Sunday, October 14, 2007

September 2007 Returns For My Model Long-Term Portfolio

My Hypothetical Model Portfolio registered its strongest performance (on a % basis) in nearly a year during September. The Portfolio was down for the month until the Federal Reserve unexpectedly cut interest rates by 50 basis points on September 18th, sparking a strong stock market rally. The FED said the rate cut was intended to "help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets."

As of the market close on September 28, 2007, the Hypothetical Model Portfolio was up $6173, or about 4.06% during September. The Hypothetical Model Portfolio is now up about $12929 in 2007, a gain of 8.89%, as shown on the table below (click for a larger image of the table). The 2007 returns for the Hypothetical Model Portfolio still slightly trail the 9.10% return of the benchmark Vanguard S&P 500 Index fund (VFINX), my benchmark proxy for the S&P 500 index.

International stocks led the way in September, with the iShares Emerging Markets ETF (EEM) rising about 11.57%, the Templeton Russia closed-end fund (TRF) rising sbout 9.61%, and the Vanguard Developed Markets Index mutual fund (VDMIX) rising about 5.39%. The FED's rate cut weakens the U.S. currency relative to foreign currencies and was a major cause of the strong returns for foreign stocks during September.

Tech stocks were also strong performers during September - the Nasdaq 100 ETF (QQQQ) rose a strong 5.20%. Large caps also performed well, with VFINX rising 3.72%.

Financials were laggards - the iShares Dow Jones U.S. Select Dividend Index Fund (DVY) rose a scant 0.30% and the Vanguard Small Cap Value Index (VISVX), a fund holding many financial stocks, rising just 1.69%.

Through the first 9 months of 2007, foreign and tech stocks have been carrying the Hypothetical Model Portfolio. EEM has led the way, with a return of about 30.9%, QQQQ has returned about 19.26%, and VDMIX has appreciated about 13.58%.

One of the holdings in my Hypothetical Model Portfolio, VFINX, paid dividends during September. As I mentioned in a previous post, the dividends from mutual fund holdings are reinvested. VFINX paid a dividend of $0.62/share (a total of $153.38) which was reinvested on September 21 to purchase an additional 1.091 shares at a price of $140.49/share.

I was glad to see decent returns during September. I anticipate that the portfolio will rise a few more percentage points over the last three months of the year and will close out 2007 up 10-15% for the year.

*The Hypothetical Model Portfolio was created with an investment of $100,000 in securities as of the closing values on December 30, 2005 and an additional $25,000 was invested n securities as of the closing values on December 29, 2006. The reason why the total cost in the chart is greater than $125,000 is because the total cost accounts for the value of distributions reinvested into the mutual funds in the portfolio.

August 2007 Returns

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