Maintain your old Siemens Hipath system

No Load Mutual Funds: Boost Your Portfolios Returns

Investors who exclusively use broadly diversified, no load mutual funds for their stock investments often lose out on opportunities to increase the reward potential of their portfolios. This article looks at two methods investors may use to enhance the performance of their portfolio of diversifed, no load mutual funds.

Diversify, diversify, diversify!

Rebalance your portfolio periodically.

These have become the mantra in the post dot-com era. Stocks, bonds, and cash typically form the major asset classes for constructing portfolios of no load mutual funds. Lot of emphasis rightly gets placed on the percentage of assets allocated to no load mutual funds of different asset classes. However, the division of assets within a particular class does not nearly get the attention it should.

All too often, investors exclusively use broadly diversified, no load mutual funds for their stock investments. Fidelity Magellan Fund (Nasdaq: FMAGX) and Fidelity Contrafund Fund (Nasdaq: FCNTX) are examples of popular Fidelity funds investors commonly use. By following this approach, investors often miss out on opportunities to enhance the reward potential of their portfolios.

In a related article, we have looked at how investors can use sector funds to construct a diversified, no load mutual fund portfolio. In this article, we look at how investors can use sector funds to enhance the performance of their portfolio of diversified, no load mutual funds. Although Fidelity funds are presented as examples, the concepts outlined here can be implemented using sector funds managed by other institutions such as Vanguard or T. Rowe Price.

Sector funds confine their investments to a particular sector of the economy. Fidelity funds managed under the Select Portfolios® are sector funds. For example, Fidelity Select Energy (Nasdaq: FSENX) is a no load mutual fund that focuses its investments on various segments of the energy industry such as integrated oil companies, oil and gas exploration and production companies, and oil field service companies.

So how does one use sector funds to increase the performance potential of a portfolio of diversified, no load mutual funds?

Focus on sectors with growth opportunities. An investor having a portfolio of diversified, no load mutual funds may commit a portion of her assets to sector funds that focus on areas having significant growth opportunities, e.g., electronics or software. Some financial professionals call this the 'core and satellite' portfolio approach where the diversified, no load mutual fund is the core and the sector fund is the satellite holding. Investments in Fidelity funds like Fidelity Select Electronics (Nasdaq: FSELX) or Fidelity Select Software and Computer Services (Nasdaq: FSCSX) can enable the investor add emphasis on growth sectors such as electronics and software, respectively.

Take a proactive approach to sector investing through sector rotation. Like in the previous case, an investor having a portfolio of diversified, no load mutual funds commits a portion of her assets to sector funds. With this approach, the investor however seeks to maximize the potential of the portion of assets committed to sector funds by periodically switching assets into sectors with higher expected returns.

For example, until not too long ago, major corporations pruned technology related capital spending whereas falling interest rates kept consumer spending strong. To profit from such secular trends, an investor may choose to invest in Fidelity funds such as Select Consumer Industries (Nasdaq: FSCPX) and Select Leisure (Nasdaq: FDLSX) while avoiding Select Technology (Nasdaq: FSPTX). AlphaProfit.com's research indicates that sector rotation has the potential to outperform the market averages on the basis of relative returns as well as risk-adjusted returns. To employ this approach effectively, you need to understand and follow the dynamics of the individual sectors. You must also be able to make informed decisions on sectors to select and sectors to avoid.

The Impact on Your Portfolio. Strong performance from a portion of assets committed to sector funds can materially enhance the return of your portfolio of no load mutual funds. Fidelity funds such as Select Electronics and Select Software and Computer Services sport 10 year average annual returns of close to 18%; this is nearly twice the 10 year average annual return of 9.4% for the Fidelity Magellan Fund. Using tactical, infrequent rotation of assets among sectors, the AlphaProfit's Focus? model portfolio has increased at an average annual rate of 34.4% since 1993.

So what do these return rates translate to you in dollar terms? A $100,000 investment in a diversified, no load mutual fund that grows at 10% per year results in $259,374 at the end of 10 years. If the same $100,000 is divided such that $85,000 is invested in the same diversified, no load mutual fund growing at 10% per year and the remaining $15,000 is invested in sector funds growing at 30% per year, the assets will total $427,256 at the end of 10 years. That is $167,882 or 65% more than the $259,374 resulting in the former case.

Thus by allocating even a relatively small, say 15%, of the total portfolio of no load mutual funds to sector funds, you can dramatically increase your returns.

Key Points to Remember

1. Investors who exclusively use broadly diversified, no load mutual funds for their stock investments often miss out on opportunities to enhance the return of their portfolios.

2. Sector funds can serve as a valuable return enhancing booster for an investor owning a portfolio of diversified, no load mutual funds.

3. Investors may choose to take a passive long-term approach to investing in sector funds that target high growth sectors of the economy. Alternatively, an investor can take a proactive approach to maximize the potential of sector funds by periodically switching assets into sectors with higher expected returns.

4. Investors willing to look beyond broadly diversified, no load mutual funds have a powerful ally in sector funds. Such investors can materially increase portfolio returns by committing a relatively small fraction of their total assets invested in diversified, no load mutual funds to sector funds.

Notes: This report is for information purposes only. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice. This report does not have regard to the specific investment objectives, financial situation, and particular needs of any specific person who may receive this report. The information contained in this report is obtained from various sources believed to be accurate and is provided without warranties of any kind. AlphaProfit Investments, LLC does not represent that this information, including any third party information, is accurate or complete and it should not be relied upon as such. AlphaProfit Investments, LLC is not responsible for any errors or omissions herein. Opinions expressed herein reflect the opinion of AlphaProfit Investments, LLC and are subject to change without notice. AlphaProfit Investments, LLC disclaims any liability for any direct or incidental loss incurred by applying any of the information in this report. The third-party trademarks or service marks appearing within this report are the property of their respective owners. All other trademarks appearing herein are the property of AlphaProfit Investments, LLC. Owners and employees of AlphaProfit Investments, LLC for their own accounts invest in the Fidelity Funds mentioned in this report. They may for their own accounts also buy, sell, or hold long or short positions in any of the other securities mentioned in this report. AlphaProfit Investments, LLC neither is associated with nor receives any compensation from Fidelity Investments. The investment returns and examples provided above are solely for illustrative purposes. Past performance is neither an indication of nor a guarantee for future results. No part of this document may be reproduced in any manner without written permission of AlphaProfit Investments, LLC. Copyright © 2004 AlphaProfit Investments, LLC. All rights reserved.

About The Author

Sam Subramanian, PhD, MBA is Managing Principal of AlphaProfit Investments, LLC. Sam developed the ValuM? Investment Process for managing investments. He edits the AlphaProfit Sector Investors' Newsletter?. For the 5 year period ending December 31, 2003, AlphaProfit model portfolios increased by up to 288%, a compound annual return rate of 31%. To learn more about AlphaProfit and to subscribe to the FREE newsletter, visit: http://www.alphaprofit.com

In The News:

'You sold your country out': Judge hits out at Trump's ex-adviser
Tue, 18 Dec 2018 15:58:00 +0000
A judge has delayed the sentencing of Donald Trump's former national security adviser Michael Flynn after telling him: "You sold your country out."

Bump stocks banned after Las Vegas massacre
Wed, 19 Dec 2018 01:16:00 +0000
Donald Trump has banned a device which allows semi-automatic weapons to fire like machine guns, after they were used in the Las Vegas shooting.

Fighting in key Yemen city dies down after ceasefire
Tue, 18 Dec 2018 07:50:00 +0000
Yemen's key port city of Hodeida was calm on Tuesday, hours after a ceasefire came into effect between government-allied forces and the country's rebels.

Brit arrested over cannabis oil in Bali could face death penalty
Mon, 17 Dec 2018 21:56:00 +0000
A British man who could face the death penalty after he was arrested in Bali for allegedly smuggling cannabis oil has admitted he has been "very stupid".

Seven English-speakers killed by Cameroon military
Tue, 18 Dec 2018 17:12:00 +0000
Seven suspected English-speaking separatist rebels have been killed by the military in Cameroon.



tikatoshop.it

Erfahrungen mit Pallhuber Wein
Agen Bola SBOBET Terpercaya

Travel in comfort and at your leisure with CT Airlink Limousine & Car Service for top quality private transportation and exceptional customer service. We operate Sedans, SUVs & Vans for CT Car Services to covering all Connecticut airports including Car Service from CT to Newark Airport , Mohegan Casino Uncasville CT, Foxwoods Casino Mashantucket CT, Manhattan Cruise Terminal NYC, Brooklyn Cruise Terminal NYC and Bayonne Cruise Terminal NJ. CT Airlink hire licensed and friendly chauffeurs who have in-depth knowledge of the Areas.

Traders, Defend Against the Dreaded Death Spiral.

It has often been said that there is only two... Read More

Stocks & Oil, Sat Jun 18th, 2005

Both the stock market and oil prices rallied recently, which... Read More

Why This Bear?

People are constantly asking me why is the stock market... Read More

Downdraft

For the year 2000 we have seen hundreds of mutual... Read More

?Fears Only Enemy Is Action?

What a great statement!I just heard someone use it in... Read More

Ignore Stock Market Talking Heads

You should ignore analysts on TV, the radio, the newspaper... Read More

Valuation

Every day I hear from the "experts" on CNBC-TV and... Read More

The Seven Mistakes All Novice Traders Make and How to Correct Them

We learnt the following the hard way! If any of... Read More

Choosing a Stock Broker

If you were to find that you had some severe... Read More

Will the Stock Market be Lower in October?

The stock market often closes a week in the middle... Read More

Emotional Involvement

I'll bet with almost anyone that has stocks or mutual... Read More

Investing in Dividend Paying Stocks

I was recently interviewed for a press release through a... Read More

The Great Stock Market Secret

When the stock market is going up and all your... Read More

Risk Control

Everything you invest in has risk so you want to... Read More

On Line Stock Trading: Small Cap & Micro Stocks Go Up and Down - How Can You Profit?

Success in small cap & micro cap stock trading like... Read More

Its A Duck

If it walks like a duck, quacks like a duck... Read More

Shorting Stocks ? The Basics, Part II of II

After the publication of the first part of this two... Read More

Lemmings Are Gathering

Before they go over the cliff to their destruction these... Read More

The Golden Goose is Sick

It is finally catching up with them. The brokerage companies... Read More

The 401(K): How The Insider Has Stolen Your Retirement!

Mutual funds were moderately successful in creating a presence in... Read More

Its Better

Question: How does it get better when it gets worse?Last... Read More

Evaluation II

As I said in Part I everyone in the insane... Read More

Selection Vs Direction

As I have said many times before in this column... Read More

Trapeze Artist - Swinging with the Stock Market

When we go to the circus we see a trapeze... Read More

Trading For A Living

How many times have you said to yourself, "I'd like... Read More