Spring 2017
Investor Guide to the FundX Upgrader Funds
New Opportunities
in Sustainable Investing
Should You
Reach For Higher Yields?
A New Approach
to a Balanced Account
In the Spring 2017 Issue
Shareholder Letter................................................. 3
New Opportunities in Sustainable Investing........ 4-5
Should You Reach For Higher Yields?.................6-7
A New Approach to a Balanced Account.............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 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 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 Funds invest in underlying funds and these underlying funds may invest in securities
of small companies, which involve greater volatility than investing in larger, more established companies, or they may invest in foreign securities, which
involve greater volatility and political, economic and currency risks and differences in accounting methods; these risks are greater for investments in
emerging markets. The underlying funds may invest in debt securities, which typically decrease in value when interest rates rise; this risk is usually
greater for longer-term debt securities. Lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher rated
securities. While the Upgrader Funds are diversified, the underlying funds may invest in a limited number of issuers and therefore may be considered nondiversified. The underlying funds may engage in short sales; an underlying fund’s investment performance may suffer if it is required to close out a short
position earlier than intended. Some underlying funds may borrow money for leveraging and will incur interest expense. Some underlying funds may use
derivatives, which involve risks different from, and in certain cases, greater than the risks presented by more traditional investments. 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. The underlying funds may invest in asset-backed and mortgage-backed securities, which involve
additional risks such as credit risk, prepayment risk, possible illiquidity and default, and increased susceptibility to adverse economic developments.
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. The MSCI All Country World Index (ACWI) is a market capitalization weighted index designed to provide a broad measure of equitymarket performance throughout the world. The Bloomberg Barclays U.S. Corporate High Yield Bond index is a market value-weighted index which covers the U.S.
non-investment grade fixed-rate debt market. The Bloomberg Barclays US Treasury 1-3 Year index measures the performance of U.S. Treasury securities that have a
remaining maturity of at least one year and less than three years. You cannot invest directly in an index.
References to other funds should not be interpreted as an offer of these securities. 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.
Automatic Investment Plans do not assure a profit, nor do they protect against a loss in declining markets.
The FundX Upgrader Funds are distributed by Quasar Distributors, LLC.
2
Spring 2017
UPGRADER
Call your broker or 1-866-455-FUND (3863)
Shareholder Letter
Introducing
the New FundX Fund
Dear Fellow Shareholders,
I’m delighted to announce that we’ve launched a sustainable investing fund:
FundX Sustainable Impact Fund (SRIFX).
We’ve been working on this fund for a long time. I first started managing what were
then called “socially responsible” portfolios for some of my clients about 20 years ago.
Sustainable investing has really changed in the last two decades. Today, it’s better
known as sustainable responsible impact investing, and it’s one of the fastest
growing areas of the investment world. It accounts for one in every five investment
dollars under professional management in the U.S., according to the U.S. Forum
on Sustainable Investing (USSIF).
There are many new investment opportunities as well. Previously, investors were
limited to funds that self-identified as sustainable or socially responsible funds.
Morningstar estimates that these funds make up just 2% of the fund universe.
Today, there are new tools available that rate funds on sustainable criteria, and this
gives investors many more funds to choose from. Learn more about our Sustainable
Impact Fund (SRIFX) and how it uses these new fund ratings on page 4-5.
Put high-yield bonds to work in your portfolio
Another hot topic these days is interest rates. One area of the bond market that
could hold up if rates continue to rise gradually is high-yield bonds. But these are
lower quality bonds, so they are best used carefully. Find our tips on page 6-7.
Bridge the gap between stocks and bonds
With interest rates rising, bonds may produce lower returns than they have over
the last 30 years, and this has led some investors to consider alternatives to the
classic balance of stocks and bonds. We share what we call the new balanced
portfolio on pages 8-9.
FundX
Sustainable
Impact
Fund is now
available
My team of portfolio managers and I are very grateful for your continued support,
and we continue to work diligently to help you retire comfortably, reach your
lifelong investment goals and navigate changing markets.
Janet Brown
President, FundX Investment Group
www.upgraderfunds.com
UPGRADER
Spring 2017
3
Poverty
No Hunger
Good Health
Quality
Education
Gender Equality
Clean Water
and Sanitation
Climate Action
Clean O
ean Land
Economic
Growth
Industry &
Innovation
Infrastructure
Sustainable
Cities
Responsible
Consumption
Clean Energy
Justice, S
Instituti
New Opportunities in
Sustainable Investing
Sustainable investing has come a long way from what was previously called socially
responsible investing. There are smart new strategies and tools that are uncovering
many new investment opportunities.
Many people haven’t kept up with all the ways that sustainable investing has
changed. They assume that sustainable issues will take a hit as government policies
and regulations change; they don’t realize that today some of the biggest changes
come from consumer demand and the market.
Another persistent misconception about sustainable investing is that it only
focuses on environmental factors. In fact, sustainable investing covers a wide range
of important issues that are grouped into three broad categories: environmental,
social and governance (ESG).
Understanding ESG
How to put
environmental,
social &
governance
(ESG) investing
to work in
your portfolio
E is for Environmental
Environmental issues are perhaps the most widely understood. They consider a
company’s impact on the planet. A company with strong environmental practices
uses renewable energy; reduces emissions; supports clean air and water; and works
to address the risks of climate change.
S is for Social
Social issues are based on how a company affects people, including its employees
and customers. A socially responsible company treats its workers fairly, provides
a productive workplace, keeps customer data secure and creates good products
that are safe to use.
Janet Brown
President
G is for corporate governance
Governance is about how a company runs its business. A company with good
governance works to balance the needs of executives and shareholders. It has a
diverse and independent board of directors. It’s open about its political and lobbying
efforts, and it has policies in place to prevent bribery or corruption.
4
Spring 2017
UPGRADER
Call your broker or 1-866-455-FUND (3863)
Oceans
Strong
ions
Introducing
Why ESG matters
A company’s environmental, social and governance
Impactul
(ESG)Partnerships
policies help investors determine which
companies they want to support, and many companies
are finding that ESG practices can also be good
for business. A company can save money by using
renewable energy and it could gain customers by
producing safe products. A company with strong
oversight from its board may operate more efficiently
or avoid costly lawsuits or fines.
Studies have repeatedly found that companies with
good ESG policies also have performed well. A 2015
review1 of more than 2,200 studies since the 1970s
found a positive link between ESG factors and good
financial performance.
How to find good ESG investments
Many funds seek to own companies with strong ESG
practices, and new fund ESG ratings from Morningstar
and MSCI have substantially expanded the number
of funds to choose from. A 2016 MSCI study2 found
that thousands of funds had “significant exposure to
sustainable impact themes”, but only 14% of these funds
were self-professed ESG or sustainable funds.
How you use ESG ratings, however, really matters.
Funds with terrific ESG ratings aren’t always the best
performers, so if you only use ESG scores to select
funds, you may not get the returns you need to fund a
comfortable life in retirement.
Since ESG ratings are based on a fund’s portfolio and
not on any one particular stock, you may find that
some funds with high ESG ratings own companies
that you don’t want to support, or these funds may not
focus on the issues that are most important to you.
ESG ratings also change as the funds’ portfolio
changes, so you may need to check on your funds more
often to make sure they’re still up to your standards.
With our new Sustainable Impact Fund (SRIFX),
we’ve incorporated ESG ratings into our time-tested
Upgrading strategy. This way, we seek to own funds that
have strong recent returns and good environmental,
social and governance (ESG) ratings. We monitor a
fund’s performance and ratings regularly to keep you
invested in a way that we believe has the potential to
build wealth and build a better world.
1 Gunnar Friede, Timo Busch & Alexander Bassen, “ESG and financial performance:
aggregated evidence from more than 2000 empirical studies”, Journal of
Sustainable Finance & Investment, 2015.
2 MSCI Research, Inc., “Fund Transparency: Exploring the ESG Quality of Fund
Holdings.” March 2016
FundX
Sustainable
Impact Fund
The Sustainable Impact Fund is
designed to help you build wealth
and build a better world.
Invest in funds with strong recent returns
We manage SRIFX using our time-tested Upgrading approach. Upgrading leads us to invest in funds with strong
recent returns because these funds may continue to do
well. It’s designed to help investors build wealth, navigate
changing markets and reach lifelong investment goals.
Own diversified stock funds
with strong ESG ratings
SRIFX also seeks to own funds with robust ESG
ratings. These ratings identify funds that are invested
in companies with good environmental, social and
governance practices. ESG investing seeks to help you
make a difference in the world.
Professionally managed
portfolio of sustainable funds
SRIFX is a fund-of-funds, which means you’ll own a
portfolio of diversified stock funds that is built, monitored
and managed by FundX’s experienced money managers.
How to Invest
You can invest in SRIFX at most major brokers, like
Schwab or Fidelity, often for no transaction fee, or you
can purchase the Fund directly from our shareholder
services for as little as $1,000.
Call 1-866-455-3863
to get started.
Should You
Reach For Higher Yields?
High-yield bonds add tremendous value at times, so it makes sense
to at least consider investing in them.
High-yield bonds have had terrific returns in recent years. In 2016, they outpaced both
stocks and higher quality bonds. The Bloomberg Barclays U.S. Corporate High Yield
index was up 17.13% compared to 11.96% for the S&P 500 and 2.65% for the Bloomberg Barclays Aggregate Bond index.
High yields may also be useful in a rising interest-rate environment, since their higher
yields could help offset a decline in bond prices. In the second half of 2016, when the
10-year Treasury yield rose from 1.49% to 2.45%, higher quality bonds lost money
while high yields gained over 6.5%.
We seek to own
high-yield bonds
when they are
doing well and
avoid these bonds
when they aren’t
in favor
You need to use high-yield bonds carefully, however, because these funds are risky.
These are lower credit quality (“junk”) bonds, so they have a higher risk of default, and
defaults tend to increase when interest rates rise.
High-yield bonds also can be quite volatile compared to other bonds. They are typically
more correlated to stock markets, and that can make it hard for investors to hold these
bonds long term. During the 2008 credit crisis, some high yield bonds lost 25-30%.
Ideally, you’d own high-yield bonds when they’re doing well and you’d avoid these
bonds when they’re out of favor. This may seem unrealistic, and yet it’s what our fixed
income approach is designed to do.
6
Spring 2017
UPGRADER
Sean McKeon
Portfolio Manager
Call your broker or 1-866-455-FUND (3863)
Flexible Income Fund
Navigating changing bond markets since 2002
When to own (and when
not to own) high-yield bonds
Seeks to capitalize on potential
gains from high-yield bonds
Our Flexible Income strategy has a proven track
record of moving us into high yields when they have
strong recent returns and steering clear of these
bonds when they’ve lost momentum, as you can see
in the chart below.
INCMX has a history of owning lower quality bonds, like
high yields, when they’re doing well compared to other bonds
and avoiding these bonds when they’re out of favor.
High-yield bonds have contributed to INCMX’s benchmarkbeating performance for the past year and since inception. For
the 12 months ending March 31, 2017, INCMX was up 5.76%
compared to 0.44% for the Bloomberg Barclays Aggregate
Bond index. INCMX returned 3.62% annually for five years;
4.02% annually for 10 years; and 5.09% annually since its July
1, 2002 inception. The index was up 2.34% for five years; 4.27%
for the 10 years; and 4.45% since INCMX’s inception. The gross
expense ratio for the Flexible Income Fund is 1.50%.
We didn’t have to predict how high yields were going
perform in advance. Instead, we simply followed our
strategy and bought into the funds that were excelling
in the current market environment.
Use high-yield bonds
as part of a diversified portfolio
We limit our exposure to high yields, and that’s one
way that we’ve sought to mitigate the risk of these
bonds in the Flexible Income Fund (INCMX).We
also use these bonds has part of a diversified bond
fund portfolio. Currently, we own high-yield bond
funds along with floating-rate and strategic funds.
For additional diversification, we also have exposure
to total-return funds, which aren’t entirely invested
in bonds. You can find INCMX’s portfolio online at
www.upgraderfunds.com.
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.
Following Momentum in High-Yield Bonds
INCMX has owned high-yield bonds when they’re doing well.
35%
30%
25%
% of INCMX 20%
in high-yield
bond funds 15%
10%
5%
0
2002
2003
2004
US Corporate
-1.41% 28.97% 11.13%
High-Yield Index*
US Aggregate
10.26% 4.10% 4.34%
Bond Index*
US Treasury
5.87% 1.92% 0.91%
1-3 Year Index*
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
15.81%
7.44%
2.45%
-4.47%
17.13%
2.74% 11.85%
1.87% -26.16% 58.21% 15.12%
4.98%
2.43%
4.33%
6.97%
5.24%
5.93%
6.54%
7.84%
4.21% -2.02%
5.97%
0.55%
2.65%
1.62%
3.92%
7.31%
6.67%
0.80%
2.40%
1.55%
0.43%
0.63%
0.56%
0.86%
0.36%
*All indexes cited are Bloomberg Barclays indexes
www.upgraderfunds.com
UPGRADER
Spring 2017
7
The New Balance
A New Approach to a Balanced Account
The classic balanced portfolio includes both stocks for growth and bonds for a
buffer against the volatility of stocks. But with interest rates rising, bonds may
have lower returns than they have over the last 30 years. This has led investors to
consider alternatives to the classic balance of stocks and bonds.
You could increase your exposure to stocks in an attempt to compensate for
potentially lower returns from bonds, but this could increase the volatility of
your portfolio and may make it difficult to stay invested in challenging markets.
You could also hold cash instead of fixed income, since cash can be a buffer
against the volatility of stocks, but most investors prefer bonds because bonds
have higher gain potential over time.
How can you
bridge the
gap between
stocks and
bonds?
Here’s what we call the new balance: a portfolio that includes stocks, bonds and our
Tactical Upgrader Fund (TACTX).
How to complement a portfolio of stocks & bonds
TACTX is a hedged equity portfolio that attempts to bridge some of the gap between the volatility of stocks and the relatively low yield of fixed income. TACTX
seeks to be less volatile than a fully invested portfolio of stocks and it also has
less interest-rate risk because it typically has little exposure to bonds. The fund
8
Spring 2017
UPGRADER
Jason Browne
Chief Investment Officer
Call your broker or 1-866-455-FUND (3863)
aims to provide some of the growth potential of equities without fully participating in sharp stock market
advances or declines.
TACTX’s gains and losses may be independent of nearterm stock and bond market performance, so it may
complement a balanced portfolio of stocks and bonds.
A new approach to a balanced account
One way to invest in the new balance is to own the
Upgrader Fund (FUNDX) for growth; the Flexible
Income Fund (INCMX) for fixed income; and the Tactical
Upgrader Fund (TACTX) for further diversification.
This combination seeks to produce moderate returns
with limited risk, which can help investors ride through
potentially low-returning periods for bonds and through
volatile periods in the stock market.
The charts below show the value of adding hedged
equities to your balanced account. This equally weighted
portfolio (one third in FUNDX, one third in INCMX
and one third in TACTX) generated solid returns over
the last seven years, and it never had a negative calendar
year from 2010 to 2016. As shown below, it had a
narrower range of returns than a stock fund portfolio,
and it outperformed a bond fund portfolio, even as
interest rates rose.
If you are seeking to reduce fixed income exposure but
are not ready to embrace the volatility of greater, direct
stock market exposure, this portfolio may be for you.
Bridging the Gap Using Hedged Equities
The New Balance—a mix of stock funds (FUNDX), bond funds (INCMX), and
a hedged equity fund (TACTX)—seeks moderate returns with limited risk.
All returns annualized
through March 31, 2017
1 year
5 year
10 year
Since Inception
Inception Date
FUNDX
11.47%
9.39%
3.93%
7.06%
11/1/01
INCMX
5.76%
3.62%
4.02%
5.09%
7/1/02
TACTX
10.59%
3.89%
N/A
-0.41%
2/28/08
Growth of $100,000 & Cumulative Returns 2010-2016
Best & Worst Calendar-Year Returns 2010-2016
30%
29.56%
$200K
25%
$190K
$180K
20%
$179,580
$170K
13.52%
15%
$160K
$149,520
$150K
10%
7.22%
8.55%
$140K
79.58%
$130K
5%
$120K
0%
-5%
-1.20%
0.53%
-4.66%
FUNDX
INCMX
TACTX
0.29%
New
Balance
$129,990
29.99%
$110K
$138,340
38.34%
49.52%
$100K
FUNDX
INCMX
TACTX
New
Balance
The chart shows the maximum and minimum calendar-year returns and the average annual returns for FUNDX, INCMX and the New Balance (FUNDX,
INCMX and TACTX). It assumes reinvestment of dividends and capital gains. This chart does not imply future performance. The gross expense ratio for
FUNDX, INCMX and TACTX is 1.79%, 1.50%, and 1.70%, respectively. 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 at www.upgraderfunds.com.
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.
“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.
“I like to know that
someone is watching my
portfolio when I can’t.
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
Equity
Capture Global Market Trends
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 large-cap
and small-cap, value and growth and
international and domestic.
Balanced
Combine Growth and Stability
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
SRIFX
FUNDX
SRIFX
HOTFX
FUNDX
SRIFX
FUNDX
HOTFX
RELAX
HOTFX
SRIFX
TACTX
RELAX
FUNDX
TOTLX
TACTX
RELAX
SRIFX
TOTLX
TACTX
HOTFX
INCMX
FUNDX
TOTLX
INCMX
RELAX
HOTFX
INCMX
TACTX
RELAX
TOTLX
TACTX
INCMX
TOTLX
INCMX
Investors in these funds seek the stability
of fixed income and seek a buffer against
the volatility of equities. These funds invest
in bond and total return funds, targeting
those areas excelling in the current market
environment.
Find updated portfolios and performance at
www.upgraderfunds.com
Sustainable Impact Fund
Global
Global Growth
Growth &
& Impact
Impact
Upgrader Fund
Sustainable
Impact Fund
GlobalGrowth
Growth&Fund
Fund
Global
Growth
Global
Impact
AggressiveFund
Upgrader
Fund
Upgrader
Sustainable
Impact
Fund
Aggressive
Growth Fund
Fund
GlobalGrowth
Growth
Global
&Fund
Impact
Aggressive
Growth
Upgrader
AggressiveFund
Upgrader
Conservative
UpgraderFund
Fund
Global
Growth
Aggressive
Balanced
FundFundGrowth Fund
Balanced
Fund
Tactical
Upgrader
Fund
Aggressive
Upgrader
Fund
Sustainable
Impact
Conservative
Upgrader
Fund
Growth
Tactical
Hedge
Global
Aggressive
GrowthHedge
Fund
Global
Growth
&&
Growth
&Impact
Tactical
Balanced
Fund
Upgrader
Fund
Flexible
Return
Fund
Tactical Total
Upgrader
Fund
Conservative
Upgrader
Fund
Flexible
Income
Sustainable
Fund
Global
Growth
Flexible
Income
&Impact
Tactical Hedge
Balanced
FundFund
Global Growth & Impact
Flexible Income
Total
Return
Fund
Tactical
Upgrader
Fund
Aggressive
Upgrader
Fund
Flexible
Fund
Upgrader
Flexible
IncomeFund
Growth
& Tactical
Fixed
Global
Aggressive
GrowthHedge
Fund
Fixed Income
Income
Global Growth Fund
Flexible
Return
Flexible Total
Income
FundFund
Conservative
Upgrader
Fund
Flexible
Income
Aggressive
Fixed Income
Balanced
Fund Upgrader Fund
Global Aggressive Growth Fund
Flexible Income
Fund
Tactical
Upgrader
Fund
Conservative
Upgrader
Fixed Income
Global
Growth & Tactical
Hedge Fund
Balanced Fund
Flexible Total Return Fund
Tactical
Upgrader Fund
Flexible Income
Global Growth & Tactical Hedge
Flexible Income Fund
Flexible
Fixed IncomeTotal Return Fund
Flexible Income
Flexible Income Fund
Fixed Income
235 Montgomery Street, Suite 1049
San Francisco, CA 94104-3008
www.upgraderfunds.com
1-800-763-8639
In the Spring 2017 Issue
Shareholder Letter................................................. 3
New Opportunities in Sustainable Investing........ 4-5
Should You Reach For Higher Yields?.................. 6-7
A New Approach to a Balanced Account............. 8-9
By Mail: Go to
UPGRADERFUNDS.com
Download an Application
to send in.
Online:
Go to upgraderfunds.com
& click “Open a New Account”
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.