American Investment Services, Inc.

Disciplined, Diversified, & Cost Effective

Jun. 2013 – New Recommendations, Same Approach

The investment industry is quick to tout investment products based on the latest research. Firms are under intense pressure to quickly bring compelling new products to market. Eye-catching results that appear to break new ground tend to get attention, while less spectacular but often very important findings get ignored. These distorted incentives exist not only among money managers’ research desks but also in academia.

Our investment recommendations change infrequently. We are wholly owned by AIER, a non-profit entity devoted to providing low cost, useful research to its readers. We are under no pressure to rush products to market or to publish sensational findings. Our owner is patient and dedicated to the proposition that AIS will prosper over the long term if we focus exclusively on the best interests of our clients and readers.

Our research standards are rigid. In order to be considered for inclusion in our portfolios, asset-classes and investment vehicles must meet very strict criteria. The return premium provided for taking a risk must be sensible, persistent over time and across markets, and be captured cost effectively after accounting for transaction fees, taxes and other factors.

This month we have broadened our recommendations to include international real estate and international fixed income securities. The articles that follow summarize our research and discuss the mutual funds and ETFs we recommend for gaining exposure to these sources of return.

We first evaluated foreign commercial real estate in March 2007. Despite compelling short-term evidence pointing to a unique source of return, we concluded at the time that data was insufficient to recommend international REITs as a distinct asset class. The last six years have provided a much longer data series and solid evidence of the diversification benefits of holding REITs globally. We are convinced that individual investors can benefit from targeted exposure to this dimension of return.

Our international bond fund recommendation exemplifies our rigorous investment vehicle selection process. We have long been convinced of the merits of holding foreign bonds. However, until now no mutual fund, ETF or other investment vehicle available to retail investors has satisfied our requirements regarding diversification, duration, currency risk, and cost. Newly available products from Vanguard meet these standards.

Also In This Issue

New Recommendation: International Bonds
What Is An Asset Class
Going Global In Real Estate
The High-Yield Dow Investment Strategy
Recent Market Statistics
The Dow Jones Industrials Ranked By Yield
Recommended Investment Vehicles