Performing Better than the Overall Market Performance by Utilizing Simple Rotation

From 1999 through 2005, the stock market basically went nowhere. The SP 5 hundred, as an example, only showed a 0.2% compounded yearly return during that time which is not much better return for the risk than you’d have got with a cash market fund. The destiny of the Nasdaq 100 was even more dismal.

It’s been an annoying time for investors. They’ve been left pondering what they can do to improve their returns, and they are on the lookout for alternatives to the low performance index funds and buy and hold investing. They need mutual fund advice. Many alternative newsletters and financial advisors say that by investing in sector funds and using rotation, folk are finding better results. The Hulbert Financial Digest and other best-performing newsletters are all endorsing some variation of this method. It is not tough to do either, if you use Fidelity Select Funds.

We’ll take a close look at what makes Fidelity Select Mutual Funds such a sensible choice for investors :
* Even though Fidelity imposes a minimum holding period of thirty days, their funds have traditionally realized above market returns.
* After the thirty day period, you can do unlimited trading with no redemption costs.
* Fidelity has a sector fund to track most sectors, so regardless of what local market sector is showing strength, youare going to be able to get in on it.
* Fidelity has a minimum of $2500 per fund. There’s also no load on Select Funds.

Sector rotation methods

Though there are many sector rotation techniques in existence going back for roughly 10 years, the one that follows is one of the simplest you’ll find :
1. Track all Fidelity Select Mutual Fund price changes for 25 days.
2. Invest in the fund with the highest gain.
3. Hold the fund for no less than a month to avoid early redemption costs.
4. If it’s’s still the top fund after 30 days, keep holing it. If it isn’t, change to the fund that’s top rated at that point.
5. Hold the new fund for thirty days and repeat.

During those identical years the major indices were so flat, 1999 to 2005, investors using this sector fund rotation system showed over 16% gain each year for a total of almost 200% gain during the same period of time.

Naturally, as with everything in the world, there is a disadvantage to the rotation system. Its drawdown isn’t any betterthan that of thefinal market. Between two thousand and 2002, the method drawdown was almost fifty percent. While it achieved all time highs in 2006, you continue to wish to proceed carefully. The drawdown factor might be something that you need to consider when pondering investing.

You can see, though, that there’s a real advantage in using a sector rotation strategy that you don’t get with buy and hold investing. Every serious financier should be certain to include the system in their portfolio.
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