First Quarter 2004 Allocations and Model Portfolios

© 2003 Tom Madell, Ph.D.
Publisher, Mutual Fund Trends/Research Newsletter
Dec 29, 2003

Many people have found our prior "beginning of the year" fund category and specific fund suggestions to be quite helpful. (Please see our Feb. 5, 2003 issue for our previous record of outperforming beginning of the year recommendations.)

In this update, we present some changes to our allocations going forward and to our Model Portfolios, both last modified in our June 30, 2003 update.

In recognition that different people prefer different kinds of portfolios based on the degree of risk they are willing to assume and their need for relative security and possibly income, among other factors, we are now recommending adopting one of three strategies for the coming months, or a combination of more than one.

The following are our recommended allocations for most investors, that is, for those following a moderate risk strategy (We personally prefer this strategy):

Class	Percent of Portfolio
Stocks	60%
Bonds	35%
Cash	5%

Here are our recommended moderate risk category breakdowns for stock and bond funds:

Stocks

Bonds

Category	Our Favorite	Current Risk Level (In our view)	Allocation
High Yield	Vanguard High Yield	Medium	30%
International Bond	American Century International Bond	High	20
Short Term	PIMCO Total Return Instit.	Low	10
Inflation Protected	Vanguard Inflation Protected Securities	Medium	20
Long Term Corporate	Vanguard Long Term Corporate	Medium	20

Next, we present our recommended overall and category allocations for highly aggressive investors, that is, for those following a higher risk strategy:

Class	Percent of Portfolio
Stocks	80%
Bonds	20%
Cash	0%

Stocks

Bonds

Category	Our Favorite	Current Risk Level (In our view)	Allocation
High Yield	Janus High Yield	Medium	40%
International Bond	American Century International Bond	High	25
Emerging Markets	T Rowe Price Emerging Market Bonds	High	5
Inflation Protected	Vanguard Inflation Protected Securities	Medium	20
Multisector	Janus Flexible Income	Medium	10

Last, we present our recommended overall and category allocations for investors primarily motivated to choose more relatively stable investments with highly satisfactory manager track records; these funds will best serve the needs of those following a conservative, relatively low risk strategy designed to provide good income with some growth potential:

Class	Percent of Portfolio
Stocks	40%
Bonds	55%
Cash	5%

Stocks

Bonds

Category	Our Favorite	Current Risk Level (In our view)	Allocation
High Yield	Columbia High Yield	Low	20%
International Bond	T Rowe Price International Bond	High	15
Interm Term	Dodge & Cox Income	Medium	15
Inflation Protected	Vanguard Inflation Protected Securities	Medium	20
Long Term Corporate	Vanguard Long Term Corporate	Medium	30

Please check back at our site shortly after the beginning of the new year for a summary of how our recommendations did for the entire past year and since June 30, 2003.