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Win with Disciplined Sector Rotation

Stock market volatility scares investors.

However, your financial health can be affected if you let fear drive your investment decisions.

The performance of several types of equity assets from December 31, 1993 to December 31, 2013 is shown below:


Source: Richard Bernstein Advisors LLC, Standard & Poor’s, Dalbar

A dollar invested in AlphaProfit Fidelity Focus and ETF Focus portfolios on December 31, 1993 is worth $46.39 and $45.41, respectively. A dollar invested in S&P 500 is worth $5.84. In comparison, a dollar in average investor’s account has grown to $1.64.

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The S&P 500 gained at a 9.2% annual rate during this period. Many equity asset types fared better than the S&P 500.

Yet, Dalbar’s estimate of the annualized return earned by the average investor during this 20-year period falls well short at just 2.5%.

The 20-year period includes phases of substantial turmoil and volatility from the Great Recession and the dot-com bust.

The average investor underperformed nearly every equity asset class due to poor timing of asset allocation decisions.

The average investor would have fared better by buying and holding most equity assets instead of buying assets after prices have run up and selling them in a panic after prices have plunged.

AlphaProfit’s disciplined investment process has helped its Fidelity and ETF model portfolios provided in the Premium Service perform better than even the top performing energy, healthcare, and information technology sectors.

The AlphaProfit Fidelity Core and Fidelity Focus model portfolios have gained at annualized rates of 17.0% and 21.1%, respectively while the AlphaProfit ETF Core and ETF Focus model portfolios have gained at annualized rates of 16.8% and 21.0%, respectively.

AlphaProfit’s investment selection process evaluates sectors on valuation, momentum, and news quality to identity likely leaders and laggards. See: Fidelity Select Funds: Choose the Best Fidelity Sector Fund Consistently

The sector rotation process includes or retains prospective leaders and eliminates prospective laggards from the model portfolios.

AlphaProfit’s investment process has navigated through both favorable and unfavorable phases with a 75% success rate in picking winners. The long-term performance of the AlphaProfit Fidelity and ETF model portfolios reflect this success rate. AlphaProfit’s Premium Service has bagged Hulbert Financial Digest’s #1 rank 12 times.

Bottom line: Do not let fear drive your investment decisions. Keep your emotion in check and you will prosper.

To get the current recommendations in the AlphaProfit Fidelity and ETF Focus model portfolios, subscribe to AlphaProfit Premium Service now.


Must-read Articles on Sector Investing

Using Sector Funds to Construct Diversified Mutual Fund Portfolios

High-potential diversified portfolios can be constructed by dividing assets among a group of sector funds. This approach gives the investor flexibility to over-weight or under-weight certain sectors versus broadly diversified indexes. 'Sector funds are too risky.' 'I doubled my money with Fidelity Select Technology in 12 months!' 'Avoid sector funds.' If all of this sounds confusing, you are not alone.

Sector Mutual Funds: How to Pick Winning Sector Funds and Avoid Losers

If you are looking to earn great returns from the stock market sector mutual funds are right up your alley. Sophisticated investors recognize the potential sector mutual funds offer and know how to make such funds work for them. You can consistently beat the market by investing in the right sector mutual fund at the right time. In fact, you can make money even in bear markets.

Sector ETFs: Invest in the Best Sector ETF Consistently

Sector ETFs are among the most potent investment vehicles that allow individual investors to exploit advantages previously available only to large institutions. You can beat the market by investing in the right sector ETF at the right time. In fact, you can actually make money even when the overall market is tanking. However all too often, investors use sector ETFs inappropriately and get their fingers burnt.

New ETF and Mutual Fund Recommendations

ETF Mutual Fund RecommendationsThe Fidelity and ETF Core and Focus model portfolios have gained at annualized rates of 14.6% and 17.8%, respectively since 1994. The model portfolios will be repositioned with new mutual fund and ETF recommendations on Friday, June 28. Learn more about AlphaProfit's Free and Premium Service investment newsletters.

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