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2013 Fund Review – Buy/Hold Plus

Overview

As you are already aware, overall 2013 was an excellent year in the market.  The focus of this has been on the S&P 500, which gained over 32%.  However, as most individuals are not invested solely in the Large Cap Blend category, this can often be very misleading to their expectations for their own accounts.  A quick look at the other major broad indexes shows that the MSCI performed roughly 10% less than the S&P 500, and Barclays Aggregate over a whopping 34% less.  Not to mention many of the alternative, lower correlated categories such as Real Estate, Natural Resources, and Developing Markets, which also lagged this most public index.  It is therefore important to remind clients that, as with any well balanced and diversified portfolio, stabilized growth through limited volatility is the goal – not to outperform one broad Large Cap Blend Index.   Below you can find a detailed evaluation of how the Buy/Hold Plus funds performed compared to both broad and specific category indexes.

 Indexes Comparisons

The three major broad indexes are the S&P 500, MSCI EAFE, and Barclays US Aggregate Bond.  All domestic equity funds are compared to the S&P 500, international equity funds to the MSCI EAFE, and all fixed income funds to the Barclays US Aggregate Bond index.  This view however does not lend itself much to the three alternative categories used, as they are utilized specifically for their contrary movements to the major equity indexes.  It is therefore not surprising their performances were all subservient in this year of high major equity index returns.

Looking past the alternatives, out of the 8 domestic equity funds utilized, 7 beat the broad index of the S&P 500 – the sole fund performing below came in at a marginal 0.40% less.  Half of the 8 domestic funds also surpassed the broad index by over 5%; the highest at a 16.72% superior margin. Looking at the three large cap funds in particular that are most closely correlated to the S&P 500, the Laudus US Large Cap Growth Fund returned 5.40% above, the SunAmerica Focused Dividend Strategy W Fund returned 7.68% above, and the iShares Russell 1000 Value returned .30% below the broad index.

Internationally, both foreign funds surpassed the MSCI EAFE by at least 2.5%, with the greater of these just under 5% better.  Lastly for fixed income, four of the five surpassed the Barclays US Aggregate Bond index by at least 2.50%.

Overall, 13 of the 15 funds highly correlated to one of the three major broad indexes surpassed the associated index in 2013.

 When examining each of the 18 funds compared to their specific category index, 14 were able to outperform, with half of those outperforming by at least 5%.

 Overall we were very pleased with how our funds performed both compared to their specific category and broader indexes.  Because of the uncertainty in any particular asset class from one year to the next, a well balanced and diversified approach can add greater stability and limit volatility in your client’s progress towards their financial goals.

All performance numbers obtained through Morningstar Principia ending 12/31/2013