“Be fearful when others are greedy. Be greedy when others are fearful” – Warren Buffett.
Where are we, at the end of January 2019?
Since December 24, the stock market has had an explosive, almost historic, move back up, regaining a little over half of what it lost in the precipitous decline that started in October. In general, as I’ve stated many times, market declines are normal and healthy. We just want to be on guard against the big bear market move, as in 2008. I’ve stated many times in this newsletter in recent months, that I don’t see that danger yet. I’ve also observed that program trading (i.e. buying and selling by software robots) could be causing market moves to be more dramatic. Software robots would not affect the ultimate destination of the markets (since that depends on the economy and corporate earnings) but it could make the ups and downs more dramatic and volatile. I think that increased volatility may be here to stay.
People were understandably fearful during this decline, just as they were tempted to be greedy in August when the market and YTD returns ran up dramatically. As Mr Buffet implies in the above quote, human emotions can mislead and force bad decisions in the realm of investing. Some of the clients are also tempted to bring their political views into the picture. My goal is to keep my focus solely on the numbers.
The World of Fixed Income, Part 2
Last month I talked about the problems we had with fixed income at the end of the year. Our fixed funds showed too much correlation to the stock market, which I don’t prefer. Of course, in January those funds were our friend, making good money. I will be discussing a couple of real estate investment trusts with many of you (I talked about one of them last month already) because my research indicates the potential for steadier performance with an excellent return (higher than we’ve seen with our funds). And yes, with very little correlation to the stock market.
How Did the Markets and our Funds Do in January 2019?
All index and fund returns are courtesy Morningstar.com. Here are the index returns and our fund returns, for Jan 2019:
|Russell 2000 (small co)||11.19%|
|US Aggregate Bond Index||1.06%|
|ONEQ||9.82%||Fidelity Nasdaq||Fidelity commission free ETF|
|IJR||10.63%||iShares Small-Cap||Fidelity commission free ETF|
|FENY||11.65%||Fidelity Energy||Fidelity commission free ETF|
|FTEC||8.14%||Fidelity Info Tech||Fidelity commission free ETF|
|FDIS||10.10%||Fidelity Discretionary||Fidelity commission free ETF|
|FHLC||5.98%||Fidelity MSCI Healthcare||Fidelity commission free ETF|
|FBIOX||12.85%||Fidelity Biotech||stock mutual fund|
|FSMEX||8.65%||Fidelity Medical Equipment||stock mutual fund|
|FCNTX||9.45%||Fidelity Contra Fund||stock mutual fund|
|FBGRX||9.71%||Fidelity Blue Chip Growth||stock mutual fund|
|PSGAX||7.52%||Virtus KAR Small-Cap Gr||stock mutual fund|
|FKDNX||11.44%||Franklin Dynatech||stock mutual fund|
|CFRAX||2.71%||Catalyst floating rate||fixed income mutual fund|
|EIFAX||2.98%||Eaton Vance floating rate||fixed income mutual fund|
|FFRAX||2.69%||Fidelity floating rate||fixed income mutual fund|
|GIREX||2.18%||Griffin real estate int rate||fixed income mutual fund|
|RNDLX||3.48%||RiverNorth Strategic||fixed income mutual fund|
|FAGIX||6.89%||Fidelity Capital & Income||fixed income mutual fund|
|LENDX||0.30%||Stone Ridge Alternative||peer to peer fixed return m.f.|
|Prime Meridian Small Bus LP||0.38%||1 month lag||private peer to peer fixed return|
|Prime Meridian Real Estate LP||0.70%||1 month lag||private peer to peer fixed return|
|KIP, Kay Income Partners LP||0.56%||private mortgage fund|
Your investment return(s) for January 2019 was/were as follows:
We should talk if you would like to review exactly where you stand or if we should consider a change. I am available at your convenience. I have Skype video in case you would like to do a video conference.