Sector Investing, Sector Funds, and Sector Rotation
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Sector funds focus their equity investments within a specific sector or industry of the economy. Stock prices of companies within a sector or industry move together due to causal factors. Examples of such factors include introduction of new technologies or products, changes in consumer demand or demographics, or increase in merger & acquisition activity.
Impacted by above-mentioned factors, the share price performance of a sector or industry can be markedly different from that of a broad index like the S&P 500. Sector returns highlighted in yellow indicate those of the year's best Fidelity Select Fund picked by AlphaProfit's prescient ValuM investment process for inclusion in the sector model portfolios.
Returns of Fidelity Select Funds that invest in the above listed sectors or industries are used as measure of the sector's or industries' share price performance.
The ValuM process enables subscribers to add value to their accounts in both bull and bear markets.
Harnessing Sector Investing through Sector Rotation
Given the wide variation in returns of individual sectors, one needs to invest in the right sectors at the right time to harness the potential of sector investing.
Sector rotation is an investment process where the investor seeks to increase returns by opportunistically switching from one sector to another, thereby earning returns in excess of those earned by buy-and-hold investors.
The chart below illustrates how AlphaProfit subscribers enhanced their return by 28% by switching from Health Care Providers (FSHCX) to Consumer Staples (FDFAX).
Timely sector rotation increased the value of investment accounts starting at $10,000 to $15,507, nearly $2,800 more than buy-and-hold investors staying either in Health Care Providers, Consumer Staples, or the S&P 500 index fund.
Prudent sector rotation offers significant potential to grow wealth over time. As shown above, an index investor adds wealth at a 10.2% annual rate during the two-year period. In comparison, an AlphaProfit subscriber adds wealth at a 24.5% annual rate. Assuming the AlphaProfit subscriber and index investor add wealth at 24.5% and 10.2% annual rates, respectively for another three years, their accounts starting at $10,000 will be worth $29,938 and $16,228, respectively. In other words, AlphaProfit subscriber adds $13,710 or 137% in value.
Investing in Sector Funds
Mutual funds as well as exchange-traded products like ETFs are available for investing in sectors. Investors can use these sector focused investment products in different ways:
By prescient sector selection and prudent sector rotation, AlphaProfit enables subscribers to harness the reward potential of sector funds.
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