Sector Rotation Strategy

Before You Trade

Every investor and trader has his/her own tolerance for risk and expectations for reward. Selecting a strategy that is best for you should be done with the advice of a skilled investment professional that understands your personal financial situation, your investment goals and objectives, and your personal timelines. This site does not offer investment advice based upon your personal financial situation and cannot guide you as to which strategy is best for you. Our Model ignores the adverse tax consequences associated with short-term capital gains. Tax implications are a critical component of any investment strategy. Therefore, depending on the strategy you choose to implement, it is possible that any trading activity could result in a taxable event and result in lower investment return.                                      

What is sector rotation? 

Sector rotation is an investment strategy involving the movement of money from one industry sector to another in an attempt to beat the market. To harness the potential of sector investing, you need to invest in the right sector funds at the right time. Equally important, you need to avoid sectors funds that end up delivering poor performance.

The basic idea behind a sector rotation is that the economy operates according to cycles and some sectors will be up at certain times and down at others. Investors using this approach must identify the boom and bust cycles in the sector they plan to invest in. Then, during the down periods, buy and then turn around and sell when the prices are at their peak right as the boom is ending.  This type of sector rotation strategy can be quite complex and time consuming.  

Our Sector Rotation Strategy

Our proprietary sector rotation strategy focuses on the momentum behind the various sectors and allocates into the top momentum sectors on a quarterly basis.  A more diversified investment approach is usually safer, and this is why we focus on top five sectors. Depending on our momentum model their will be situation when less than five sectors will be held.  When there are not five positive momentum sectors to hold for a quarter, then the other allocations are placed in cash. 

How to use our Sector Rotation Strategy

At the end of every quarter our subscribers will receive an email which will identify the top sectors for the next following quarter.  A subscriber will allocated 20% into each of the top sectors, and if there is not a total of five to allocate into, then those allocations will be held in a cash position until the next quarter allocation.  There are many investment choices to choose from, and it is up to the subscriber to pick which ones they prefer to use. 

Sectors that are utilized within Strategy:

Strategy/Model Performance

6/30/2004 to 3/31/2008 

Returns for time period stated are presented for illustrative purposes only and are not intended to project the performance of a specific investment. Holdings that track the individual sectors were used for all Sector Rotation Strategy performance calculations. Buy & Hold is defined as if you bought the S&P 500 Index at the closing price on 6/30/2004 and held it to the end of the period stated. Indexes are unmanaged and do not incur management fees, cost and expenses, and cannot be invested in directly. Cash holdings assumes a 0% return while in a cash position. Performance graphs are based on an initial investment of $10,000.) See Assumptions & Limitations     

Strategy/Model Performance

6/30/2004 to 3/31/2008

Performance data quoted above is historical. Past performance is not a guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. You cannot invest directly in an index. Returns are for illustrative purposes only.      

Disclosure          

Performance data quoted above is historical. Past performance is not a guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. You cannot invest directly in an index. Returns are for illustrative purposes only.The performance data above has been based on the holdings that track the underling sectors and the S&P 500 Index is our benchmark. The closing prices of the sector holdings were used in calculating these performance numbers. The Benchmark Returns show how the S&P 500 Index has performed since the current allocation was issued. When holding on to a cash position, will have 0% performance due to the assumption that the investment is in cash earning no return. Our calculations do not include commission costs, margin costs and taxes.

Assumptions & Limitations: Our benchmark calculations do not include commission costs, margin costs and taxes. Since numerous investment vehicles exist to track the performance of the various sectors, all performance results we publish here are hypothetical and is calculated using the select sector tracking holdings themselves as the investment. Calculations assume all trades are placed at market close of the end of the quarter. Sector indices are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. Hypothetical model performance returns assume no reinvestment of any dividends or distributions that may have been paid with respect to the underlying holding. See Also Assumptions & Limitations

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