap Value slowing down. The S&P 500 Index doubled its return for the year by squeaking by another gain of less than a 2% for the quarter, which still leaves the Small Caps the leading asset class this year with almost 7% appreciation, even after a flat quarter. It will take some time for us to know if this quarter signaled a role reversal, or was just a bump in the road for equities.

The rising interest rates helped the dollar this quarter resulting in a flat quarter for International stocks.

2nd Quarter 2004 Fund Review

Not a lot of good news for our funds in the 2nd Quarter, but then again with all the volatility we're happy to say there wasn't a lot of bad news. While most of our Bond Funds dropped a percentage point or two, the average Stock Fund made up for that by picking up a point or two.

Interestingly, all of our leading funds gained between 3.5% and 4% this quarter, with no real regard for asset class. Once again ABN AMRO Mid Cap (CHTTX) was a leader for the Mid Cap Stock. The Yacktman Fund (YACKX) and Fidelity Value (FDVLX) joined it on top this quarter. Selected American (SLASX) and Fidelity Contrafund (FCNTX) led the Large Caps Funds, while Royce Special Equity (RYSEX) was our leading Small Cap Fund

While you might think an uneventful quarter wouldn't lead to many changes in our recommended fund list you'd better think again. While none of our funds have lost money in the last year, in some cases we feel there are better places to invest your money, so make sure you read the whole newsletter this quarter.

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