Has Anyone Tried NoLoadFundX?

[Patrick]

FUNDX's literature states that their objective is to beat the S&P500 index with similar volatility. The thing is, over the past six years anyone could have beaten th S&P500 by investing in Total Foreign. Shrug.

How do you know in advance to invest in Total Foreign?

 

[lightwaves]

I think the point here is that fundx appears to lower the risk by attempting to be in the funds that are performing the best at the time regardless of sector. It is not trying to guess at which sector is going to be the right one. Yes, if you guess right, you may make more money than fundx but with much greater risk that you may be wrong if you try to target a narrow sector and hope for the best. The way I look at it is to get a decent return (greater than the S & P average) while keeping my over all risk as low as possible.

 

[cute fuzzy bunny]

You would have to know in advance that the REIT fund would perform like it has. FundX has been changing funds over the years according to its strategy.

How do you know in advance that the things fundx buys are going to perform as well as the things fundx has picked in the past, especially when its past is primarily a bull market where almost everything went up almost all the time?

What exactly is the measured benefit of "the strategy" vs the measured benefit of that bull market?

Most distributed asset allocation plans using 4-5 different asset classes composed of cheap passive index funds produced a similar or better return with less volatility, no need to change funds and incur huge capital gains ( or losses ) and much more tax efficiency.

To pick a funds pure bull market record, compare it to an index it doesnt mirror, and claim a successful strategy isnt good investing.

But then again, neither is the idea of momentum investing. You're betting that you know what the short to medium term mass psychological reaction of the market investors is going to be for a set of asset classes. Good luck with that when they turn fickle.

Its gambling, not investing.

 

[cute fuzzy bunny]

Compare fundx to vanguards global equity fund...something with a little more variety and a closer risk profile than the s&p500. Hint: the difference causing the advantage is the expense ratio and tax efficiency. Otherwise they move in near lockstep.

 

[ERD50]

I think the point here is that fundx appears to lower the risk by attempting to be in the funds that are performing the best at the time regardless of sector. It is not trying to guess at which sector is going to be the right one.

Personally, I don't care so much what their strategy is - I care about results.

The way I look at it is to get a decent return (greater than the S & P average) while keeping my over all risk as low as possible.

Problem is, FUNDX does not meet that criteria. It is more volatile than the S&P, so it makes no sense to compare performance to the S&P.

As I pointed out above, Morningstar says that it's volatility more closely matched the MCSI EAFE. And FUNDX underperforms that index.

Here you go - on a one year period, FUNDX underperformed BOTH the S&P and the MSCI EAFE. Higher highs AND lower lows. IOTW, higher volatility.

EFA: Basic Chart for ISHARES MSCI EAFE FD - Yahoo! Finance

-ERD50

 

[lightwaves]

What do you think of the following discussion of fundx performance from their web site:

NoLoad FundX | Mutual Fund Perfomance | Mutual Fund Investment Strategy

 

[ERD50]

Another thing those yahoo charts don't reflect - yields. Those are graphs of NAV, and a little extra yield will make a diff over a longer time period.

EFA (iShares MSCI EAFE Index) - Yield:2.75%
FUNDX - Yield:2.07%

And, in a taxable account, there is this:


EFA (iShares MSCI EAFE Index) - Annual Holdings Turnover 5%
FUNDX - Annual Holdings Turnover 84.00%

-ERD50

 

[Patrick]

To pick a funds pure bull market record . . .

I think the fund's record included the end of the dotcom bear market. The reason that time frame is used is that the fund's inception date was 11/02/2001.

Anyway, here are some stats on the newsletter from 1980 to 2006. It has a few bear markets in it.

Welcome to NoLoad Fund*X

 

[Patrick]

And, in a taxable account, there is this:

FUNDX - Annual Holdings Turnover 84.00%

-ERD50

So are there any tax strategies to get around this, other than doing the trading in a tax-deferred account?

Does it make a difference at the other end when we have to pay taxes on deferred money anyway?

 

[Patrick]

Here you go - on a one year period, FUNDX underperformed BOTH the S&P and the MSCI EAFE.

-ERD50

If you're buying the individual mutual funds yourself as recommended by the newsletter, you will do better by the percentage of the management fees charged by FundX, since you're no longer paying them, correct?

 

[kombat]

Actually, the strategy is a momentum play - you invest in funds that have done well in the recent past on the assumption that they will continue to do well in the near future. When they stop performing well, you switch to other funds that are doing better at that time.

How is that not "Buying high, and selling low"

 

[Patrick]

How is that not "Buying high, and selling low"

Well, I think the idea is to "buy medium and sell higher than that."

 

[cute fuzzy bunny]

Seems your mind is made up Patrick. I guess the lure of beating the market is just too hard to avoid even when faced with superior performing, lower risk, cheaper alternatives that require no special skills or newsletters.

Thus, I recommend sinking as much of your money as you see fit into it and let us all know how it works out for you.

Kombat...its about buying into irrational exuberance and riding it for just the right time. Somehow someone thinks they know the right time to get in and get out. With tens of thousands of mutual funds having been unable to do that successfully over a hundred year period. But this time its going to be different.

 

[ERD50]

What do you think of the following discussion of fundx performance from their web site:

NoLoad FundX | Mutual Fund Perfomance | Mutual Fund Investment Strategy

Two things:

1) Why can't they duplicate this performance in a mutual fund, so I can just buy it and not need to trade and follow a bunch of funds?

2) They did very well in some years. Great - how do you know which years to be in this fund? Even their star Class 3 has underperformed the EAFE since 2002. If I got in in 2002, I would not be such a happy camper.

-ERD50

 

[Patrick]

Seems your mind is made up Patrick. I guess the lure of beating the market is just too hard to avoid even when faced with superior performing, lower risk, cheaper alternatives that require no special skills or newsletters.

No, my mind is not made up, which is why I started this thread. I want to explore the possibility that this may work. Your mind, though, apparently is made up. Please tell me what the superior performing, lower risk, cheaper alternative is and I will consider that also. In addition, I'm interested in your newsletter - please provide additional info. Thanks.

 

[twaddle]

Patrick, I have no knowledge of the FUNDX strategy, but the academic support for momentum as a source of additional returns is pretty compelling. If I were you, I would first check out the academic data. I referenced a study of Dimson earlier in this thread. There are also papers that tell you which strategies have performed best historically (in terms of momentum periods vs trading costs, etc).

BTW, it's not well known, but even some "passive" index funds try to capture momentum to some extent. For example, a "value" index might be designed to add stocks and remove stocks from the index when they reach a certain P/B threshold. But they've found that letting the stocks run (in both directions) before they add/remove from the index increases returns. I think DFA was the first to implement this "bonus" feature.

Also, FUNDX is discussed on other sites. For example:

NoLoad FundX vs. Equity Fund Outlook (in taxable account)

Why not set up a horse race? Buy the newsletter. Trade in your tax-advantaged account. And compare to some of the more mainstream approaches over time. Worst case, you'll pay for an education.

 

[samclem]

Hmmm. So, they have a "Class 3" thing. This prompts my suspicions, too. I've seen other newsletters that had various flavors of lists ("aggressive", "conservative" or "1", "2""3", or Red, Blue Gold, Pink, etc). Over time, they merge the lists or add new ones, and somehow the new thing keeps the performance record of the best thing that was blended into it. Fund families do the same thing with their dog funds--they quietly go away. Survivorship bias lives.

Also, it would be interesting to do a sensitivity analysis on this FundX thang and see just how critical the day of purchase/sale is. Most of us have a real life, and we won't be able to check the recommendation every day and trade immediately (we take vacations, etc.) But, some of these newsletters have, in the past, somehow made very "fortuitous" buy/sell calls that would have been impossible or impractical for a real investor to comply with. So, I'd like to know just what the record would be if the [-]drone's [/-]investor's moves are 3 days later than the buy/sell recommendations of the [-]racing form[/-] newsletter.

If it were easy, or even possible, the big money would be doing it.

 

[unclemick]

Patrick, I have no knowledge of the FUNDX strategy, but the academic support for momentum as a source of additional returns is pretty compelling. If I were you, I would first check out the academic data.
Why not set up a horse race? Buy the newsletter. Trade in your tax-advantaged account. And compare to some of the more mainstream approaches over time. Worst case, you'll pay for an education.

1980's - even got to read my buddy Huel's copies for free at the old rocket plant.

And boy did I pay for the education. ER'd at the end of 1992 - S&P500 Index was the horse I rode to victory - all the others died, were put out to pasture or are maybe still running somewhere.

It's the hormones - happens every generation and I truly believe it's incurable - but with the right 12 Step Program aka once a month DCA into Index funds the disease can be managed.

I believe I saw the same momentum the academics did - several times - but catching it or keeping it proved somewhat elusive.

And there are always the few who catch 'the one in the decade' and are set for life - and are not quiet about it.

heh heh heh - around our water cooler - it was a woman engineer - isn't it always that way.

 

[TickTock]

How do you know in advance to invest in Total Foreign?

You don't. The point is, FUNDX is set up to look very different than the S&P500, yet that's what they're using as a benchmark. If they'd picked Total International as a benchmark instead, they'd look not so hot. Neither is (IMO) a correct benchmark.

 

[cute fuzzy bunny]

No, my mind is not made up, which is why I started this thread. I want to explore the possibility that this may work. Your mind, though, apparently is made up. Please tell me what the superior performing, lower risk, cheaper alternative is and I will consider that also. In addition, I'm interested in your newsletter - please provide additional info. Thanks.

I already pointed to the vanguard REIT fund and their Global Equity fund, both of which beat fundx since its inception.

I also provided a link to a book report I wrote compiling the key points of hundreds of pages of materials that analyzed the jumpin' bejeezus out of this topic and came to the inescapable conclusion that active management and trying to time the market does not, has not, and will not produce significant improvements in returns. In fact, the overwhelming heap o' data says that active management and market timing reduces returns, increases costs, increases taxes, and produces a lot of disappointment.

So yes my mind is made up. I used to feel certain that some element of timing was very possible. I used to feel that active management simply MUST help at least a little bit when the markets are highly volatile. On the basis of having read big heaping piles of material that conclusively proved all of those suspicions to be blatantly false, I changed my mind.

There really ARE two kinds of people. Those that know they cant beat the market and those who dont know they cant beat the market.

Hey Twaddle you seem persistently interested in the benefits of momentum investing. Which newsletters are you subscribed to, which funds have you purchased and what % of your net worth is invested using this strategy?

I'm sure your money is where your mouth is.

 

[Patrick]

I already pointed to the vanguard REIT fund and their Global Equity fund, both of which beat fundx since its inception.

I also provided a link to a book report I wrote compiling the key points of hundreds of pages of materials that analyzed the jumpin' bejeezus out of this topic and came to the inescapable conclusion that active management and trying to time the market does not, has not, and will not produce significant improvements in returns. In fact, the overwhelming heap o' data says that active management and market timing reduces returns, increases costs, increases taxes, and produces a lot of disappointment.

So yes my mind is made up. I used to feel certain that some element of timing was very possible. I used to feel that active management simply MUST help at least a little bit when the markets are highly volatile. On the basis of having read big heaping piles of material that conclusively proved all of those suspicions to be blatantly false, I changed my mind.

There really ARE two kinds of people. Those that know they cant beat the market and those who dont know they cant beat the market.

Hey Twaddle you seem persistently interested in the benefits of momentum investing. Which newsletters are you subscribed to, which funds have you purchased and what % of your net worth is invested using this strategy?

I'm sure your money is where your mouth is.

So you are invested in Vanguard's REIT and Global Equity funds?

 

[twaddle]

Hey Twaddle you seem persistently interested in the benefits of momentum investing. Which newsletters are you subscribed to, which funds have you purchased and what % of your net worth is invested using this strategy?

I'm sure your money is where your mouth is.

CFB, why so angry? I try to keep an open mind, especially when there is compelling evidence.

Here's a blurb from the article on the Dimson study:


Momentum investing in equity markets delivers "striking" and "remarkably persistent" excess returns, according to the most comprehensive study to date of the phenomenon.

Yet the study's highly regarded authors, Elroy Dimson, Paul Marsh and Mike Staunton of the London Business School, confessed to being "puzzled" by the findings, which fly in the face of a belief in efficient markets. "As a measure of abnormal performance it is quite striking," said Mr Dimson, BGI professor of investment management at LBS.

Since I find the evidence for multiple approaches compelling, guess what I do? I use multiple approaches!

My momentum trading portfolio is up 38% YTD. A meaningless number, but you wanted to know. FWIW, I use options to go both short and long.

I'm still learning, and I'm still open to other proven approaches. Whatcha got for me?

 

[cute fuzzy bunny]

So you are invested in Vanguard's REIT and Global Equity funds?

Got some reit but never owned global equity. Probably be dumping the reit pretty soon.

Why dont I own them? Frankly I dont need the risk, the volatility or the returns.

If I did, I'd look at other options besides ones that I already know arent very good strategies. This is just another "get rich quick" scheme, except the people assured of getting rich arent the investor. Its the newsletter seller and the fund managers.

Where do you see anger Twaddle? I just saw that you pipe in anytime theres a discussion on momentum and thought I'd make sure everyone knows that you dont actually have a horse in the race, proven by the fact that you answered none of the three questions I asked!

 

[twaddle]

CFB, I don't subscribe to any newsletter. I'm a DIY guy trying to figure this stuff out from the academic studies. I believe I gave you a reference in another thread that outlined a few approaches.

What I always love about these momentum discussions is the same thing I love about the market timing discussions. We always have some "gurus" who say "that doesn't work!" But they never bother to define exactly what doesn't work. And for some reason, very few people here seem to be interested in what does work, to what extent it seems to work, and how or why it might possibly work. Surely somebody here besides me must find this stuff interesting rather than something which must be shutdown with chants of "Bernstein! Bernstein! Bernstein!" Or something.

So that covers your first question. I already answered your second question. I don't use funds -- I use options.

And it's a small part of my portfolio. Like I said, I'm still learning. Just dipping my toes in the water at this point.

 

[Patrick]

Surely somebody here besides me must find this stuff interesting rather than something which must be shutdown with chants of "Bernstein! Bernstein! Bernstein!" Or something.

I'm certainly interested. After all, if index investing a la Bogle puts you at the 80th percentile, there's still 20% above that left to be exploited.