Portfolio Updates | WSBE 421


An ETF is a basket of investments that track a stock index, a commodity, bonds, or a diverse group of assets. For the most part, ETFs offer the same type of diversity as mutual funds, allowing you to choose different investment strategies and goals.

Investors can help themselves to market-, dividend-, earnings- and sales-weighted ETFs. You can also find plenty of commodity, country, and sector exchange-traded funds. Actively-managed ETFs are growing in popularity, and during the economic woes of the recession—with sectors like housing and financials under fire—short ETFs grew considerably.

SPDR S&P 500 ETF Trust (SPY)
This is the granddaddy of ETFs, having launched in January 1993, as the very first fund of its kind. Though it’s often called the “benchmark index,” that’s not entirely true, as it serves as a benchmark only for its asset class, large-cap domestic stocks. This fund tracks the market-cap-weighted S&P 500 index. Despite some choppy trade throughout the broader market recently, this ETF still has a month-to-date gain of more than 3%, and a year-to-date return of 4.57%, to 392.04.

Cohen & Steers REIT and Preferred Income Fund, Inc. (RNP)
Fund sponsor Cohen & Steers says the primary investment objective of this fund is to seek high current income through investment in real estate and diversified preferred securities. Its top two REIT holdings are American Tower (AMT) and Crown Castle (CCI), both of which own wireless towers. On its chart, the fund was finally able to overcome resistance above 23, and is trending along its 10-day moving average. The preferred securities in this fund offer fixed dividend payments, an advantage to investors if equity markets weaken. This asset class is also generally more stable than stocks.

Vanguard Dividend Appreciation Index Fund ETF Shares (VIG)
Across the board, Vanguard funds are known for being low-cost vehicles that offer exposure to various sectors or themes. This fund gives investors a diversified portfolio of large-cap domestic dividend-paying stocks. Dividends help investors ride out market downturns; as stock prices decline, the fund owner will continue receiving dividends. The fund tracks the Nasdaq U.S. Dividend Achievers Select Index, which gives exposure to U.S. stocks with a record of increasing their dividend payments. The fund, which launched in 2006, is trading at all-time highs, in a tight sideways pattern. Those areas of tight trade often precede further gains.

Consumer Discretionary Select Sector SPDR Fund (XLY)
This fund tracks the consumer discretionary sector, which has cooled off this year after a run-up of 29.63% in 2020. So far in 2021, it’s up just 1.70%. Not that a gain is anything to sneeze at, but other sectors are taking up the leadership mantle. For now, this remains a hold, as it’s notched a total return of 39.61% since the portfolio’s inception. This S&P sector was affected by the inclusion of Tesla (TSLA) in the broader index in December. Tesla is included in the consumer discretionary sector, where it immediately became the sector’s, and this ETF’s, second-largest component with a weighting of 13.87%, with only Amazon (AMZN) being larger. Both stocks are down in March, which affects the ETF.

Mutual Funds
Mutual funds offer a number of categories, investing styles and strategies, including:

Equity funds. They are just what they sound like: Funds that invest in stocks. They are categorized as follows:

  • Large cap (>$10billion)
  • Mid cap ($2 – $10 billion)
  • Small cap (<$2 billion)

Additionally, each of these categories may be further divided into:

Index funds are for investors who want funds that follow the broader markets, have lower operating expenses, and lower turnover. These funds offer portfolios constructed to match or track the components of a market index, such as the Standard & Poor’s 500 Index (S&P 500).

Value funds include equities that are priced low, relative to their earnings potential.

Growth funds consist of companies with high growth, but also are more volatile and riskier than value stocks and generally priced at a higher premium.

Blended funds are a combination of both value and growth equities.

Sector funds concentrate on one particular sector of the economy. There are sector funds for just about any industry or subsector of any industry. Oil, energy, financial, pharmaceutical, semiconductors, hardware, software—you name it—there’s probably a sector fund for it. While the concentration in one industry can bring fabulous rewards, it can also cause significant losses, making these funds more appropriate for investors who can handle more-than-average risk.

Bond funds, which invest in fixed-income securities, are also very popular, especially for investors who are more conservative with their money. These funds are available in short-term (< 5 years), long-term (>10 years) or intermediate-term (5 – 10 years).

Balanced funds may include a combination of equities and fixed income investments, ‘balancing’ out risk, but also reducing returns.

Foreign funds offer investors the opportunity to own stocks and bonds of companies outside the U.S.

Artisan Mid Cap Fund Investor Class (ARTMX)
This fund rallied to a high of 52.19 in February, but is down 4.22% so far in March. Good news for individual investors: The barrier to entry here is low, with a minimum investment of $1,000. The management team seeks to identify companies with a strong competitive advantage. The most heavily weighted sector is technology, at 32.61%, down slightly from earlier this year, as the sector pulled back. Mid-cap stocks, often an overlooked asset class, may continue to perform well this year if larger techs continue lagging other areas of the market.

Fidelity Balanced Fund (FBALX)
This fund’s managers have latitude to allocate anywhere between 50% and 70% to equities. This means they can adjust the weightings, depending on market conditions. Currently, the equity sleeve is hovering near 70%, a wise decision at a time when many fixed-income asset classes are struggling, relative to equities. The largest sector, unsurprisingly, is technology. The fixed-income sleeve consists of corporate and government investment-grade bonds. Underperformance of the bond market has not had an outsized effect on the fund, which notched a year-to-date total return of 3.18%, although that lags some equity-only funds.

Needham Small Cap Growth Fund Retail Class (NESGX)
Small caps, which historically outperform larger stocks but have lagged in recent years, posted outstanding returns as 2020 came to a close. This fund trounced its benchmark, the Russell 2000 Growth Index, outperforming by a massive 36.72%. Managers invest in companies where they identify strong potential for growth and industry disruption. In a reflection of that approach, the top holdings of the fund differ significantly from the most heavily weighted index stocks. Once small-cap growth rotates out of favor relative to large caps, which happened in 2017, this fund may again lag other asset classes.

SELL T. Rowe Price Blue Chip Growth Fund (TRBCX)
This fund is being sold from the portfolio. It’s a four-star-rated fund (by Morningstar) that seeks long-term capital growth, with income as a secondary objective. We’re exiting with a total return of 83.73%. You’ll still have domestic equity exposure in your portfolio, but we believe the recent gap down in price warrants the sale

Recent Returns:

Y-T-D: 0.34%

1-year: 77.48%

3-year: 19.68%


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