Question

What is meant by the concept of rotational investing?

Answer 1

Rotational Investing

Rotation investing is a modern day investment strategy that has gained more and more attention in the last few years,it is the rotation of portfolio assets overtime, it is the process of shifting investment assets from one sector of the economy to the another,this involves using the proceeds from the sale of securities related to a particular investment sector for the purchase of securities in another sector this is mainly used for diversifying the holdings over a specified holding period

It requires a great deal of liquidity and broad latitude for enacting investment positions some investors believe that sector rotation strategy can be a profitable approach to investing.

Broad market sector rotation seeks to follow market cycles of the economy these are based on bullish bearish as well as recessions, recoveries expansions and contractions these are the opportunities to expand market and reduce losses to safehavens in the recessionary markets

Market cycles has four stages:

Market Bottom: This is represented by diving prices, culminating in a long term flow

Bull Market: This begins as the market rallies from the market bottom.

Market Top: This stage hits the top as bull market flattens out

Bear Market : Her we go down again this is the precursor to market down

One of the benefit for rotational strategy is it provides downside protection from bear markets and risk is reduced to the investee and increases the profits in a high level and strength of investor

There are three reasons why this strategy might not works:

The investee should pick up the stock from top sectors and then sell the stocks when the stumble it is not possible to continuously succeed all the periods

Every time you move to a new sector you get charged fees once you have sell your old holdings and purchase new ones these fees will eat in your profits

Rotational investing strategy is one of the best strategy to become a good investee in todayys markets