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Because Markets Change: An Ever-Changing Portfolio

FUNDX: An Ever-Changing Portfolio
Because markets change, we change our portfolios, too. We change FUNDX’s portfolio in an attempt to take part in broad market leadership trends, such as foreign and domestic markets and large-, mid- and small-caps.  This is illustrated in the charts below.

Over the past 12 years, there were times when FUNDX looked like a foreign fund, with 80% invested in foreign and emerging market funds. At other times, FUNDX looked more like a domestic large-cap fund, with 80% in large-cap U.S. funds and ETFs. Recently, the Fund has looked more like a global fund with 20% in foreign funds and 60% in U.S. mid-cap funds.

Foreign & Emerging Markets

FUNDX has the ability to take advantage of global market trends, as the chart of the fund’s foreign and emerging market exposure indicates. FUNDX may not always look like a global fund, but at times it can be (and has been) primarily invested in foreign funds and ETFs.

When international markets outperformed from 2002 through 2007, we had up to 80% of FUNDX’s portfolio invested in foreign funds and ETFs with limited exposure to emerging market funds. Because emerging economies can be volatile, we cap the amount we invest there – that’s why the levels on the Emerging Markets chart seem so low even when FUNDX is invested in that area.  But even a small commitment to these stocks can give a big boost to returns.  

FUNDX’s emerging market exposure has dropped to almost zero in recent years because emerging markets have done so poorly. We’ve also replaced most of the Fund’s foreign fund exposure as U.S. markets, particularly large- and mid-cap funds, have outperformed.

Large- , Mid- and Small-Cap Stocks

FUNDX’s exposure to different market capitalizations has also varied over the years. FUNDX can be fully invested in large-or mid-cap U.S. stocks, but we limit the Fund’s exposure to small-caps because small company stocks can be more volatile than those of seasoned companies.  

Large-, mid- and small-cap funds made up a sizable part of the Fund’s portfolio in the early 2000s, but we replaced most of these positions in 2003 through 2007 in favor of leading foreign funds and ETFs.

Since the 2008 declines, large- and mid-cap funds and ETFs were often strong performers (investors often favor the stability of big, established companies in periods of market uncertainty) and the Fund has had steady exposure to both large- and mid-cap funds, but not always at the same time.

In 2011 - 2012, as dividend-paying large-cap stocks led, FUNDX’s was almost entirely invested in large-caps, but in 2013, we were led to replace some of FUNDX’s large-cap positions with leading mid-cap funds and ETFs. In recent years, the Fund has had roughly 10% in small-cap funds and ETFs.

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