Picking the Best Mutual Fund

Thursday, September 02, 2010

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Simple Truths

This year's best fund is often next year's worst fund.
No fund is always the best fund.
The best fund is, invariably, a sector fund.

Sector Funds

Momentum strategies work best when trading among sector funds. These funds don't all look like the green S&P 500. Each follows its own chart pattern.

FastTrack's Momentum Monthly FTAlpha Model produces the red line which is the actual value of a portfolio once a month over many years of Momentum trading. The red line consistently beats the green line, the S&P 500 return, gaining over 20% annually (ANN=20.34%)

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Always be in the best fund! FastTrack strategies gradually shift among funds. Momentum strategies sell the losers and buy the winners. Momentum strategy works for both aggressive and conservative retirement accounts.

Click for more on how the Model trades sector funds.

For More than Sectors

The green line is the S&P 500. The yellow is line is a simple, equally weighted average of all growth mutual funds.

The chart shows that growth funds are more volatile than the S&P 500, move in the same pattern as the S&P, and have slightly better return than the S&P.

To take full advantage of growth funds, you have to trade. The red line is a quarterly Momentum Model of the same Growth funds. The return (Ann=) is more than 4% per year higher than the simple growth average.

Try the Quarterly Momentum Model Free,
Click to download.

A Diversified Portfolio

Vanguard offers a wide variety of funds, and they allow quarterly trading. This chart shifts assets among

VFINX,Vang 500 Index
NAESX,Vang SmallCap
VUSTX,Vang USTres LTrm
VEIEX,Vang Emerg Mkts

The red Screen Average is computed by the FastTrack Quarterly Momentum Model.

The red line is much less volatile than the individual equity funds with better return.
The bear market from 2000-2003 becomes a flat period, not a period of total loss.
The best periods of the volatile Emerging Markets fund are picked up, not the worst periods.

To try the Quarterly Vanguard Momentum Model Free,
Click to download.

Frequent Trading?

For frequent traders, the Momentum Model works well in the universe of exchange traded funds and bear funds like Rydex Ursa

SPY   S&P 500(SPDR)
MDY   S&P 400(SPDR
RYURX Rydex Ursa
EEM   MSCI Emerg Mkt(iS)

In this case the Momentum Model's resistance to the bear market is provided by Rydex Ursa. Use of bear funds always reduces volatility, but can hurt bull market return. The portfolio could be traded daily without redemption fees and restrictions.

To try the Frequent Trading Momentum Model Free, Click to download.

Note that many ETF's, like EEM, have only a small amount of historical data, but you will find that they closely correlated to similar Vanguard funds with 20+ years of history. Run the Model with the long established funds, but trade the equivalent ETF.

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Call 866-295-0166 for help getting started. We will show you how to do these strategies for yourself.

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