Should I Sell Low and Buy High?

Q: "You Got to Know When to Fold 'Em"  has me puzzled. If I sell my lagging funds and buy your recommended Upgrading funds, it seems like I'm "selling low and buying high." Is that really a good idea?

Upgrading is based on a quantifiable market reality called "performance momentum." At any given time, based on the interaction of market conditions and the particular investing approaches of various fund managers, some funds will perform better than others. Upgrading seeks to identify these better-performing funds as early as possible and tap into their higher returns as long as possible.

Our selling discipline doesn't allow recommended funds to become long-term laggards. To offer a relay-race analogy, when an Upgrading fund begins to get "tired," the baton is handed off to a "fresher" fund to continue the race.

True, switching to Upgrading may mean selling laggards when they're down, while buying recommended funds that have performed better lately. But the research behind fund momentum and the Upgrading strategy indicate there's good reason to believe the funds you buy now will outperform the laggards you're replacing. (Well delve into this in more detail in November).

• Performance Momentum and SMI's Fund Upgrading Strategy [PDF]  

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Performance Momentum and SMI's
Fund Upgrading Strategy [PDF]  

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