Sector rotation is the practice of shifting investments through the course of a regular business cycle into sectors that are expected to perform the best in each phase of the business cycle. Within each phase of the business cycle there are different economic factors at work and some sectors will thrive while others will struggle. By investing in the strongest sectors of the current phase of each economic cycle, practitioners of sector rotation are able to significantly boost their investment returns. Instead of investing in the entire stock market index, why not invest in the top performing sectors and harvest greater investment gains? Not only are greater investment gains made, but the process automatically weeds out poor performing sectors of the economy.
The Leverage Effect of Sector Rotation
Over time, following a sector strategy in your investment portfolio will have a magical compounding leverage effect. Time is your greatest friend with this strategy as you will find that in the long run you will avoid making investments in poor performing areas of the economy. What this does is creates an upward bias to your long run performance results by avoiding any significant declines in your portfolio value. Over time, your portfolio does not have to work as hard as other portfolios fully exposed to the market index. Continue reading ‘Sector Rotation Investing – How to Uncover the Hottest Stock Market Investments’ »
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