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December 2014 AAII MODEL PORTFOLIOS UPDATED: Large Cap Gains Leave Small Caps Lagging

The S&P index climbed 2.5% in November. Energy prices and strengthening economic data in the US continued to be the themes for the market. With gasoline $3 a gallon (and under) now a reality for consumers, analysts expect that that money will return to the market in the form of consumer spending This would be a welcome change, given the rather poor Black Friday retail sales numbers that came out. Additionally, a weakening China also cast a pall over the market as its economy struggled with a bursting housing bubble and slowing demand across the globe for everything except iPhones. The Model Fund Portfolio climbed 1.3% during November, while the Model Shadow Stock Portfolio, which specifically invests in small-company stocks, fell 2.4%.

The Model Shadow Stock Portfolio’s 2.4% decline for the month trailed its comparison benchmarks: The Vanguard Small Cap Index (NAESX) was up 1.0% and the DFA US Micro Cap Index fund (DFSCX) was down 0.7%. Year-to-date, the Model Shadow Stock Portfolio has declined 9.6%, trailing the Vanguard Small Cap Index fund (up 6.0%) and the DFA US Micro Cap Index fund (down 0.4%). The Model Shadow Stock Portfolio has a compound annual return of 16.8% since its inception in 1993, while the Vanguard Total Stock Market Index fund (VTSMX) has gained 9.4% annually over the same period.

The Model Fund Portfolio’s 1.3% gain in November compares to a gain of 2.4% for the Vanguard Total Stock Market Index fund. Year-to-date, the Model Fund Portfolio is up 9.7%, while the Vanguard Total Stock Market Index fund is up 12.4%. The Model Fund Portfolio has a compound annual return of 9.4% since inception in June of 2003 beating the performance of the Vanguard Total Stock Market Index fund over the same time period, which returned only 9.6%.

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