Salient to Investors:
Mark Hulbert writes:
Avoid mutual funds whose recent performance has begun to slip, no matter how good their performance might have been in previous years.
Favor funds with stellar recent returns, even if their longer-term performance is dismal.
No Load Fund X is the best performing stock-mutual-fund advisory service tracked by the Hulbert Financial Digest over the past two decades with an 11.3% annualized return versus 8.6% for the overall stock market.
A FundX Investment study of over 300 broad market funds found that the best portfolio was one that picked funds according to an average of their returns over the trailing 1, 3, 6 and 12 months – an 11.7% annualized return from 1/1/99 through 3/31/13 versus 3.5% for the S&P 500 – both include reinvested dividends and net of expenses. Using just the best performing funds over the past 12 months, produced a 10.2% annualized return.
Janet Brown at No Load Fund X said too much weight should not be placed on expense ratios when choosing funds.
The strategy has not beaten the market every year. Funds in mid-2008 that were exhibiting the best performance over the recent past were big casualties in the fall 2008 market meltdown.
Taxes eat into the profit of a frequently switching portfolio, so fund-switching strategies make more sense in tax-deferred portfolios.
The strategy does not work well with funds that charge a commission for purchases or levy transaction costs when selling shares held for only a short period.
Strategies that invest based on short-term recent performance historically don’t work as well with the riskiest funds.
Read the full article at http://www.marketwatch.com/story/pick-funds-with-stellar-recent-returns-2013-04-26
Click here to receive free and immediate email alerts of the latest forecasts.