It’s been an eventful year. There have been ups and downs but if you followed Dynamic Fund Ratings for the UK All Companies sector you could have made over twice as much growth compared to the UK stock market index.
Our experience is that the vast majority of investors and advisers do not have a reliable, repeatable process to select their funds and do not apply it with discipline.
If you followed our Dynamic Fund Ratings through 2017 you made over twice the return of a FTSE 100 index tracker.
Over the year to date you would have made a 21.23% return. That’s over twice the return of an index tracker (9.78% - see chart 1
). The sector average return was 11.33%.
What did this mean in practice?
- You bought the 3 funds on at the start of January 2017,
- You reviewed your funds 6 months later...
- ...and switched into the 3 funds with the highest Dynamic Fund Ratings at the beginning of July.
In money terms, if you had invested £100,000 using Dynamic Fund Ratings in January you would have made £11,450 more than an index tracker.
Remember you did this by following a process with discipline, not by doing anything daft. From within a single sector you simply chose funds with a higher likelihood of generating more growth for you. Simple.
To recap. Our Dynamic Fund Ratings are based on a type of momentum investing. At its simplest, this means buying an investment (in this case a fund) which is already performing well on the assumption that it will continue to perform well for a defined period. This is based on academic evidence that good performing funds tend to continue to do well over certain periods.
The research to show how and why our ratings work is shown here
ACTION FOR INVESTORS
- Make sure your investment process is understandable, repeatable…and that it works.
- Apply it with discipline
- Make sure you have a plan in place for what to do if markets fall
*Performance data: 31/12/2016-13/12/2017