It's offical: Mid-Cap Growth was the best performer in January

Active traders of mutual funds: You may want to increase your allocation in the mid-cap growth sector.

By luck, two of the top performing mutual funds (FIDYX & KAUFX, both no-load) mentioned below have been my core holdings in the last 5 years. I know they are good. But I didn't realize they were this good in January, 2007!!!



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U.S. Growth Beat Value Funds Across Market-Cap Spectrum
BY TRANG HO

INVESTOR'S BUSINESS DAILY

Posted 2/5/2007

Growth funds reversed roles with value funds last month as U.S. diversified stock funds climbed 1.99%.

The Dow gained 1.27% in the first month of the new year. The S&P 500 rose 1.4%.

Mid-cap growth trumped all other investing styles with a 3.19% jump, according to Lipper Inc. Mid-cap value climbed 2.71%. Their benchmark, the mid-cap S&P 400, surged 3.54%.

Among top performing funds in this category, AIM Capital Development bolted 3.53%. AIM Dynamics flew 3.49%. Alger MidCap Growth added 2.47%.

Large-cap growth funds gained 2.36% in January vs. 1.29% for large-cap value.

Small-cap value growth leapt 2.19%, topping small value's 1.76% gain. The small-cap S&P 600 index climbed 2%. The broader Russell 2000 rose 1.61%.

Baron Small Cap returned 3.9%, Legg Mason Partners Small Cap Growth 4.7% and Federated Kaufmann Small Cap 4.49%.

The decision by the Federal Reserve last week to hold interest rates steady lifted the stock market to new highs. For a fifth time in a row, the Fed voted to leave the key interest rate unchanged at 5.25%.

"It makes me a little less defensive and more aggressive," said John Massey, who oversees $500 million as senior vice president and portfolio manager at AIG SunAmerica Asset Management.

"I shifted to an overweight in consumer stocks because I think the consumer is going to be fine," he said.

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