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Repositioning Your Portfolio - One Step at a Time

Transitioning your portfolio can be daunting - whether you’re looking to add to your growth potential by taking on more risk, or seeking to buffer yourself by adding to bonds.  The dramatic market shifts we’ve seen these past few years have made investors wary of making changes to their portfolios for fear the market might be on the brink of a major run-up or an abrupt sell-off.

Whether you are looking to increase risk or lower it, we  suggest setting a plan and shifting your portfolio allocations gradually. Here’s how:

Map Out Your Course
The first step is to determine how you ultimately want to be invested. Consider what mix of equities and fixed income may be appropriate for your long-term goals and your own tolerance for risk.

Once you’ve determined how you want to allocate your portfolio, consider what funds you’ll use for this allocation.

The FundX Upgrader Funds provide vehicles to accommodate a variety of risk levels and investment goals in one fund purchase. Each FundX Upgrader Fund holds an actively managed portfolio of other mutual funds and ETFs.  When used in combination with one another, we believe they can match most investors’ needs.

For example, if you are in cash today and you ultimately want to be 40% in stocks and 60% in bonds, consider using the FundX Upgrader Fund (FUNDX) for your allocation to stocks and the FundX Flexible Income Fund (INCMX) for bonds.  You might invest 10% in FUNDX and 15% in INCMX today, and repeat this every two weeks.  After six weeks you would be 100% invested at your target allocation.

If your target is 60% equities and 40% fixed income, you might opt to simply buy the FundX Conservative Upgrader Fund (RELAX).  That fund invests in stock funds and bond funds at that 60/40 mix.  You could set up a similar investment schedule, but you’d only need to purchase shares in one fund.

Invest Gradually
Whether you are 100% in cash and hoping to eventually be entirely invested in stocks, or you are currently invested in bonds but know that you ultimately need exposure to stocks for growth, invest gradually.

By investing little by little, you’ll avoid trying to guess the ‘right’ time to invest, and you’ll be prompted to take action regardless of near term market activity.

Why Not Invest All At Once?
Most investors are simply too paralyzed by uncertainty to plunge their entire portfolio into the market in one day.  Spreading out the investments over weeks or months essentially spreads the risk of buying at an inopportune time.

If you invest part of your money and the market rallies, you can feel good knowing at least some of your assets are participating.  If you invest a portion and the market goes down, you can feel relieved that not all your money was committed, and you can now buy at lower prices.  Either way, you have shifted from inaction to action.

One Step at a Time
If you’ve been out of the market for some time, you may find that even relatively minor market shifts can feel scary. We spoke with an investor who moved some of his cash into bonds in the fall. But when bonds sold off in November 2010, he panicked, sold his positions, realized losses and ended up back on the sidelines, feeling even more nervous about getting invested again. This is why it’s important to consider how to get invested in a way that helps you feel protected no matter what direction the market takes.

Click here to see an example of Investing Over Time

  • 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.
  • 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.
  • 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.

Periodic investment plans do not assure a profit and do not protect against loss in declining markets.

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