Mutual Fund Switching, Sector Investing Newsletters

Mutual Fund Switching or Sector Investing Newsletters are typically 100% in the market in one mutual fund or another. The idea is to rank each mutual fund's strength by price velocity, momentum, or some other formula, then switch into the strongest ranked mutual fund or funds and stay with it. This position is held for a week, month or even quarter as long as it maintains its relative strength position amongst the alternative funds. Where Asset Allocation Newsletters rebalance the portfolio at most quarterly, a Mutual Fund Switching, Sector Investing Newsletter will typically hold at longest for three months. More frequent trading (more work) usually translates into more profit. This Fund Switching/Sector Investing is meant to place the portfolio assets in the strongest sectors while completely avoiding the weakest.

Being in the strongest momentum funds sounds great, but sometimes it's a selection of the strongest fund in a market of declining funds or a selection of the least declining fund. The market in general is declining and the strongest funds are just delcining less then the altenative. While this is a better senario then owning the funds declining the fastest there are now better alternatives.

Since most Fund Switch Newsletters concentrate on stocks only, this places the subscribers in precarious positions when stocks are in for a long decline. The addition of Bear Market Funds among the ranked funds helps alleviate some of this danger. However, it requires a bit more sophistication to use the Bear Market Funds and conservative investors tend to shy away from them. The Fund Switching, Sector Investing subscriber can also avoid this bear market danger with the addition of an Asset Class Allocation strategy to their overall portfolio.

There are a few fancier Mutual Fund Switching/Sector Investing Newsletters that add the element of Asset Allocation by adding multiple asset classes into their Fund Ranking Matrix. Here, the ranking may include domestic and international stocks funds, domestic and global bonds funds, and gold funds and maybe even real estate funds like the Fund TargetingTM Matrix at www.GuerrillaFunds.com . In a protracted stock market decline, the mutual fund investor can avoid stock funds completely if the other asset classes, bonds for instance, show superior strength.

This is an entirely different philosophy from traditional Asset Allocation . Instead of spreading your asset across multiple asset classes and hoping that the losses in one area will be offset by greater gains in another, the Asset Allocation within Fund Switching/Sector Investing moves up one significant step in investing by working to completely avoid the weakest areas of the market and concentrate on the strongest. The Mutual Fund Switcher Newsletter crowd believes that there is less risk by maintaining positions in only the strongest markets and eliminating exposure to the weakest. With this sort of Sector Newsletter there would be times when the subscriber would hold no positions in domestic stocks.

Some Mutual Fund Switch Newsletters dissect the market narrowly by concentrating on market sectors, automotive, health, oil services, etc. This takes the risk to reward equation up one more step. The same idea applies, pick the strongest funds (sectors) and allocate the money amongst them. We see this often with newsletters specializing in the Fidelity Select Funds or the Rydex Sector funds. It is a must to have a fund family that allows frequent trading or the use of Exchange Traded Funds (EFT). It's a way to follow the "hot" money. The individual sectors will change leadership much more often then switching with Index Funds so trading or reallocation will increase dramatically. If the newsletter's forecast is precise then the rewards can be significant, if not the results devastating.

Mutual Fund Switching, Sector Investing Newsletters work well for the more proactive investor. By offering a more sophisticated approach then the traditional Asset Allocation newsletter, they require closer monitoring and more frequent reallocation. While they can offer significantly superior gains over simple buy and hold investing, they like their Asset Allocation brethren do not offer worst case scenario recommendations. At a time when all markets are to be avoided (1929-1933, 1987) for the protection of principal, the Mutual Fund Market Timing Newsletters are the only answer. Because Market Timing Newsletters results can shine through any intermediate bull and bear market, they can, in these catastrophic instances, be the difference between rags or riches.