Winter 2018 Investor Guide to the FundX Upgrader Funds Stepping Back into the Market How Bond Markets Could Change Taking Charge of Your Financial Future WINNER The Upgrader won the 2017 Star Award for the best mutual fund newsletter/magazine for retail investors (small asset level) by the Mutual Fund Education Alliance (MFEA).
In the Winter 2018 Issue Shareholder Letter... 3 Stepping Back into the Market... 4-5 How Bond Markets Could Change... 6-7 Taking Charge of Your Financial Future. 8-9 The fund's investment objectives, risks, charges and expenses must be considered carefully before investing. The statutory and summary prospectuses contain this and other important information about the investment company, and may be obtained by calling 1-866-455-3863, or visiting Upgraderfunds.com. Read it carefully before investing. Mutual fund investing involves risk. Principal loss is possible. The FundX Upgrader Funds ( Funds) are considered funds of funds and an investor will indirectly bear the principal risks and its share of the fees and expenses of the underlying funds. Shareholders will pay higher expenses than they would if they invested directly in the underlying funds. The Funds employ an Upgrading strategy whereby investment decisions are based on near-term performance, however, the Funds may be exposed to the risk of buying underlying funds immediately following a sudden, brief surge in performance that may be followed by a subsequent drop in market value. The Sustainable Impact Fund s sustainable impact investment policy, which incorporates an analysis of environmental, social and corporate governance factors, may result in the Fund foregoing opportunities to buy certain Underlying Funds when it might otherwise be advantageous to do so, or selling its holdings in certain Underlying Funds for sustainable impact investment reasons when it might be otherwise disadvantageous for it to do so. The Funds are subject to the same risks as the underlying funds and exchange-traded funds in which they invest including the risks associated with small companies, foreign securities, emerging market, debt securities, lower-rated and non-rated securities, sector emphasis, short sales and derivatives. ETFs are subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of an ETF s shares may trade at a discount to its net asset value, an active secondary trading market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact a Fund s ability to sell its shares. Past performance does not guarantee future results. While the funds are no-load and available on no transaction fee platforms, management and other expenses still apply. Please refer to the prospectus for further details. The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. The Bloomberg Barclays Aggregate Bond index is an unmanaged index generally representative of intermediate-term government bonds, investment grade corporate debt securities and mortgage-backed securities. You cannot invest directly in an index. Diversification does not assure a profit or protect against loss in a declining market. Nothing contained on this communication constitutes tax, legal, or investment advice. Investors must consult their tax advisor or legal counsel for advice and information concerning their particular situation. Any tax or legal information provided is a summary of our understanding and interpretation of some of the current income tax regulations. Investors must consult their tax advisor or legal counsel for advice and information concerning their particular situation. Neither the Fund nor any of its representatives may give legal or tax advice. The FundX Upgrader Funds are distributed by Quasar Distributors, LLC. Stocks, bonds, and other asset classes have different risk profiles, which should be considered when investing. All investments contain risk and may lose value. 2 Winter 2018 UPGRADER Call your broker or 1-866-455-FUND (3863)
Shareholder Letter How will you reach your goals? Dear Fellow Shareholders, What s the best way to reach your investment goals? This i s a question most investors should revisit over time as stock and bond markets change and especially as their lives change. With stock markets hitting record highs, you might consider different ways to get more fully invested. Or perhaps you re starting to think about working with an advisor who can get you back on track and help you avoid mistakes. In this issue of The Upgrader, you ll learn three ways you can move forward given current market conditions, including getting more fully invested, preparing for changing markets, and deciding how to best manage your investments. Step back into the market If you ve got cash on the sidelines because you re worried about stock market declines, consider investing in flexible i ncome. S ee h ow b onds c ould h elp y ou increase your potential returns and why some bond funds may be better prepared for rising interest rates on pages 4-5. 3 ways you can move forward now Three ways bond markets could change Rising interest rates are a major concern for bond investors, and they could affect the bond market in different ways. On pages 6-7, we look at three possible changes and what they could mean for your portfolio. Take charge of your financial future Should you manage your own portfolio of funds or have it managed for you? Find out how to think through this important decision on pages 8-9. As an investor in the Upgrader Funds, you have my team and I working to help you build wealth, navigate changing markets and reach your lifelong investment goals. If you have questions about our approach or want to talk about your goals and concerns, please give us a call at 1-800-763-8639 and ask to speak with an advisor. Best, Janet Brown President, FundX Investment Group WINNER The Upgrader won the 2017 Mutual Fund Education Alliance (MFEA) Star Award for best fund newsletter/ magazine (small asset level). The Star Awards honor fund companies that have made extraordinary efforts to communicate with shareholders and support their investment goals. UPGRADER Winter 2018 3
Stepping Back into the Market Most investors use stocks, bonds or cash to try to reach their goals. They own stocks if they hope to retire comfortably and have something to leave for their kids or grandkids. Stocks can be volatile, however, and they ve experienced some steep declines. Cash can offer stability, but it doesn t have the growth potential most people need. Bonds offer a middle ground between the volatility of stocks and the low returns of cash. Stocks, Bonds & Cash 12/31/2002-12/31/2017 $40,000 Stocks $30,000 $20,000 Bonds (INCMX) Bonds (Index) Cash $10,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 INCMX gross expense ratio: 1.50% Avg Annual Returns 12/31/2017 1 Year 5 Years 10 Years 15 Years S&P 500 21.83% 15.79% 8.50% 9.92% FundX Flexible Income (INCMX) 6.04% 3.41% 4.14% 5.13% BBgBarc US Agg Bond 3.54% 2.10% 4.01% 4.15% JPM Cash US 6 Month 1.66% 1.00% 1.54% 2.14% Source: Morningstar Direct Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by calling 866-455-3863 or visiting www.upgraderfunds.com. The JP Morgan Cash 6 Month index measures the total return performance of six-month U.S. dollar deposits. The chart illustrates the performance of a hypothetical investment and assumes reinvestment of dividends and capital gains. 4 Winter 2018 UPGRADER Call your broker or 1-866-455-FUND (3863)
If you ve got cash on the sidelines, bond funds like INCMX can be the next step toward getting fully invested again. Sean McKeon Portfolio Manager How bonds can help you move forward Some investors have extra cash in their accounts right now. They d like it invested and they probably need to invest it to reach their goals but they re worried they might be buying into the stock market just before a decline. Bonds could be a way for these investors to step back into the market. Bonds have outpaced cash over time, so they can help investors try to grow their assets while waiting for the opportunity to buy into stocks. Bonds have been less volatile than stocks, and they ve held up better in down markets, and that can help investors stay invested, even during market declines. Which bonds to own now? There are risks in the bond market, of course, such as rising interest rates (read more on possible bond market changes on pages 6-7), so it makes sense to invest in a fixed income strategy that can adapt to these changes. Many investors use index funds to get low-cost exposure to the bond market, but index funds may not be well positioned for higher interest rates. The Bloomberg Barclays Aggregate Bond index is a common proxy for the overall bond market, and it includes mostly government bonds, which tend to be more susceptible to interest rate changes. Our Flexible Income Fund (INCMX) uses a fixed income approach that s designed to adapt to changing bond markets. INCMX has done particularly well as interest rates rose over the last few years by targeting the areas of the bond market that held up best when rates rose, like floating-rate, high-yield and strategic bond funds. In more challenging bond markets, like the 2008 credit crisis, INCMX owned more defensive bond funds, like shorter-term bonds and Treasuries. By actively responding to changing bond markets, INCMX outpaced the bond market over the last 15 years without much difference in volatility, as you can see on the chart. If you ve got too much cash and you need to get more fully invested then consider a fund like INCMX. You ll have a strategy that seeks to help you navigate changing interest rates and stay on track in an ever-changing world. Invest in INCMX If you re looking for a fixed-income approach that is designed to adapt to changing bond markets, consider INCMX. The fund is available at most major brokers for as little as $1,000, or you can invest directly. INCMX is intended for investors with at least a two-year time horizon. Call 1-866-455-3863 to get started. www.upgraderfunds.com UPGRADER Winter 2018 5
How Bond Markets Could Change What will you do if bond markets change? Bonds have been a pretty reliable source of gains for years now, but there s uncertainty in the bond market now that interest rates are on the rise. Changing interest rates are at the top of investors minds, and the markets may respond to rising rates in different ways. It s important to consider some of the possible outcomes we might face and think through how to best respond to these changes. 3 ways rising rates could affect bond markets (& what it might mean for your portfolio) This is a good time to make sure you ve got a plan for changing markets. 1. Interest rates increase & the economy strengthens The strong economy prompted the Federal Reserve to increase rates several times in 2017, yet continued growth and low inflation expectations helped both stocks and bonds. If this continues, total-return funds, which typically own stocks and bonds, could do well. This environment also could favor floating-rate funds and high yields because the additional yield may help offset a decrease in bond prices. Janet Brown President 6 Winter 2018 UPGRADER Call your broker or 1-866-455-FUND (3863)
2. Rising rates trigger an economic slowdown If rates rise and the economy slows, the areas of the bond market that have done well lately, like higher-yielding bonds, could come under pressure. This could spark a flight to quality, which would favor higher-quality corporate bonds, government-backed mortgage bonds or even Treasuries. 3. Interest rates rise & defaults increase As rates rise, some leveraged companies may not be able to make their payments or refinance at higher interest rates, and they could default on their loans. Defaults have been very low in recent years, but if that changed, it could hurt lower-quality bonds like high yields. Higher-quality bonds, especially short-term bonds, could be better bet in this environment. These three scenarios assume that rates will keep rising, but there s also the chance that rates could stay the same. This would benefit most bonds, particularly those with higher yields. What you can do now? It s tough to prepare for bond market changes in advance because, as you can see, what works in one market environment doesn t necessarily work in another. If you sell out of high-yield bonds now because you re worried about defaults, you could miss out on potential gains if the economic growth improves or if rates stay the same. Even when market predictions are correct, the timing and outcomes of those predictions is often way off. Rather than trying to predict future markets, we believe it s best to rely on a proven strategy that can help you respond to changing markets in a disciplined way and avoid making emotional mistakes. As the old saying goes, the time to have a map is before you go into the woods. Bond investors aren t in the woods yet, and that s why this could be a good time to get your plans together. If markets take an unexpected turn, you ll want to be able to stay on track. A Plan for Changing Bond Markets Our Flexible Income approach has helped thousands of investors navigate changing markets for many years now. This strategy was initially only available to our money management clients, but in 2002, we began implementing it for investors in our Flexible Income Fund (INCMX). Here s why we believe it s up to the challenge: Opportunistic We can (and have) capitalized on a wide range of opportunities in the bond market, including in higher and lower quality bonds, strategic and high-yield bonds, floating-rate securities and even total-return funds, which aren t fully invested in bonds. Diversified We build diversified bond fund portfolios and avoid getting too concentrated in certain kinds of bonds. Our Flexible Income Fund (INCMX) owns 10-15 different bond funds, which represent around 13,000 individual bonds. Active Our active approach has a good track record of adapting to changing markets. We owned short-term bond funds in more challenging bond market environments, like 2008. We moved into strategic, floating-rate and highyield bond funds when these funds came into favor. How to Invest The Flexible Income Fund (INCMX) is available at most major brokers, including Charles Schwab and Fidelity. You can also invest directly. Call 1-866-455-3863. www.upgraderfunds.com
Taking Charge of Your Financial Future What s the best way for you to invest? Should you manage your own portfolio of funds, or have it managed for you? This is a question that we re often asked, given that we have different ways for investors to use our Upgrading strategy. We publish the NoLoad FundX newsletter, which helps investors use Upgrading to buy and sell funds in their own accounts. That s the DIY option. We re also investment advisors: we provide a more personalized and full service experience for our money management clients. We create and implement a plan to help clients try to reach their lifelong goals. We work to make sure clients are invested in a way that s consistent with their particular risk level and their goals, and we re there to help them stay on track through up and down markets and through major life transitions. There s no one right answer about how to manage your money. It s ultimately a personal decision, and what works for one investor may not work for another. But it s worth taking some time to consider which approach might work best for you and your family. Find what works for you Some investors focus solely on performance, and while performance is important, we believe it shouldn t be the only consideration. What s the best way to invest: on your own or with someone else? Jason Browne Chief Investment Officer 8 Winter 2018 UPGRADER Call your broker or 1-866-455-FUND (3863)
You ll want to consider whether you enjoy investing and how much time and interest you have to devote to it. After all, investing is a long-term commitment. Even during retirement, you re likely looking to manage your portfolio for decades. Many people enjoy investing, and they like monitoring their portfolios and deciding what trades to make. Others want to spend their golden years taking extended vacations and spending quality time with their families without having to worry about what s happening in the market. Investors may want more professional oversight in retirement since emotional mistakes in retirement can be very costly. Another consideration is your temperament. As famed investor Warren Buffet explained, The most important quality for an investor is temperament, not intellect. Over long-term periods, like 20 years, stocks have had good gains, but to participate in those gains, you had to stay disciplined through some very difficult market conditions. This can be challenging, and it s one reason why some people opt to have their portfolio professionally managed rather than trying to go it alone. You should also consider what works for your spouse and family. You may love managing money and have a great temperament for it, but your spouse may not share your interest in investing. Working with an advisor can provide a back-up plan so if something happened to you, your family wouldn t have to take on this responsibility. Don t let the decision hold you back Deciding how to manage your portfolio is an important step toward taking control of your financial future. But you don t want to spend years out of the market while you re making a decision about whether to manage your portfolio or have a professional do it for you. If you feel stuck, remember that you can change your mind. We have clients who started out with our do-ityourself newsletter and then eventually decided that they preferred to have us manage their fund portfolio for them. We ve also talked with investors who have chosen to manage part of their account on their own and they ve invested the rest in one of the Upgrader Funds that we manage or become a private client. If you need help or want to discuss your particular situation with a portfolio manager, please give us a call us at 1-800-763-8639. We re here to help. MANAGING MONEY TAKES TIME AND EXPERTISE. LET S DO IT TOGETHER The Upgrader Funds are another way you can have a professionally managed portfolio of funds. You ll have our seasoned advisors managing your fund portfolios and working to keep you invested in a way that seeks to build wealth, navigate changing markets and stay on track in an ever-changing world. You have direct control over how much of your account is invested in the funds. You can build a custom balanced portfolio by pairing the Upgrader Fund (FUNDX) with the Flexible Income Fund (INCMX), for example. You can also use the Upgrader Funds for part of your portfolio. If you enjoy managing stock funds, you could offload your fixed income investing to us. When you invest in INCMX, you ll get an active approach to fixed income without the hassle of doing it yourself. Invest Today: The Upgrader Funds are available at most brokers, including Charles Schwab and Fidelity, for as little as $1,000. You can also invest directly: call 1-866-455-3863. Questions? Call us at 1-800-763-8639 to speak to a portfolio manager. www.upgraderfunds.com UPGRADER Winter 2018 9
Why FundX? I don t have time to do the Upgrading myself. Investors in the FundX Upgrader Funds have professional money managers working for them. We monitor the funds and the markets and make any necessary portfolio changes. I like to know that someone is watching my portfolio when I can t. Even when I know what I should do, I have trouble acting on my decisions. When you invest in the FundX Upgrader Funds, we follow the NoLoad FundX Upgrading strategy for you. We execute the NoLoad FundX Upgrading strategy in a disciplined manner. If a fund or ETF falls in our ranks, we sell it and buy a higher ranking fund.
We Navigate Changing Markets for You The six Upgrader Funds are designed to help you navigate changing markets and meet lifelong investment goals. Equity Capture Global Market Trends SRIFX FUNDX HOTFX TACTX Sustainable Impact Fund Global Growth & Impact Upgrader Fund Global Growth Fund Aggressive Upgrader Fund Global Aggressive Growth Fund Tactical Upgrader Fund Global Growth & Tactical Hedge Investors in these funds seek to participate in global stock market growth. The funds can invest in different areas of the markets as new opportunities arise, including largecap and small-cap, value and growth and international and domestic. Balanced Combine Growth and Stability RELAX Conservative Upgrader Fund Balanced Fund Investors in this fund seek the growth potential of an equity fund with the lower volatility of a fixed income fund. Flexible Income Focused on Stability INCMX RELAX Flexible Income Fund Fixed Income Investors in this fund seek the stability of fixed income and seek a buffer against the volatility of equities. This fund invests in bond and total return funds, targeting those areas excelling in the current market environment. Find updated portfolios and performance at www.upgraderfunds.com
101 Montgomery Street, Suite 2400 San Francisco, CA 94104 www.upgraderfunds.com 1-800-763-8639 FundX in the media Jason Browne FundX Chief Investment Officer CNBC Closing Bell November 24, 2017 FundX CIO Jason Browne talked about what you can do if volatility comes back into the market in 2018 and how to stay invested on CNBC s Closing Bell. Invest by Mail: Go to upgraderfunds.com to get an application Invest Online: Go to upgraderfunds.com and click Open a New Account Invest by Broker: FundX Upgrader Funds are also available at most major brokers. FundX Investment Group is publisher of the monthly investment newsletter NoLoad FundX and advisor to the FundX Upgrader Funds.