Tuesday, December 05, 2006

Upgrader Funds

(This is not at all to be taken as financial advice, just some musings.)
When it comes to investing strategies, there are two basic approaches in buying mutual funds.
(These are funds which take your money and invest them in particular stocks for you, for a fee. Sometimes the investment is across huge swaths of the market, like funds that invest in those stocks that make up the S&P 500 [the "top" 500 companies in the US stock market], or the Wilshire 5000 Total Market. They can also be quite focused, like investing solely in biotechnology, or real estate.)
One approach is a market timing approach - entering the market when certain indicators show that the outlook for growth is favorable, and exiting when the signals are unfavorable. This takes some following of a strategy - either your own, if you're really, really expert, or of a market timing newsletter, such as that of Bob Brinker, among many others.
The other approach is the buy-and-hold strategy. This means that you put your money in a fund, and let it sit there, riding out the ups and downs of the market. Over time, the US stock market has outperformed other, more conservative, instruments of investment, such as government bonds. If someone has a long enough time-horizon to wait out the inevitable roller-coaster, past history indicates that overall one will do better in the stock market than elsewhere.
For the buy-and-hold investor, the Upgrader funds are an interesting option. The strategy is based on an intriguing concept. This fund buys other mutual funds which are just beginning to perform well, in the hopes of riding the wave. As the fund begins to underperform, (trends are determined based on certain algorithms), the Upgrader fund shifts out of those funds.
Since the inception of FUNDX (the trading symbol for the basic "Upgrader fund"), the fund has significantly outperformed the S&P 500, which is a traditional benchmark used in comparison to a fund. You can go here for the data. (You can enter 'FUNDX', then a space, then 'VFINX', which is a fund which mirrors the S&P 500 index, and see the results over the medium and longer term)
[Full disclosure - I have retirement money in that fund]
Saving for retirement is a very important priority, as Social Security, even if it survives until retirement age for thirtysomethings like me, will not cover costs of living, and company pensions are basically a thing of the past. Looking into investment in mutual funds as a way to provide for the golden years is a good idea.
Now, I could go off on a tangent to discuss how one stream of Judaism today mirrors the buy-and-hold, and one is more the market timer, adjusting and tinkering as the climate dictates, but that's not really the point of the post. It was more to see who among Mishmar readers, if at all, is into this stuff... [If politics works...] (and a public service reminder to save for retirement).

Links to this post:

Create a Link

<< Home