Shareholder Letter

Set a Plan and Stick to It

Dear Fellow Shareholders,

So far in 2011 choppy market action has been shaped by a variety of economic challenges, geopolitical trials and natural disasters. Bonds outperformed stocks in the second quarter as concerns of a global economic slowdown and the European debt crisis overshadowed  fears of inflation and rising interest rates.  Recent reports of weakness may be temporary, partly due to Japan coming to a standstill.  It’s possible that the economic soft patch will harden.  Commodity prices have corrected and corporate earnings and cash are solid.

Ever since the market collapse of 2008 investors have been extremely cautious, putting most money into bonds. Yet when stocks are in a rough patch,  market declines can be a buying opportunity.  Since stocks bottomed in March 2009, we’ve had 12 pullbacks (between 5% – 9%) from a high and each time we’ve gone on to make a new high.

We’ve weathered two corrections so far this year: the first quarter retreat lasted about four weeks and the second quarter slide was six weeks.  That long of a losing streak hadn’t happened since September 2002.  Skittish investors again pulled assets from stock funds and loaded up on bond funds.  But remember that pull-backs are part of normal market action.

Too often investors are their own worst enemy: they buy while stocks are doing well and sell when the market declines, essentially buying high and selling low.

This is why the annual DALBAR study consistently shows that investors gain far less than their mutual funds.  As DALBAR president Louis Harvey told USA Today in June, investors “jump in and out of the market at the wrong times, due largely to emotional decisions driven by fear and greed.”

Financial planner Carl Richards also urges investors to avoid reacting emotionally. “The reality is that all we know what the market has already done,” Richards wrote in a March 2011 post on the New York Times Bucks blog. “We have no real idea of what it will be doing tomorrow or next week.” The challenge for investors is how to live with this uncertainty.

Please call us at 800-763-8639 if you have any questions.   All the best for a glorious summer,
Warm regards,
Janet Brown

Diversification does not assure a profit nor protect against loss in a declining market.

• Small-and medium-capitalization companies tend to have limited liquidity and greater price volatility than large-capitalization companies.
• Investments in foreign securities involve greater volatility and political, economic and currency risks and differences in accounting methods.
• Investments in debt securities typically decrease in value when interest rates rise.This risk is usually greater for longer-term debt securities.
• ETF Trading Risk – Because the funds invest in ETFs, they are subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of an ETF’s shares may trade at a discount to its net asset value (“NAV”), an active secondary trading market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact a Fund’s ability to sell its shares.

Additional Risks Associated with the FundX Tactical Upgrader Fund and FundX Tactical Total Return Fund:

• Non-Diversification Risk –The Underlying Funds may invest in a limited number of issuers and therefore may be considered non-diversified.
• Short Sales Risk –The Underlying Funds may engage in short sales, which could result in such a fund’s investment performance suffering if it is required to close out a short position earlier than it had intended.