Equal Sector Investing

[professor_frink]

Just came across an article on on equal sector investing. Haven't really heard anything about this as a strategy before, haven't seen it mentioned on the forums here either so thought it may be of interest for some.

http://www.businesswire.com/portal/...d=news_view&newsId=20100217005417&newsLang=en

For those of you that don't know what it is -

Equal sector investing is a strategy in which a portfolio is divided equally among the economic sectors of the market, for example the sectors of the S&P 500. These sector weights are then periodically rebalanced back to equal weight. Although similar in concept, equal sector investing is not to be confused with equal stock investing in which the individual stocks in a portfolio, rather than sectors, are assigned equal weights.

What caught my eye about it was the claim that this style of investing had outperformed the S&P 500 each year for the past decade. No mention of returns before 2000 though(wonder if there is a reason for that)

What is also interesting is was this comment -

the out-performance of an equal sector strategy is partially attributable to its risk management characteristics. “Over the last 30 year the largest annual declines in the S&P 500 have been precipitated by a crash in the market’s largest sector. In 1981, it was Energy stocks. In 2000, it was Technology. Most recently it was the Financial sector.

Comments?


Cheers