Revisiting Fidelity Select Rotational

PrudentTrader has long published a rotational investment philosophy utilizing the Fidelity Select Portfolios. There are 41 Select Portfolios. Let’s revisit this rotational method today.

First the Rules:

  • Calculate six month relative strength and rank at end of each month.
  • Buy on the open the top 2 ranked portfolios.
  • Hold the two until they are replaced in the rankings. Rotate into the new top 2.

First a 16 year period covering this millennium to date bull and bear markets with no market timing.

Respectable overall performance. Each draw-down is recovered and exceeded. Draw-downs however, are too large. Most will quit just prior to the turn around, it’s human nature. My methodology employs a major market timing component, in other words an exit to avoid the potential of a major decline. That timing model has the bull phases since 2000 as:

January-03 Jan-08
October-09  ???

So lets begin in January of 2003 and end in January of 2008 and compare, how do we do?

Now let’s figure the final leg of this analysis from November 2009 thru the present time, we will begin the new phase with the monies gained from the first.

The big benefit of utilizing a major market timing mechanism is reducing by more than half, the draw-downs experienced with no major timing component. Some graphical displays:

Is it for you? Nice and easy method to follow and execute in about 10 minutes a month.