July 2010 Investment Portfolio Review

June 2010 capped a not-so-happy quarter for investors. As we go to press, I haven’t seen numbers for any of the high-profile funds, but something tells me July probably looked better on paper than it did in the accounts.

For the record, the S&P 500 Total Return Index was +7.01% for the month, bringing year-to-date performance to -0.11%. The rolling 12-month performance ended the month at +13.84%. The results for my model investment portfolios are listed below. To read my comments for previous months, please CLICK HERE.

U.S. Dollar Core Portfolio

This portfolio is ideal for retirement plans or individuals in the wealth-seeding phase (see definition).

July 2010: +1.99%  YTD: +5.38%  12-Month: +9.85%

Your account must be able to buy and sell four funds:

1. S&P 500 INDEX: SPY (or IVV) or VFINX or FSMKX or PREIX
2. MSCI EAFE INDEX: EFA or VDMIX or FIENX or PIEQX
3. 7-10 YEAR TREASURY BOND: IEF or VFITX or FIBAX or PRTIX
4. TIPS BOND: TIP or VIPSX or FINPX or PRIPX

This portfolio is reweighted once per month, making it suitable for conservative taxable accounts or retirement accounts where the plan administrator severely limits investment choices and the number of transactions you can make each year.

U.S. Dollar Satellite Portfolio

This portfolio is risk-oriented, suitable for trading accounts or those in the wealth-building phase.

July 2010: +2.85%  YTD: +11.05%  12-Month: +24.14%

Your account must be able to buy and sell six funds:

1. RUSSELL 2000 INDEX: IWM or VEXMX or FCPGX or PEXMX
2. MSCI EMERGING MARKETS INDEX: EEM or VEIEX or FEMKX or PRMSX
3. 20+ YEAR TREASURY BOND: TLT or VBLTX or FLBAX or PRULX
4. U.S. BASIC MATERIALS SECTOR INDEX: IYM or VAW or FSDPX or PRNEX
5. U.S. REAL ESTATE INDEX: IYR or VGSIX or FRESX or TRREX
6. GOLD: GLD or VGPMX or FSAGX or T. Rowe Price N/A

This portfolio extends the core portfolio and is reweighted once per week. Individuals managing larger sums in flexible retirement accounts or trading accounts may allocate up to 35% to this portfolio to take advantage of additional asset classes and frequent tactical adjustments.

Canadian Dollar Core Portfolio

This portfolio is versatile. It is suitable for Canadian retirement plans and individuals in the wealth-seeding phase. It is also used to diversify U.S. Dollar holdings.

July 2010: +1.52%  YTD: +2.74%  12-Month: +7.82%

Your account must be able to buy and sell five funds:

1. XSP: iShares CDN S&P 500 Index Fund
2. XIN: iShares CDN MSCI EAFE Index Fund
3. XIC: iShares CDN Composite Index Fund
4. XRB: iShares CDN Real Return Bond Index Fund
5. XLB: iShares CDN Long Bond Index Fund

This portfolio is reweighted once per month, making it suitable for conservative taxable accounts or retirement accounts. Investors seeking currency diversification should consider allocating a combination of up to 65% Canadian Core Portfolio/35% U.S. Satellite Portfolio.

Thrift Savings Plan “Growth” Portfolio

This portfolio is for individuals participating in the Thrift Savings Plan, a retirement savings plan for civilians who are employed by the United States Government and members of the uniformed services.

July 2010: +3.38%  YTD: +4.81%  12-Month: +11.46%

The growth portfolio uses the F, C, S, and I Funds and is reweighted once per month.

Thrift Savings Plan “Income” Portfolio

This portfolio is for individuals participating in the Thrift Savings Plan, a retirement savings plan for civilians who are employed by the United States Government and members of the uniformed services.

July 2010: +0.91%  YTD: +2.55%  12-Month: +5.09%

The growth portfolio uses the G, F, C, S, and I Funds and is reweighted once per month.

Past Performance

These all-weather portfolios are designed to minimize the investment roller coaster. Slow and steady wins the race.

Please Note

The charts above illustrate the performance of a hypothetical $100,000 investment made in the investment plan since inception. Figures include reinvestment of capital gains and dividends, but do not reflect the effect of any applicable brokerage commission charges and income taxes, which would lower these figures. This chart is not intended to imply any future performance of the investment plan.

Past performance is not a guarantee or a reliable indicator of future results. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk; investments may be worth more or less than the original cost when redeemed. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets.

Hedge Your Portfolio

Diversification is the first line of defense in normal market conditions. During time of extreme volatility, it may become necessary to liquidate a portfolio or, for tax purposes, hedge exposure with inverse funds.

Hedge ratios are published daily. To learn more about portfolio construction, please visit The Knowledge Base.

Reweighting the Portfolio

The portfolios are reweighted periodically to adapt to ever-changing market conditions. The U.S. Satellite portfolio is reweighted weekly while the Core and TSP portfolios are reweighted monthly to conform to limits imposed by administrators of conservative retirement plans and the U.S. government Thrift Savings Plan.

Results achieved will be closer to published returns if subscribers reweight as directed. Due to the value of the account, tax status, commission and other transaction costs, subscribers may choose to adjust their portfolio only when it has drifted from the suggested weighting by a material amount.