A sector rotation strategy is a way of investing where you try to predict which stock market sectors will be in next be in favour. You then rotate or sell shares in the falling sectors, and buy stocks in the rising sectors.
However, in order for you to get profit from a sector rotation strategy, you need to guess right three times:
You have to pick the top sectors, and then pick the stocks that will rise within those sectors, and then sell before the sector stumbles. It’s virtually impossible to consistently succeed at all three over long periods. But that’s not the only problem with a sector rotation strategy.
Sector rotation could inadvertently push you into the worst-performing sectors. There are many theories about which sectors will outperform at any given stage of the economic cycle. But trying to pick winning sectors—and staying out of other sectors—seldom works over long periods. Investors who attempt to do so often wind up with heavy holdings in the worst-performing sectors. That would be devastating to your portfolio, even if you confine your investments to well-established companies.
Sector rotation strategies cost money. Every time you move to a new sector you get charged fees twice. Once when you sell your holdings in the old sector, and then again when you purchase holdings in the new sector. This may not be seem like a big deal for investors who use discount brokers, but trading fees and commissions add up. These fees will eat into your profits.
We recommend that you avoid using a sector rotation strategy. Instead, at TSI Network we feel that investors should use our three-part Successful Investor philosophy:
Invest mainly in well-established companies;
Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
Downplay or avoid stocks in the broker/media limelight.
Using a sector rotation strategy rarely works. That’s because you need to guess right twice to profit from sector rotation
We have long advised against practicing a top-down sector rotation strategy, and that advice hasn’t changed as we look ahead. Under-weighting or over-weighting sectors of the… Read More
Learning how to spot the top blue-chip companies, dividend-paying stocks, and ETFs will help you choose the best way to invest $100K
If you’re looking for the best way to invest $100K, we recommend using our Successful Investor approach.
One key part of our three-part investing program… Read More
For successful investors, good portfolio management centres around building a well-balanced portfolio.
Portfolio management is the process of choosing and monitoring the investment holdings for an individual or institution.
4 balancing acts for a successful portfolio
For successful investors, good portfolio management will include these 4 balancing… Read More
Focusing on a stock market forecast can result in untimely buying and selling, which in turn will most likely lead to lower investment returns
When investors base buy and sell decisions on a short-term stock market forecast, they often experience notably poor investment results, or even… Read More
Follow these 5 investment habits to maximize your portfolio gains
At first glance, some bad investment habits seem sensible, even conservative. One of the most common is to hold off on buying stocks “until things settle down.” The funny thing is that the urge to hold… Read More
The importance of diversifying your holdings while sector investing, and why it’s a smart idea to avoid a sector rotation strategy
Your portfolio strategy should begin with one of the three key elements of our Successful Investor philosophy: Spread your money out across most if not… Read More
Most successful investors describe themselves as buy-and-hold investors. But for many, their strategy is more like buy-and-hold-till-I-get-bored. How long you hold depends on the ability to find good stocks to buy.
Rather than “buy and hold,” we prefer a “buy and watch closely” strategy. That’s… Read More
We advise against a so-called “sector rotation” approach to investing; this is when you try to hop from sector to sector. We also advise against practicing a top-down sector rotation style; underweighting or overweighting sectors of the stock market depending on a forecast of the… Read More
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We do not collect or disclose personal information, except when it is provided to us voluntarily by the site/store visitor with their consent.
We store subscriber and password files containing personal information securely. These files are stored in secure areas that are not accessible to the general public. We are always working to ensure the security of your personal information.
What personal information do we collect?
The information we receive from customers helps us personalize and continually improve your online experience at TSI Network. TSI Network may collect personal information online for all legal purposes, which include, but are not limited to:
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Changes to this Policy
This Policy is the sole authorized statement of TSI Network's practices with respect to the collection of personal information through TSI Network's websites and the subsequent use and disclosure of such information. Any summaries of this Policy generated by third party software or otherwise (for example, in connection with the "Platform for Privacy Preferences" or "P3P") shall have no legal effect, are in no way binding upon TSI Network, shall not be relied upon in substitute for this Policy, and neither supersede nor modify this Policy.
TSI Network may revise this Policy from time to time.
Legal Notices and Disclaimers
The contents of this web site and our publications are based upon sources of information believed to be reliable, but no warranty or representation, expressed or implied, is given as to their accuracy or completeness. Any opinion reflects the Successful Investor’s judgment at the date of publication and neither the Successful Investor, nor any of its affiliated companies, nor any of their officers, directors or employees, accepts any responsibility in respect of the information or recommendations contained in the publications or on this web site. Moreover, the information or recommendations are subject to change without notice.
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