This is the background information on how I manage my IRAs. These investments can be made with nonIRA money as well. It seems to work for me, but may not be right for you. I follow 100 Fidelity funds and update the list of funds to include the best performing funds monthly.
02Oct15 update: Stupid Fidelity mutual fund rules, see comment below, place too great a restriction on selling funds. Therefore, when possible, I will identify an EFT which approximately matched the Fidelity fund performance and invest in the ETF. ETFs allow selling at any time and have no holding period limitations. I plan to use a 7% stop loss order based on daily closing prices to sell the ETF.
IRA #1
My goal is increased growth and limited switching by investing IRA #1 in one of the top 20 Fidelity funds based on my ranking.
1. If an owned fund’s price declines by 5%+, I will:
a. exchange to the highest ranked fund which is going up if the market is going up or
b. exchange to Fidelity Cash Reserves.
2. If an owned fund is not ranked as one of the top 20 Fidelity Funds, I will:
a. exchange to the highest ranked fund which is going up if the market is going up or
b. do nothing.
3. If invested in Fidelity Cash Reserves, I will:
a. exchange to the highest ranked fund which is going up if the market is going up or
b. do nothing.
The fund I invest in is the highest rank fund whose percent deviation has been increasing for at least two weeks.
The rank of a fund is determined by measuring the fund’s current price deviation from a 39 week exponentially smooth average of the fund’s prices. The top 20 funds are the 20 funds whose deviation is the greatest.
If the sum of all deviations is up over at least two weeks, I consider the market to be going up.
All evaluations, exchanges, decisions, etc. are done on a weekly basis. Daily changes are ignored.
One additional consideration is Fidelity’s very stupid rules on short term trading. The details are explained in the fund prospectus, but basically if you go in and out of a fund with a short time (30, 90, 180, etc. days depending on the fund) Fidelity will bar you from buying the fund again for a year and with several short term trades will bar you from buying any funds.
IRA #2
Managed the same as IRA #1, except to limit volatility and risk, the IRA is invested in 5 of the top 20 funds. Otherwise all the rules are the same.
My method of fund evaluation and portfolio management has changed but only slightly over the last 30+ years.
Updated 19 Jan 2018