Upgrading Strategy Eyes Foreign Funds

Focus: GLOBAL

Janet Brown Image Janet Brown Editor, NoLoad Fund*X

Funds that have done well recently tend to continue to do well in the coming months and even years, says Janet Brown, explaining the proprietary Upgrading strategy behind NoLoad FundX. Here, she also highlights a recent trend towards strong rankings for foreign funds.

For the last eight years Upgrading kept us mostly invested in domestic funds as U.S. markets outpaced foreign. But markets change. Historically, markets rotate between U.S. and foreign stocks about every five years.

This last U.S. trend was longer than average, but that doesn’t mean you should write off foreign funds for good. If you exclude foreign funds entirely, you could miss out on years of strong performance overseas.

Our Upgrading strategy prompts you to buy foreign funds when the trend favors foreign markets, and it moves you into U.S. funds when domestic markets start bringing in stronger recent returns.

Market trends typically move in fits and starts, and there were times like 2005 when we were led to reduce our foreign exposure in the midst of what we now know was a clear foreign trend, and there were years like 2012 when we began moving back into foreign funds only to see U.S. markets once again take the lead.

Upgrading has a good record of capitalizing on major trends and limiting the damage from these kinds of fakeouts along the way. This month, as foreign funds have come up the ranks again.

We can’t know whether this month’s ranks represent the start of a new trend or a temporary shift (many respected analysts believe the trend is finally shifting away from the U.S.).

What we do know is that markets will change, and we can prepare for these changes by staying open-minded,
considering a broad mix of funds (including foreign and domestic funds), and investing in the funds that have the strongest recent returns.

In our monthly Upgrader portfolio we have new recommendations for iShares MSCI France (EWQ) and the iShares MSCI Korea (EWY).

In addition, among aggressive stock funds we have a new buy rating on the iShares MSACI EMU Index (EZU), which corresponds to the European Monetary Union (EMU) markets. Among core stock funds we have a new buy recommendation on the Vanguard Euro Index (VGK).

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