Sector Rotation Model

Is it a good time to invest in equities now?

While the equity markets might be volatile right now, the chart here shows that the equity markets have traditionally rewarded the long term investor.

The Sector Rotation Model is an interesting investment plan designed to give you exposure to the equity markets yet help control the risk. World known investment advisory firm, Dorsey, Wright & Associates, manages the Sector Rotation Model based upon their research in the Point & Figure methodology.

The Point & Figure methodology dates back to the late eighteen hundreds and Charles Dow, founder of the Wall Street Journal, was the first to popularize this methodology. The Point & Figure methodology has its roots in the irrefutable law of supply. The methodology provides a logical, sensible, organized approach to deciphering supply and demand in the equity markets.

Utilizing the Relative Strength concept of the methodology, the SRM program identifies those which sectors, from a universe of over 20, have the strongest attributes compared to the broad market. When a sector falls out of favor on its relative strength readings, it is removed from the portfolio. As long as a sector has positive relative strength attributes, it will remain in the portfolio. The relative strength readings are longer term, typically lasting eighteen months.

This dynamic, monitored portfolio aims to have exposure only to those sectors with the highest probability of outperforming the market and avoid those sectors with the lowest probability of outperforming the market which ultimately reduces risk. Because the portfolio is invested in , Exchange Traded Funds (ETFs), baskets of stocks within a sector, the risk of an individual stock falling and hurting the portfolio is minimized. Of course, there is always general market risk since this portfolio remains 100% invested at all times.


If you want to sign up for SRM, click here