No matter where you are on the spectrums of age, wealth, investing experience, or risk tolerance, SMI has strategies that are designed to meet your needs. Each of our 4 strategies is a quantitative approach to investing; this means that each strategy relies on quantitative analysis to guide each move.
The Sound Mind Investing Funds are designed for investors who recognize the tremendous potential of Dynamic Asset Allocation, Bond Upgrading, Fund Upgrading, and Sector Rotation, but who prefer to have the strategies implemented for them by professionals.
Solid strategies and management you can trust are two of the key ingredients you should look for in choosing mutual funds. We believe the Sound Mind Investing Funds offer both, and invite you to examine whether they may be the right investment vehicles to help you pursue your financial goals.
**Please click on the strategies to learn more**
DAA - Dynamic Asset Allocation:
Dynamic Asset Allocation (DAA) strives to capitalize on the fact that economic conditions change over time. The economy unpredictably cycles through extremes of prosperity, recession, inflation and deflation. During each of these economic phases, certain assets tend to perform well, while other assets do not. The goal of DAA is to invest in the asset classes that are best suited for the current economic environment and (possibly more importantly) to not be invested in the asset classes that are poorly suited for the current economic environment.
The strategy involves using exchange-traded funds to rotate among six asset classes, holding three at any one time. The six asset classes are:
- US Stock Market
- International Stock Market
- Real Estate
- Precious Metals (Gold)
DAA is designed to be a defensive, low-volatility strategy with the goal of demonstrating the power of “winning by not losing.”
|SMI Funds Using DAA||% of Fund’s Portfolio Typically Using This Strategy|
Fund Upgrading is a “momentum” strategy built on the idea that recent performance tends to persist. The strategy normally diversifies across five stock fund “risk categories”.
Fund Upgrading attempts to own the best-performing stock mutual funds and ETFs, regardless of what the current market environment may be. The Fund Upgrading strategy has been a principal investment strategy recommendation of the Sound Mind Investing newsletter, a separate entity, to thousands of subscribers since it began publication in 1990.
In this strategy we continually monitor and rank thousands of mutual funds in order to determine which ones have been performing the best recently. We purchase those funds showing superior performance relative to their peer group, and hold them until they stop outperforming. When that occurs, those lagging funds are sold and replaced with other funds showing stronger recent performance.
Fund Upgrading is based on research indicating that, as economic conditions change, market leadership rotates among companies of different sizes, and among different investment approaches.
While market conditions are constantly changing, fund managers rarely change their approach. Managers that excel under one set of market conditions are often only average (or worse) under a different set of conditions. Rather than buy a fund and hold it through both the periods that favor the manager's approach and the periods that don't, Fund Upgrading attempts to seek out and buy those funds that are excelling right now. We make no attempt to predict which funds will lead the market in the future. Instead, Fund Upgrading helps us to gradually move into funds that reflect the market's continually evolving leadership. While most investment approaches focus on long-term performance as the key to determining which mutual funds will succeed in the future, we believe the opposite is true. Research has shown that funds exhibiting superior performance in recent months tend to continue to perform well in the following months. As a result, we focus only on returns over the past 12 months in determining which funds are the best candidates for ownership. This approach to selecting new funds, coupled with a strong discipline to replace lagging funds, is the key to the Upgrading strategy. The Fund Upgrading strategy typically invests in underlying funds in the following five “risk categories.”
- Large-Cap Value
- Large-Cap Growth
- Small to Mid-Cap Value
- Small to Mid-Cap Growth
These broad category definitions make a wide range of investment opportunities available since the strategy typically owns a mixture of foreign and domestic investments at any given time, as well as a mixture of funds that invest in both larger and smaller stocks. In addition, the strategy typically provides diversification among various management styles (i.e., "growth," "value," and other management styles).
|SMI Funds Using Fund Upgrading||% of Fund’s Portfolio Typically Using This Strategy|
|SMILX||0% with the ability to use up to 60%|
This strategy typically invests in a single special-purpose stock fund (ETF) that focuses on a specific sector, like biotech or financial services. These especially high current momentum funds are identified by SMI’s quantitative analysis techniques. Sector Rotation is usually considered a high-risk, high-reward strategy. While its peaks and valleys are expected to be higher and lower than the other SMI strategies, Sector Rotation’s goal is to generate impressive long-term returns.
|SMI Funds Using Sector Rotation||% of Fund’s Portfolio Typically Allocated to This Strategy|
Bond Upgrading is a “momentum” strategy built on the idea that recent performance tends to persist. The SMI Funds using this strategy can invest in bond funds, bond ETFs and individual bond securities.
Bond Upgrading attempts to gain exposure to the best-performing bond types and bond durations, by applying special momentum techniques both within and across bond categories.
SMI Funds using this strategy will typically allocate approximately half of their bond portfolio to less dynamic "core holdings", where the focus is stability and safety. The other half of those funds' bond portfolios will use Bond Upgrading, which uses momentum based performance indicators of the various bond categories to identify which categories may currently present the best investment opportunities.
|SMI Funds Using Bond Upgrading||% of Fund’s Portfolio Typically Using This Strategy|
|SMIDX||33 1/3% when used|
|SMIRX||13 1/3% when used|