A what's-hot-now strategy that succeeds over the long haul.
Sometimes being trendy is good for you. Consider FundX Upgrader, a fund based on the what-works-now strategy of Janet Brown's monthly NoLoad Fund*X newsletter. Brown's approach is simple: She rounds up top-performing funds, then cuts them loose when their returns slip. This allows the investor to tap into whichever area of the market is in vogue, which these days includes energy-sector and Japan funds. "We don't apply judgment or try to forecast what will happen -- we just stick with what's working now," says Brown, 55.
So far, the four-year-old fund's short-term strategy has produced relatively long-term gratification. Upgrader (symbol FUNDX; 800-763-8639) returned an annualized 14% over the past three years to November 1, four percentage points per year ahead of Standard Poor's 500-stock index.
Upgrader, one of five funds in the FundX family, is based on the newsletter's most successful portfolio, called Higher Quality Stock Funds. It's been so successful that Brown considers those picks to be the letter's "model portfolio." If you had invested in the Higher Quality portfolio's top five funds over the past 25 years, you'd have earned an annualized 17%, according to Hulbert Financial Digest. That would have trounced the market's overall return by six percentage points per year. Recently, the Higher Quality top-ranked funds included ICAP International and Neuberger Berman Partners.
Buying this portfolio in a ready-made fund of funds is more convenient than following Brown's letter and assembling your own fund portfolio, but you pay a price. On top of Upgrader's annual 1.25% management fee, you also effectively pay the fees of the funds it owns. Based on the fund's most recent holdings, says Morningstar, that amounts to annual fees of 2.3%.