HOW DOES SMI SELECT THE RECOMMENDED FUNDS?
Each month, SMI ranks over 1,000 no-load funds according to our nine risk categories. As part of this process, we calculate a momentum score for each fund based on its recent performance. This score places more weight on recent performance (over the past month) with increasingly less importance on less recent returns, going back 12 months. This helps smooth out short-term performance swings, and helps us identify the funds that are most likely to outperform in the near future. When a recommended fund falls out of the top 25% of its risk category peer group, we replace it with a new fund in that category. The new fund is selected primarily on the basis of its momentum score, although there are other factors that will occasionally cause us to recommend a fund with a slightly lower momentum score than the category leader. For example, if a fund recently changed managers, we might skip over it despite it having the highest momentum score in its risk category.
Each month, SMI ranks roughly 1,500 no-load funds according to our five stock-risk categories. As part of this process, we calculate a momentum score for each fund based on its recent performance. This score places more weight on recent performance (over the past month) with increasingly less importance on less recent returns, going back 12 months. This helps smooth out short-term performance swings, and helps us identify the funds that are most likely to outperform in the near future. When a recommended fund falls out of the top 25% of its risk category peer group, we replace it with a new fund in that category. The new fund is selected primarily on the basis of its momentum score, although there are other factors that will occasionally cause us to recommend a fund with a slightly lower momentum score than the category leader. For example, if a fund recently changed managers, we might skip over it despite it having the highest momentum score in its risk category.
