Want High Performance In Bull Markets
Plus Safety In Bear Markets?
Sector Fund Timing May Be Just For You.
While aggressive timing strategies can achieve large profits over time, not every trader is emotionally able to handle them.
The good news is, you don't have to be an aggressive market timer to achieve large profits. Trading sector funds with a solid timing strategy is not only profitable, but drawdowns are usually very small because sector timing strategies are very diversified.
Trading the sectors deserves your consideration.
Trading The Sectors
How does a mutual fund market timer take advantage of stock market volatility, while protecting himself or herself from the very real risks such volatility creates, as well as from the potential drawdowns that can occur?
The answer is by trading specific industry sector funds. Here is a "quick" list of reasons why:
1. Diversification: By having small positions in multiple industries, you reduce exposure to any single industry being affected by a negative news event.
2. Volatility: While individual sectors are no less volatile than the rest of the market, they do not move together. So the volatility to one's portfolio is considerably reduced.
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3. Drawdowns: Because sector funds go to cash during sell signals, and because there are always some funds in bull markets at the same time there are others in bear markets (during which those sectors are protected in money market funds), drawdowns are kept to extreme minimums.
"In some respects, it is the equivalent of running your own well managed mutual fund." |
4. Good in All Markets: There are always single industries in their own bull markets. Even during a cyclical bear market, such as we experienced during 2000-2002 as well as 2007-2008, there were always some industries moving higher. And if not, you are still protected by being in money market funds.
5. Active Timing: Though sector timing is not aggressive, it is certainly active. You will always be trading the bullish sectors, and exiting the under performing ones. In some respects, it is the equivalent of running your own well managed mutual fund.
6. Trends: Industry sectors tend to trend. And when they trend, they often move further (in either direction) than anyone expects. During a strong bull run, it is common to find individual sectors that double the gains of the overall market.
Winning The Battle
The FibTimer Sector Timer strategy covers 16 industry specific sector funds found in the Rydex Fund Family. Several other widely used fund families also have sector funds, including Pro Funds and Fidelity Funds, that can be used with our sector timing signals.
Even in volatile market conditions during which the overall stock market is performs poorly, the FibTimer Sector Timer has performed exceptionally well.
Sector timing is proactive money management at its best. Constantly putting your money in the strongest sectors while removing it from the weakest sectors.
This is where the diversity inherent in sector timing stands out. Top performing sectors are where your timing funds are allocated, and no one sector can cause irretrievable damage to the portfolio should that industry collapse without warning.
Conclusion
Over the years, sector fund timing may go down as one of the best strategies ever created. Its ability to move funds into only those industry sectors which are performing well keeps it profitable in most market conditions.
The low drawdowns, low volatility and diversification inherent in sector timing, not to mention strong profitability, cause this strategy to stand out from all the others.
"...sector timing can create profits when other traders are lucky just to be holding onto their capital" |
In volatile market conditions sector timing can create profits when other traders are lucky just to be holding onto their capital, while drawdowns, if they occur at all, become almost a non-event.
While sector timing may not make huge gains during bear markets, being mostly in cash, the strategy will protect your investment capital. And it will then outperform during bull markets, always keeping you invested in those industries that are in their own bull markets.
Caveat.. sector timing does require active participation. The FibTimer Sector Timer requires that subscribers check the online report each evening or at least check their email for our Evening Update Report for any changes (the Sector Timer is updated daily).
Sector timing also requires a minimum account size. Remember, there "could" be as many as 16 open positions at any one time, and closed (bearish) positions should be in cash (money market funds) with those funds remaining untouched. A good guess is that a sector timing portfolio should be at least $25,000 to start.
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FibTimer reports may not be redistributed without
permission.
Disclaimer: The financial markets are risky. Investing is
risky. Past performance does not guarantee future performance.
The foregoing has been prepared solely for informational
purposes and is not a solicitation, or an offer to buy or
sell any security. Opinions are based on historical research
and data believed reliable, but there is no guarantee that
future results will be profitable. |