Our most aggressive core strategy, Fund Upgrading is a “momentum” strategy premised on the idea that recent past performance tends to persist. The strategy has you diversify your portfolio across five stock fund “risk categories” and up to four bond fund categories. You then buy the funds SMI objectively determines to have the highest momentum, occasionally replacing lagging funds with those showing stronger momentum. With only monthly maintenance, Fund Upgrading has generated considerably better long-term returns than the overall market. This article explains the changes to put in place for the coming month.
There are several fund changes this month. In light of the fact the new 2015 category allocations will be released next month and most members will be rebalancing their portfolios at that time, some readers may be tempted to wait until then to make any changes. Our advice is to go ahead and make these changes now as you normally would. While this could lead to additional transaction fees in January when the rebalancing process is completed, those fees are usually relatively small compared to the value of staying in “sync” with the latest recommendations, especially in larger accounts. Also, don’t be concerned if your allocations are off between the two large-company stock categories after this month, where we are moving a fund from one category to another (more below). You can make any necessary adjustments there next month when you rebalance.
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