Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

FundX Upgrader

edited September 2013 in Fund Discussions
David’s article on FundX Upgrader Fund [FUNDX] is insightful. I’ve read it twice, and will read it again.

I have subscribed to the NoLoad FundX Newsletter, from time to time, though I’ve never followed their approach. In 2007, I attended an AAII seminar featuring a speaker from FundX Investment Group. What struck me as interesting, besides the presentation, was how many of the audience members were talking amongst themselves about how they were buying only the hottest high-risk funds [no effort to follow the newsletter’s diversified approach; these people were just chasing the high flyers]. It reminded me of the crowd you would see at a racetrack. They were all piling in at the top of the market.

Comments

  • Dear Lawler: First I am linking an audio interview with Janet Brown from Chuck Jaffe's Money Life Show on 9/13/13. Next I am linking a Lipper Snapshot of FUNDX and it's performance against the benchmark S&P 500. It has failed to beat the bogey YTD, 1yr. 3yr. 5yr. 10yr.
    Regards,
    Ted
    http://www.moneylifeshow.com/highlights.asp Click on download Janet Brown

    Lipper Snapshot FUNDX: http://www.marketwatch.com/investing/Fund/FUNDX
  • Charles! Just to be clear: Charles did all the work, from initial contact to the Bottom Line. And did it really well. I chipped in several text edits.

    David
  • edited September 2013
    Ha! No David, no profile.

    I just listened to Ms. Brown's recent interview from Ted's link.

    Her recommendations on the five funds Mr. Jaffe floated: Buy DODGX, PRWCX, FPACX. Hold VBK. Sell DVY. All based on momentum of past year.

    Once again, I get the impression that there is very little she and the principals at FundX don't know about fund performance. They've been studying this stuff a long time.

    But I also get impression they downplay their own shorter term under-performance, like we discussed in this month's profile and is shown in Ted's Lipper Snapshot above.

    I do like their newsletter.
  • MJG
    edited September 2013
    Hi Lawlar and the MFO Gang,

    My experiences with regard to group behavior at investment seminars dovetails exactly with your observations. Folks attending these forums have low tolerance for investment principles and guidelines, but hungrily seek specific stock picking tips. They don’t want to learn to fish, just a few fish tossed into their nets.

    That’s sad, but has been a constant for at least two decades based on my anecdotal evidence from loyally attending the popular Las Vegas MoneyShow for that period. Investing wizards such as Louis Navellier and Jeremy Grantham always jam-packed their sessions to standing room only status with excited potential clients. Typically, they initiated their presentations with general global projections that bored the audience who really wanted stock recommendations. In the end, they satisfied their anxious fans who took copious notes.

    I attended at least a half dozen Upgrader presentations by Janet Brown. She is an intelligent, dedicated, informed, and charming financial professional. She also is an engaged seller. I like her.

    Several times, especially in the earlier years after the formal sessions, we discussed the asymmetric nature of the Upgrader holdings in terms of an unbalanced portfolio diversification perspective. Fundamentally, the Upgrader methodology is short-term momentum-based with a heavier weighting to the most recent performance data. Consequently, its portfolio allocations favored concentrated positions in a few market sectors while completely ignoring others. The evolving Upgrader techniques are designed to mitigate this effect. That’s in the goodness direction.

    Still, the Upgrader program remains a short-term momentum strategy. The most recent academic work in this area controversially suggests that short-term momentum tactics not only do not add to excess returns, but actually subtracts an amount that approximates the cost of doing the technical analysis. That’s more sorry news for committed chartists. Recent Upgrader fund (FUNDX) performance has definitely not excelled.

    Private investors continually seek the Holy Grail. They do so in an impatient manner. They search for the equivalent of a racetrack tout’s winning picks list, and are all to anxiously prepared to act on these ill-conceived tips. Trade frequently seems to be the operative mantra. But that wealth depleting action plan is not limited to individual investors alone. That mindset has penetrated into the mutual fund management community.

    Indeed, mutual fund managers have developed some wealth eroding habits over the decades. Today, they trade far too often. Just after World War II, portfolio turnover rates were far lower than they currently are. Back in the 1940s, mutual funds held stocks for a 6 year average length with an annual portfolio turnover rate of only 20 %. Today, mutual fund managers hold positions for half a year with 100 % - like turnover rates.

    All that that frenetic portfolio action accomplishes is to increase ownership costs. These guys are not investing; they’re speculating.

    Historical data and academic studies document that the Holy Trinity for improved mutual fund returns is low costs, low turnover rates, and long-tenured, seasoned management. More controversial, low beta funds and tactical momentum funds are sometimes added to that mix. Sadly, the current crop of active mutual fund managers more frequently than not violates the proven triad to the detriment of their shareholders.

    Unfortunately, given our behavioral biases, we will continue to fill the hallways when market experts make their carefully crafted and misleading pitches. They are the modern version of the old West’s snake oil pitchmen. They will influence and sell; we will wistfully buy.

    This is a major reason why individual investors underperform the markets, why mutual fund owners underperform the funds they own, and why active mutual fund managers underperform their benchmarks. It is a sad story that is repeated across decades of disappointment.

    There are attractive alternatives.

    Best Wishes.
Sign In or Register to comment.