One of the biggest challenges for investors over the years has been a lack of discipline and patience. In fact, emotional selling during periods of under-performance can really hurt long term returns. Our latest research — The Ups and Downs of Sector Rotation — provides valuable insight on how the discipline of sector rotation strategies can yield quite significant over-performance over time.
- Using the Ken French Data Library of 48 industry groups, we studied how sector rotation strategies have performed over long time horizons, and the risks investors must be aware of to realize the returns.
- The study found that once the strategy’s relative performance bottomed out, the next six to 24 months were critical
- Annualized return of the top quintile was 14.1% versus 7.7% for the bottom quintile, and 9.5% for the market.