Our Real Estate funds bounced back strongly in the 3rd Quarter, with Fidelity Real Estate (FRSEX) leading the way with a gain of almost 8.5%. On the other end of the spectrum, we were disappointed with both of the ABN AMRO Funds this quarter, as both of them were down in the 6% range. While this was more than the average fund in their categories, both of these funds were leaders last quarter. This shows that you should always evaluate a fund for longer time periods than just one quarter.
It was a good quarter for all of our bond funds, with Fidelity Capital and Income (FAGIX) and Fidelity Strategic Income (FSICX) with gains of almost 5%.
A list of our Favorite Mutual Funds was updated in July with information through June 2004.
Asset Allocation for 4th Quarter 2004
There are a few changes to our Favorite Mutual Fund List and Model Portfolios this quarter, but at this time of year you should consider your tax situation before buying or selling any funds in your taxable accounts.
We have added a couple of Bond Funds to our favorites list. We have been watching Westcore Plus Bond (WTIBX) for a while. It continues to be a top performing Intermediate Bond Fund, so it you need someplace new to put some of your Bond money, this would be an appropriate place. For Fidelity investors, we have now added Fidelity Strategic Income Fund (FSICX) to our favorites list. Since this fund invests in multiple bond sectors, it should gives the managers the ability to reduce the risks associated with rising interest rates.
Due to the disappointing performance we are dropping ABN AMRO Growth N (CHTIX) and ABM AMRO Mid Cap N (CHTTX) this quarter. Look for some new recommendation by year end.
It should not surprise you that one of our favorite Small Cap Funds is closing to new investors. RS Partners (RSPFX) has been one of our best performers, but if you are not already an account holder, you will no longer be able to invest in this fund. What did surpise us is that Royce Micro Cap (RYOTX) has reopened to new investors. On the Fidelity side of the house, Fidelity Small Cap Independence Fund (FDSCX) popped onto our radar screen after a relatively strong 3rd quarter. While we do not think your have to go out and sell the Fidelity Small Cap Fund (FSLCX) , we do feel that that the Independence Fund will be a better place to invest new money in the future.
We are maintaining our cautious outlook on the market this quarter. To reiterate last quarter’s newsletter, we continue to suggest reduced equity exposure.