ETF Sector Rotation Strategy
Sector ETF (Exchange Traded Fund) rotation strategy aims at maximizing the return by buying and selling sector ETFs. This is an active investment management strategy and if successfully followed offers much more return than investing in single sector-based ETF. Sector ETF rotation strategy also offer greater flexibility as now there are a number of sector ETFs available (finance, services, industry, technology, energy, etc.) and also ETFs with different proportion of holdings are available with in a sector.
ETF sector rotation strategy is a long-term trading strategy which is usually done in a cyclical manner. The followers of this strategy believe that the economy operates in a cyclical manner and every industry have peak and down times. So there is a greater chance of profitability if the trader invests in the sector at the end of the down time and withdraws it at the peak of the peak time; and then invests in other sector. More over many sectors/industries are inter-related so better/worst performance of one can indicate the upcoming performance of other sector.
The most difficult task involved in ETF sector rotation strategy is identifying the economic and sector cycle. The trader should do good initial research to create his investment plan. When figuring out his plan the trader should consider many factors including seasonal price changes, whole economic performance, predicted economic performance, his risk-tolerance, allocated portfolio portion to ETFs, his trading knowledge, etc. With this strategy it is advised to invest in more than one (distinct-related) sector ETF at a time as it is possible to cover ones loss from profit of other.
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ETF sector rotation strategy is a long-term trading strategy which is usually done in a cyclical manner. The followers of this strategy believe that the economy operates in a cyclical manner and every industry have peak and down times. So there is a greater chance of profitability if the trader invests in the sector at the end of the down time and withdraws it at the peak of the peak time; and then invests in other sector. More over many sectors/industries are inter-related so better/worst performance of one can indicate the upcoming performance of other sector.
The most difficult task involved in ETF sector rotation strategy is identifying the economic and sector cycle. The trader should do good initial research to create his investment plan. When figuring out his plan the trader should consider many factors including seasonal price changes, whole economic performance, predicted economic performance, his risk-tolerance, allocated portfolio portion to ETFs, his trading knowledge, etc. With this strategy it is advised to invest in more than one (distinct-related) sector ETF at a time as it is possible to cover ones loss from profit of other.
Follow NobleTrading on FaceBook; Be a Fan.
NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage
posted by NobleTrading at
7:55 AM
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