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The stock market ended the first quarter of 2012 on a strong note. The Dow rose for most of the first quarter, showing a solid 8% return after reporting a strong 12% rise for the three months ended December 31, 2011. The market also showed broader strength for the first three months of 2012, with the Russell 3000 Index reporting a gain of 12.9%, almost five percentage points higher than the Dow Index. While investors are still dealing with stubbornly high unemployment, unimposing GDP growth, and a weak housing market, investors are seeing some signs of improvement, notably on the earnings front, and are bidding up stocks.

European stocks rose during the same three-month period, but performed less well relative to U.S. equities, with concerns about a default in Greece, rising debt yields in Spain, and worries about the health of some other eurozone nations, such as Italy. The MSCI EAFE Index reported a lower total return of 10.0% in the first quarter. This return compared unfavorably with the first-quarter gain posted by the S&P 500 Index, which advanced 12.6%.

If the stock market remains a leading economic indicator, it is telling us that the U.S. economy may have some signs of future growth. Note that the market’s recent ups and downs give further credence to the strategy of dollar-cost averaging, since it is virtually impossible to pick the “perfect” point in time to commit new funds.

In the first quarter of 2012, more than a few of the equity funds listed in the accompanying table met or exceeded the performance of their respective benchmark Indices (S&P 500, Russell 3000, MSCI EAFE, and MSCI WORLD). 

One relatively good three-month performer was the American Funds Growth Fund of America (AGTHX). For the three-months ended March 31, 2012, it reported a total return of 14.6%, outpacing most other funds on the table below by at least several percentage points. It is a large-cap growth fund, investing at least 80% of its assets in the common stocks of companies that offer superior opportunities for growth of capital. As of December 31, 2011, the fund held about 7% of its assets in non-U.S. equities, 83% in U.S. equities, 9% in U.S. bonds, and the 1% balance in cash and equivalents. It currently has an average Overall Rank and an average Risk Rank, making it a possible choice for a variety of investors seeking growth with average risk.

Another fund with a noteworthy performance is American New Perspective Fund (ANWPX). For the three months ended March 31, 2012, it reported a total return of 13.7%, outpacing all but two of the 15 funds on our list. It also reported a solid six-month return of 20.2%. This fund seeks long-term capital growth, and, as a secondary objective, looks for income. As of March 31, 2012, it held about 44% of its assets in U.S. equities, 49% in non-U.S. equities, and the balance in cash and equivalents. It now has an average Overall Rank and Risk Rank, also making it a possible choice for investors seeking capital growth and current income.

A third fund that outperformed many of its peers over the past three months ended March 31, 2012 is Fidelity Contrafund (FCNTX). This fund invests mostly in a diversified portfolio of common stocks, selecting those whose value is not fully recognized by the market. As of February 29, 2012, the fund had about 82% of its assets in U.S. equities, 5% in Canada, 2% in Ireland, 1% each in the UK and South Korea, 5% in other countries, and 5% in cash. It objective is capital appreciation. The fund may invest in either “growth” stocks or “value” stocks, or both. It currently has our highest Overall Rank and is also rated less risky than most funds we follow, making this a superior choice for investors.

  

  

Results 

Through 

Mar. 31  

2012 

FUND NAME/ 

TICKER 

Fund 

Size 

(in 

billions) 

3 Mos 

6 Mos 

1 year 

5 years 

American Funds Growth Fund of America A 

AGTHX

$129 

14.6% 

24.4% 

3.5% 

1.9% 

  

Vanguard Total Stock Market Index 

VTSMX

169 

12.9 

26.6 

7.2 

2.4 

American Funds EuroPacific Growth A 

AEPGX

101 

12.3 

17.3 

-6.3 

0.3 

Vanguard 500 Index 

VFINX

110 

12.5 

25.8 

8.4 

1.9 

American Funds Capital World Growth & Income A 

CWGIX

72 

11.2 

18.8 

-0.8 

0.7 

American Funds Capital Income Builder A 

CAIBX

77 

5.3 

12.1 

4.9 

1.4 

Vanguard Wellington 

VWENX

61 

7.6 

16.5 

7.3 

4.8 

Fidelity Contrafund 

FCNTX

84 

14.9 

24.5 

9.4 

5.2 

American Funds Investment Company of America A 

AIVSX

59 

11.1 

22.7 

4.6 

1.0 

American Funds Income Fund of America A 

AMECX

72 

5.3 

14.3 

5.9 

1.5 

Dodge & Cox Stock 

DODGX

37 

13.3 

25.9 

2.6 

-2.0 

American Funds Washington Mutual A 

AWSHX

55 

7.7 

20.2 

8.5 

1.4 

American Funds New PerspectiveA 

ANWPX

44 

13.7 

20.9 

0.9 

2.9 

American Funds Fundamental Investors A 

ANCFX

52 

11.6 

24.1 

2.7 

2.2 

Franklin Income A 

FKINX

64 

5.5 

14.0 

3.0 

3.2 

S&P 500 Index 

  

12.6 

25.8 

8.5 

2.0 

Russell 3000 

  

12.9 

26.5 

7.2 

2.2 

MSCI EAFE 

  

10.0 

13.1 

-8.8 

-6.2 

MSCI WORLD 

  

10.9 

18.8 

-1.7 

-2.2 

Barclays Aggregate Bond 

  

0.3 

1.4 

7.7 

6.1 

Barclays High Yield Bond 

  

5.3 

12.1 

6.5 

8.8