New User?FOLLOW THE MONEY. THEN GO THE OTHER WAY.
Powerfunds are the mutual funds that are being ignored by most investors - the very funds that are poised for top returns in the months ahead.
LYNCH. BUFFETT. GRAHAM. ...COSTANZA?
Of all the great investing gurus of the past fifty years, perhaps none has more to offer the individual investor than Seinfeld's George Costanza.
As fans of the iconic '90's sitcom will remember, Costanza was a loser – unemployed, unattached and living with his parents, until one day he decided to do the exact opposite of what he normally would. A great job and a beautiful girlfriend soon followed.
A study titled “DUMB MONEY: MUTUAL FUND FLOWS AND THE CROSS-SECTION OF STOCK RETURNS”, by economists Andrea Frazzini of the University of Chicago and Owen Lamont of Yale University, shows that mutual fund investors can greatly increase their returns by doing the exact opposite of what they (and the vast majority of other individual investors) usually do.
"Individual investors have a striking ability to do the wrong thing. They send their money to mutual funds which own stocks that do poorly over the subsequent years. Individual investors are dumb money, and one can use their mutual fund reallocation decisions to predict future stock returns."- Frazzini, Lamont
HOT. THEN NOT.
Many mutual fund buyers are locked in a vicious cycle that causes irreparable harm to their wealth. They buy right before most funds fall in value, and sell right before they rise.
Frazzini and Lamont show that most fund buyers make their investing decision based on recent past performance. They purchase mutual funds that have posted the most impressive gains in the last twelve months, expecting that hot performance to continue.
But as Frazzini and Lamont prove (and contrary to what most investors believe), not only are these hot funds unlikely to continue to be top performers in the next twelve months, they are actually more likely to UNDERPERFORM the average fund in the next year by a significant margin.
Individual investors buy at the top, watch their funds decline in value, and (to add insult to injury) often give up and sell shortly before a big turnaround. Then they do it all over again.
FOLLOW THE MONEY. THEN GO THE OTHER WAY.
Powerfund investors do the opposite. Our managers pick the best funds in the most out-of-favor areas by analzying where the dumb money is going, and where it isn't. We buy mutual funds before they get popular, not after.
By doing the opposite of individuals, one can construct a portfolio with high returns."- Frazzini, Lamont
We call these out-of-favor mutual funds Powerfunds - high-quality no-load mutual funds that are being ignored by most investors - the very funds that are poised for market beating returns in the months ahead.
The Powerfund strategy focuses on buying funds in unpopular categories before they get hot. Our goal is to hold these funds until they reach full valuation, then to sell at the top. It's MAXfunds' own brand of turbo-charged contrarian investing, zigging when other fund investors are zagging, and it works.
We've been managing the Powerfund Portfolios since 2002, and in that time both have soundly beaten the S&P 500 index.
As long-time readers of MAXfunds.com know, we’ve always highlighted out-of-favor funds and categories and warned of over-hyped funds. Our award winning website highlights how bloated certain funds are where the dumb money was heading. Powerfund Portfolios is the product of our extensive mutual fund analysis.
The Powerfund Portfolios is not a complicated fund timing scheme or an impossible-to-follow trading system. We manage high-quality portfolios for long-term investments. Both Powerfund Portfolios are made up of a group of terrific, no-load, low-cost mutual funds that are carefully chosen to work together to lower volatility and increase returns.
We invest in the best funds from top quality fund companies like Vanguard and T. Rowe Price. We also find exciting new funds from lesser known fund companies. All the funds in our Powerfunds Portfolios are no-load and low-fee. High fees and load charges eat away at investors' long-term returns. There are plenty of high-quality no-load mutual funds that don't cost an arm and a leg to invest in. Invest in one of the Powerfund Portfolios and you'll own a portfolio full of them.
