A Simple Idea That Simply Works

Upgrading involves measuring near-term performance of mutual funds (twelve months and less) and comparing them to returns of other funds with similar risk. We rank hundreds of funds in this manner each month. We invest in funds with the best recent returns, and monitor their performance. When a fund drops in our ranks, we “Upgrade.

Upgrading Helps Balance Risk and Reward. It is impossible to eliminate the risk of losing money in the stock market in the short term.  But there are ways to effectively manage that risk.

Only Near-term Returns Indicate Funds Doing Well in the Current Market Environment. Funds that have outperformed in recent quarters tend to continue to show strength into ensuing quarters, a phenomenon known as “persistence of performance.” Upgrading is a disciplined method of exploiting this phenomenon.

Risk-based Fund Classification Offers a Full Range of Investment Opportunities. We group equity funds into four risk classes, with bond funds grouped into a fifth class. We don’t isolate international funds from domestic, or growth funds from value funds. Instead we segregate funds based on portfolio diversification and downside risk.

Exploit Trends in Market Leadership Without Being Lured into Riskier Funds. Funds with the highest returns to rise to the top of our rankings, whatever their investment approach. We can confidently compare funds based on current performance, and move between them without increasing our overall portfolio risk.

Gradually Move to the Top. Instead of getting whipsawed by the market’s moves, we move incrementally to the top-ranked funds by progressively selling the lower ranked funds and reinvesting in the new market leaders.