You know that interest rates are rising and that this could really affect the bond market.
And you also know that many people—even experts—have been predicting higher rates for years now, and those predictions haven’t really panned out.
Even the Federal Reserve doesn’t always get it right. The Fed anticipated making at least three rate hikes in 2016, but it ended up bumping rates up just once that year.
As we talk to investors, we’ve heard about the many different ways they’ve tried to prepare their portfolios for higher rates.
One investor bought into short-term bonds because these bonds are less interest-rate sensitive. But rates stayed low, and her short-term bonds had such low returns that she felt like she was missing out.
Another investor decided to make a large investment in high-yield bonds, which could hold up better than other bonds when rates rise. But high yields turned out to be more volatile than he’d bargained for, and he sold them because he worried that high-yield bonds were a bubble that was about to burst.
Many investors have never had any training on how to effectively adapt to changing markets, so it’s no wonder that they end up making common, but painful, mistakes.
They’re trying to do the right thing, but they often end up holding themselves back.
A strategy designed to adapt to changing markets
We’ve been navigating changing bond markets for decades, and one thing we’ve learned over the years is that a disciplined strategy can help you decide what kinds of bond funds to own now and when to move on to other funds.
A strategy gives you a way to determine when to own more conservative funds like short-term bond funds, and how to mitigate the risk of high-yield or floating-rate funds.
Our Flexible Income strategy is designed to help you make these important decisions, and it has a proven track record of navigating changing bond markets.
In the 2008 credit crisis, it led us to own lower-risk short-term government bonds, which helped us avoid the steep losses from high-yield bonds.
We didn’t stay in low returning short-term bonds indefinitely. When the bond market recovered in 2009, the strategy prompted us to buy back into high-yield, strategic and world bond funds that had strong returns.
This approach also handily navigated rising interest rates in 2016 and 2017. We didn’t have to predict when or how rates would rise, we simply focused on the funds that were excelling in the current market, and that led us to own high-yield and floating-rate funds, which ended up being some of the strongest performing areas. And we avoided more interest-rate-sensitive bonds like Treasuries and long-term bonds.
Our flexible approach to bond investing has helped thousands of investors know what to do when markets change.
It was initially only available to our private money management clients, but today, we share this approach with subscribers to our NoLoad FundX newsletter, and we implement this strategy for shareholders of our Flexible Income Fund (INCMX). It’s also how we manage the bond portion of the Conservative Upgrader Fund (RELAX), a balanced portfolio of both stock and bond funds.
If you are looking for a time-tested approach that designed to navigate changing markets and has track record to show for it, consider INCMX.
FundX Flexible Income Fund (INCMX)
Navigating changing bond markets since 2002
Targets opportunities for gains in the bond market
INCMX targets areas of the bond market that are excelling in the current market environment. In 2017, INCMX owned corporate, high-yield, and floating-rate bond funds, which were some of the strongest performing areas of the bond market.
Responds to changing risks
We change INCMX’s portfolio in response to changing markets. We cut back on high-yield bonds when they fell at the start of 2016, and then bought back into these funds when they recovered.
Responds to changing rates
INCMX’s active strategy seeks to mitigate risk, including interest-rate risk. In 2017, INCMX avoided interest-rate sensitive bonds like Treasuries and long-term bonds. It also invested in total-return funds, which usually invest in both stocks and bonds. Because these funds are not fully invested in bonds, they typically have less credit and interest-rate risk.
How to Invest
You can invest in INCMX at most major brokers, often for no-transaction fee, or you can purchase the Fund directly from our shareholder services for as little as $1,000.
Call 1-866-455-3863 to get started.
Click here for standardized performance of INCMX. Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by calling 866-455-3863 or visiting www.upgraderfunds.com.
Publication Date: Upgrader Quarterly: Winter 2017