Based on data from March 1, 2010
Core equity funds (Class 3 for newsletter subscribers)
Over the last few months, we have reduced exposure to diversified developed market foreign funds (mainly European) in favor of domestic mid- to large-cap funds. Our rankings now favor domestic mid-caps, especially mid-cap value, and the current core “buys” are now only 7% foreign. Including “holds”, our core holdings are now less than 25% foreign. ETF-only portfolios have only 5% in foreign core ETFs.
Of recent interest is the wide disparity among foreign fund rankings. Funds concentrated in Europe are among the lowest ranking, but more diversified foreign funds (especially those with exposure to Australia and Canada) remain highly ranked. Much of this divergence may be currency based, but regardless of why, we are glad our rankings have steered our portfolios away from the laggards. All foreign funds have lagged domestic funds this year-to-date.
Among domestic funds, smaller companies are leading and mid-cap funds and ETFs are clearly the strongest category of core equity funds.
Summary: We continue holding or reducing foreign developed market fund exposure in favor of domestic mid-cap funds, emphasizing mid-cap value. ETF-only portfolios hold less foreign exposure because most foreign Core ETFs are “sells”.
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