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Summing Up

To sum up, we have reviewed a strategy for maintaining mutual fund portfolios that has been effective since at least 1990 (almost certainly longer), a strategy that produces returns that well exceed buy-and-hold strategies while significantly reducing risk.

These strategies appear to be effective with a variety of investments, including mutual funds, ETFs, and probably (although I have not personally tested for this) individual stocks as well. Generally, mutual funds seem somewhat more suited for this approach than ETFs, which tend, on average, to be more volatile than the best-performing mutual fund universe (1–5).

You have learned a significant strategy for outperforming buy-and-hold strategies in the stock market, a strategy based upon relative-strength mutual fund selection, not upon market timing.

Let’s move along to the next chapter and to two simply maintained indicators that can help you decide when to buy.

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