FundX Ranks Show a Clear Domestic Trend

August 14, 2012

Market changes are only truly clear in hindsight, and looking back at the past year, it’s clear that a domestic trend is firmly in place. The top-ranked diversified funds in NoLoad FundX are all U.S. funds, while the bottom funds are almost entirely international funds.

The performance gap between the leading funds and the lagging funds is striking: the top-ranked diversified fund in NoLoad FundX, iShares High Dividend Equity (HDV) returned 45% more than the low-ranked iShares MSCI EMU (EZU) for the trailing year ending July 31, 2012.

The funds and ETFs at the bottom of the ranks aren’t bad funds. Some of these funds are great funds to hold when international markets are in favor, and six years ago, when internationals were outperforming, we held many of these funds. NoLoad FundX’s Monthly Upgrader Portfolio held SSAIX for a year from 2006 through 2007, and held EZU almost two years, from October 2006 through June 2008.  But when domestic markets are in favor, even the best international funds won’t keep up with their domestic counterparts.

Today, the Monthly Upgrader Portfolio’s longest holds are all domestic growth funds, like Wells Fargo Advantage Growth (SGROX –now closed to new investors), bought in October 2010, and iShares S&P 500 Growth (IVW) bought in August 2011.

Will we ever own these international funds again? We almost certainly will at some point. The question is when. We won’t buy a fund until it moves sufficiently up our ranks and shows strength compared with funds of similar risk, measured by one thing: total return.

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