Reader: As I understand it your latest recommendation (see July Newsletter) is to Buy, Sell, or Hold an asset class fund based on the following criteria:

(1) Sell: If that asset class has had returns of 15% per year over a 5-year period ("overvalued" asset class);

(2) Buy: If that asset class has had returns significantly less than 10% per year over a 5-year period ("undervalued" class) AND if there has also been significant improvement in performance in the current year ("momentum");

(3) Otherwise stay out of the market (??)

Is this a fair summary?

I'm also wondering: What if you are not starting from scratch but already have a portfolio, and 9/10 of what you own does not meet either the Buy or Sell criteria... would you continue to hold that portion ?

funds-newsletter: You are generally correct in stating both the Sell and Buy criteria.

The Buy criteria are a little less specific because how great the underperformance needed is not precisely defined as when selling. Generally, very low positive, or better still, negative 5 yr. performance is most compelling to suggest a Buy. However, I've updated my July Newsletter article to point out that on some occasions, people might still buy if the investment has roughly an average or "fair" valuation - that is, neither 5 yr. over- nor under-valuation. The momentum factor is not precisely defined either but here, the figure seems to be a return in at least the teens or higher over the last 12 months or so or even longer.

The above would be true whether one is already in the market or perhaps just starting although it makes sense for a new investor to get invested sooner rather than later since it might take several years for either Buys or Sells to come about during some market periods.

If you are already in the market, then yes, all your stock investments that do not qualify as new Buys or Sells would be best considered Holds.

Although the research I describe in my July Newsletter seems promising, it should for now be regarded as still "in progress". As I analyze more data, we will see just how effective the rating system I developed will prove to be. Perhaps if the results continue to be promising, I can publish more fully exactly how one can rate a given fund category using my data. But for now, there could still be changes. And, if my approach proves to be considerably successful in predicting which categories will do better or worse in the years ahead, I may want to work with someone (eg a publisher, or university researcher), to give it wider exposure.