How We Do It
Everything we do is based on our Upgrading strategy, a logical, evidence-based global approach to investing that’s been confirmed by decades of academic and industry research as well as FundX’s long-term track record.
Funds that have done well recently tend to continue to do well in the coming months and even years. Academics call this "persistence of performance", and they’ve been studying it for decades. Morningstar found evidence of it in its 2016 study, “Performance Persistence Among U.S. Mutual Funds”.
Upgrading is a disciplined, three-step process designed to capitalize on the persistence of performance of funds and ETFs.
Three Step Process
Step 1: We’re selective. We rigorously screen the fund universe to focus on about 1600 funds and ETFs we’d be willing to invest in when they are doing well.
Step 2: We manage risk. We classify funds by risk, separating the most aggressive funds from the most conservative. Our risk classes are intentionally broad: we mix growth and value funds, international and domestic funds, and large- and small-cap funds so that we can see which funds are doing relatively well now.
Step 3: We invest in funds with strong recent returns. We rank funds by their recent returns and invest in the top-ranked funds. We sell funds that don’t continue to perform well and reinvest in new top performers -- a process we call Upgrading.
Money Magazine called Upgrading “the Leapfrog Approach to Fund Investing”. It has helped thousands of investors use mutual funds and exchange-traded funds (ETFs) to build wealth, navigate changing markets, and meet lifelong investment goals since 1969.