by Martin Williams

With so many exchange traded funds available now, it has become possible to maximize investment return by creating a strategy that rotates assets between exchange traded funds – such a technique can permit a trader to find sectors that are increasing in price no matter what the current market climate is.

Index ETFs that Cover Large Market Sectors

Index ETFs were introduced about 20 years ago to track the broader stock market indexes such as the famous Dow Industrials and the index tracking etf, SPY which tracks the S&P 500 Index. These exchange traded funds generally follow the major indexes and are fairly less volatile (move less in each direction) than other more specific sector and country ETFs.

Sector ETFs

Such ETFs as OIL (oil), GLD (gold) and SHY (short term bonds), allow a system to be developed that seeks to find which narrow market segment is likely to outperform in the near term and to move the assets in the system into such narrow segment until a better candidate is found. These ETFs provide some of the benefits of diversification that ETFs generally enjoy, while allowing some of the volatility that investing in narrow segments can enjoy also. These ETFs are specific enough to ensure that at least some of the market segments will move up no matter what phase of the economic cycle the economy is in. Thus, sector rotation strategies that can give great returns are now possible without investing in individual stocks.

ETF rotation strategies must be nimble to move into the correct sector at the right time.

Regional Exchange Traded Funds

The last type of ETF that is useful for creating sector rotation strategies are the country or region specific ETFs. ETFs in recent years have been created for very specific country indexes -there are country specific ETFs for countries (or regions) as small as Hong Kong, South Africa and even Belgium. These country specific ETFs allow the investor to devise a rotation strategy that moves into the “hot” region and then out again when another region is poised to outperform.

Exchange Traded Fund Timing and Rotation Strategies – provide vast opportunities for great return for the aggressive investor.

With all the exchange traded fund possibilities for the creative investor to look to – there never has been a better time to use ETFs to devise market outperforming rotation strategies.

About the Author:
Information provided by a leading expert in the creation of mechanical timing systems for the firm of Market Signal Systems LLC, providing market timing and mechanical timing signals for exchange traded funds (ETFs) and the federal employees Thrift Savings Plan at ETF Rotation Strategies

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