Vanguard's Best Funds in December

The silver lining is that the average 30-year fixed-rate mortgage being offered at 5.07% is hovering near a record low. And, mortgage application activity picked up in November and December, with the last full week of December hitting a five-year high.

The fact that 79.8% of applicants were seeking refinancing to either cut cost or save their home from foreclosure bodes well for stabilizing the quantity of homes being offered for sale. Low real estate prices and low borrowing costs may be enticing the bottom fishers trying to get ahead of a REIT rebound.

The Vanguard Precious Metals and Mining Fund (VGPMX), third best in December, returned 15.50% in the month. The fund directly holds a global portfolio of metals and mining shares including 11.2% in Lonmin (LNMIY), 9.3% in Johnson Matthey (JMPLY), 9.2% in Eramet (ERMAF) and 6.5% in Impala Platinum Holdings (IMPUY).

During the month of December, the spot price of gold rose 7.8% to $882.05 an ounce, building its way back up from its Oct. 24 low of $682.41. Silver also bottomed in late October and has slowly and steadily worked its way up by 10.6% to $11.39 in the month.

The U.S. dollar index, a basket of euros, Japanese yen, British pounds, Canadian dollars, Swedish Krona and Swiss Francs, shed 6.0% in December in a volatile search for direction.

In the short run, low interest rates and potential deflation as well as tapped-out consumers are bearish for the U.S. dollar. However, a proposed stimulus package of $775 billion to $1 trillion may be inflationary in the long run, forcing the U.S. government to pay higher rates to borrow such a large sum. Gold and other precious metals investments, priced in U.S. dollars, do better under inflation than deflation.

Platinum crashed 67.7% from it March 6, 2008, high of $2,301.50 on concerns about the flailing automobile industry, a major user of platinum in pollution-controlling catalytic systems. Up 6.0% to $934.50 an ounce in December, platinum is making a comeback as the auto companies are getting their bailout loans.

Top 10 Performing Vanguard Funds in December Fund (Ticker) Rating Objective Total Return 1 Month Total Return 1 Year Total Return 3 Years (ann) Vanguard Extended Duration Treasury Index Fund (VEDIX) U Govt/Agency-Long Term 22.37% 55.62% N.A. Vanguard REIT Index Fund (VGSIX) E Index Fund 17.39% -37.05% -10.76% Vanguard Precious Metals and Mining Fund (VGPMX) E Precious Metals Sector 15.50% -56.02% -7.00% Vanguard Long-Term Investment Grade Fund (VWESX) D Corporate/Preferred-Inv Grade 12.52% 1.79% 2.79% Vanguard Long-Term Bond Index Fund (VBLTX) C- Index Fund-Debt 10.92% 8.26% 5.81% Vanguard Selected Value Fund (VASVX) C Value-Mid Cap 10.29% -33.44% -7.51% Vanguard Pacific Stock Index Fund (VPACX) C+ Index Fund 9.57% -34.36% -8.33% Vanguard International Explorer Fund (VINEX) D International Equity 9.30% -46.56% -9.85% Vanguard Health Care Fund (VGHCX) B+ Health & Biotech Sector 8.81% -18.45% -1.90% Vanguard Long-Term Treasury Fund (VUSTX) C+ Govt/Agency-Long Term 8.56% 22.17% 10.72% Source: Bloomberg

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