Index Funds, Where Are We Now?

By Investopedia Staff | April 29, 2012 AAA

As important economic news (such as gold hitting $1,500+ per ounce and the US Debt Ceiling) is continually hitting the headlines, its important to think about how these developments are affecting your investments. Let's take a look at how a couple of major indexes and index funds have performed since the beginning of the year to determine if your portfolio has the right balance of risk and return.

TUTORIAL: Index Investing

Focus ETF Year to Date
U.S. Dollar PowerShares DB US Dollar Index Bullish
(ARCA:UUP)
-2.94%
U.S. Equity SPDRS S&P 500 Index
(ARCA:SPY)
+11.45%
Technology PowerShares QQQ
(Nasdaq:QQQ)
+19.58%
Europe, Australia-Asia iShares MSCI EAFE Index
(ARCA:EFA)
+8.52%
Energy United States Oil
(ARCA:USO)
+4.12%
Precious Metals iShares Comex Gold Trust
(ARCA:IAU)
+6.57%
Fixed Income iShares Barclays 7-10 Year Treasury (ARCA:IEF) +0.40%



The Market
The S&P 500 index, as tracked by the SPDRS S&P 500 Index fund, has fluctuated over the year; however, this fund did start to rise in recent months as investors moved in. From the beginning of the year to now, the S&P 500 (as well as the DJIA) has at times seen gains around 10%. However, in the past year performance has been olnly up a few percent.

SEE: Index Investing

Pullbacks and Producers
Gold futures prices, followed by the iShares Comex Gold Trust fund, have continued to trade near record highs. IAU has recently hit a new all time high of $18.63. The U.S. dollar index, followed by the PowerShares DB US Dollar Index Bullish fund, has also been down. Investors have sought out gold over US dollars as protectors against the uncertainty in the markets.

Technology is currently flat compared to the beginning of the year as top PowerShares QQQ fund holdings like Apple (Nasdaq:AAPL), Qualcomm (Nasdaq:QCOM) and Google (Nasdaq:GOOG) are all flat as well.

Final Thoughts
The point of this index fund exercise is a reminder to investors to constantly focus on maintaining a diversified portfolio of investments. In addition, investors should also adopt an investment process for rebalancing their holdings by selling a percentage of winning investments and reinvesting those earnings in whatever you deem important or back into the other investments in your portfolio lagging others.

SEE: 6 Asset Allocation Strategies That Work

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