I have a portfolio which kind of follows the FundX monthly upgrader portfolio (“MUP”). It goes against every single precept of Boglehead investing. When Bogleheads read about it, they tear their garments, and unleash a loud wailing from Walmarts throughout our fair country. They threaten to sew salt in to my ocean-view acreage, scatter my flocks, and send pizzas to my house which I did not order. 

The system is the polar opposite of a buy and hold portfolio.  It is like "hot hands" investing on steroids.  Each month, you buy or sell funds based purely on a formula which the newsletter calculates using performance over the past 1, 3, 6 and 12 months. Some months, like this month, you have to sell 4 funds and buy 4 different ones.  (Don't try this in a taxable account.)

I follow the portfolio because I think of investing as being on a level slightly above fantasy basketball.  Making trades using the MUP is kind of like going to the waiver wire each month.  What fun is having money if you can't play around with it?

This portfolio is wacky. It has an average expense ratio of 1.1%.  This fact, standing alone, would result in commitment proceedings being initiated against me under Boglehead law. It presently holds 19 funds or ETFS, has held 32 different funds or ETFs in 10 months since I started tracking it on November 17, 2006. (For the math challenged, that means I have sold 13 of the funds, and bought other funds, in about 10 months, I think... My math could be wrong...)

As some of you know, my advocating of momentum investing has caused some Bogleheads to report me to the SEC. I still think it’s a good idea, although my lawyers tell me I should probably not talk about it here. Nonetheless,…

Since November 17, 2006, the FundX portfolio has returned 13.24% versus 7.56% for the 500 Index. This is so even though I have around 20% cash/bonds in the portfolio.

YTD, it is up 8.92% versus 6.02% for the 500 Index.

In the last 3 months, it has lost .52% versus a loss of 2.11% for the 500 Index. So it has lost less in the last down market.

What does this mean for you? You have three choices: (1) sell all your Vanguard funds and follow a risky momentum investment strategy; (2) buy, hold and rebalance a portfolio of low cost Vanguard funds; or (3) do both. I vote for 3. That way, you can hedge your bets, and if (1) works you can drive the people who slavishly follow (2) nuts, which is nice.  If it doesn't work, just keep it to yourself.

Whatever you do, don’t follow investment advice from an anonymous poster with the screen name of a shortstop.  Only an idiot would do that.

You assume that momentum nvesting is risky.  I'm not sure if you have an active Portfolio following Fund X, or just play money.  I've used my own momentum, or Upgrading, stategy since 1985 with very positive results.  The Portfolio is comprised of my entire liquid assets, not play money.  Fund X stategy, or Upgrading, works, but it's certainly not for everyone.

If you're interested in learning more about my particular strategy you can reference my posts on Upgrading under JerryR.  Regards, Jerry 

   

I am using real money, but I have less than 5% of my assets in a FundX portfolio.

Whether it is "risky" depends on how you define risk.  The portfolio has a lot of tracking error compared to more conventional portfolios, and moves up and own more in the short term than my Vanguard portfolio.

However, the returns have been good so far.  Let's see what tomorrow brings.

I have read all your posts on FundX, and I also receive your newsletter.  They were part of the reason I decided to implement that strategy. 

Thanks! 

Petrocelli 

Just a couple of items:

I saw in the Sept.'07 M* FundInvestor that American Century Heritage, TWHIX, is having a manager problem, in that Co-manager Kurt Stalzer is on a leave-of-absence because of health problems.  Wish him well, but I wonder if his other Co-manager(s) will keep up the Mo?

Domestic Large Growth is finally kicking some butt, with several funds in the M*500 having YTD returns above 10 percent, as of 31Aug'07.

Some notable examples:

JAMRX...16.4%...Janus Research 

BLUEX...15.2%...Brandywine Blue

FDSVX...15.2%...Fidelity Growth Discovery

FDFFX...13.7%...Fidelity Independence 

JAVLX...13.6%...Janus Twenty

Only one Large Blend was clocking in above 10%, and that is Janus Contrarian,JSVAX, but it is more of a Global fund these days with 40% foreign.

Manic trader, Ken Heebner, of CGM Focus is having an awsome year at YTD = 38.5%.  With a turnover rate above 300%, that renders M*'s data pretty useless, and certainly out of date by the time the FundInvestor went to press.

My only momemtum and/or growth play is TRP Global Stock, PRGSX, with some real money, and it is almost up to 3% of my portfolio.  Woopee!!!  But it is growing every month.

Coy

PS:  Do the old table making symbols, <tt> and </tt> work in this new format? 

 

 

I am using real money, but I have less than 5% of my assets in a FundX portfolio.

I would imagine this is because you do not believe in the investing strategy yourself. Does this make you a Boglehead?

What worries me is folks offering stuff like this, not offering the fact they themselves do not believe in the strategy, and offering one year’s worth of results as proof it works.

The newbies that enter the board that are still confused over what indexing is, why indexing works, what strategy to follow do not know one year’s worth of results is worse than M* Five Star Fund investing.

You are offering the idea investing should be fun, and you should speculate on investing strategies. This steals from the idea saving and investing are synonyms, which is where the risk comes in.

The real risk comes from the same as Five Star Funds. You stumble across a strategy, use it for 5 years, and it does well. The value of the strategy is then evident to anyone who knows no better, and they invest in this strategy just in time to watch it underperform, learn a lesson, and get back to what they would have been better off doing to begin with -- with a smaller portfolio.

At the moment I see you have a positive 16 standing on votes for the original post, so I must be wrong, huh? Or, could that just be a bunch of newbies who saw something that looked real? This to me is the danger of the voting system. But, then again, that would support what M* is selliing -- What you think?

Yes, Bogleheads, as well as Slice-n-Dicers hate speculating, whether it be FundX, other newsletters or the other ‘How to beat Wall Street’ strategies. It goes against the whole grain of responsible investing.

If you do not believe in the strategy yourself enough to invest more than 5% of your portfolio, you shouldn’t be writing emotionally persuasive rhetoric which could send some unsuspecting newbies toward this strategy.

Chin

My appologies. I didn't realize I was replying to a blog entry.

I'll not be back here.

Chin

I have taken minor positions in Fundx, Hotfx, Unbox, and Stocx just to watch the momentum effect. Over the last five years they (Fundx, Hotfx) are matching the performance of IFA/DFA  100% Equity portfolio..  dave