From 1999 through 2005, the stock market essentially went nowhere. The SP 500, for instance, only showed a 0.2% compounded annual return during that time which isn’t a great deal better return for the chance than you’d have got with a money market fund. The fate of the Naz One hundred was even more dismal.
It’s been a maddening time for investors. They have been left pondering what they can do to improve their returns, and they are on the lookout for choices to the low performance index funds and buy and hold investing. They need mutual fund advice. Many various newsletters and fiscal advisors say that by investing in sector funds and using rotation, folks are finding better results. The Hulbert Financial Digest and other best-performing newsletters are all advocating some difference of this technique. It is not hard to do either, if you use Fidelity Select Funds.
Let’s take a close look at what makes Fidelity Select Mutual Funds such a good choice for stockholders :
* Even though Fidelity imposes a minimum holding period of 30 days, their funds have traditionally realized above market returns.
* After the 30 day period, you can do unlimited trading with no redemption fees.
* Fidelity has a sector fund to trace most sectors, so no matter what domestic market sector is showing strength, youare going to be able to get in on it.
* Fidelity has a minimum of $2500 per fund. There is also no load on Select Funds.
Sector rotation Strategies
Though there are numerous sector rotation secrets in existence going back for roughly ten years, the one that follows is one of the best 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 fees.
4. If itis’s still the top fund after thirty days, keep holing it. If it is not, change to the fund that is top rated at that point.
5. Hold the new fund for 30 days and repeat.
During those very same years that the major indices were so flat, 1999 to 2005, financiers using this sector fund rotation strategy showed over 16% gain per year for a total of almost 200% gain during the same period of time.
Naturally, as with everything in the world, there ‘s a drawback to the rotation system. Its drawdown isn’t any betterthan that of the market. Between 2k and 2002, the strategy drawdown was almost fifty percent. Even though it achieved all time highs in 2006, you continue to wish to proceed with caution. The drawdown factor might be something that you need to consider when brooding about investing.
You can see, though, that there is 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 investment portfolio.
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