hardie plank siding arlington heights hardie board siding algonquin hardie plank siding crane siding vinyl siding cost .. Chicago Drug testing

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:

Invest, Be Wrong, and Make Money in the Stock Market

I have been trading for several decades and was an... Read More

Duck

Duck! No I don't mean a quack, quack. I meant... Read More

Political Investing

We have two candidates for president that have really different... Read More

Online Trading Strategy: Collecting Cash when Stocks Go UP - It PAYS to Know More than Others

When it comes to stock market trading it PAYS to... Read More

Hot Stock Trader: How to Pick Momentum Stocks with Ease and Simplicity

Most stock traders know that momentum trading can be a... Read More

The Stock Trading Plan - Why You Must Have One To Trade Successfully

This is the continuing story of our two imaginary traders,... Read More

China Syndrome

There has been great condemnation recently because China has been... Read More

?Fears Only Enemy Is Action?

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

Learn to Calculate a Stock?s Pivot Point

Stocks breakout from properly formed bases everyday but many investors... Read More

The Next Bull Market

We are already in it, but you can't see it.... 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

8 Penny Stocks to Avoid

There are many good penny stock investments available, which could... Read More

Precision Money Management

This article describes the model of a natural relationship between... Read More

Historical Briefing: Stocks, Finance and Money

The World Bank claims that some two billion of the... Read More

Tips to Finding Other People?s Simple Trading Plans

Did you know you can make money (and a lot... Read More

Shadow Bull

As one of my regular readers you know I have... Read More

Stock Trading Secrets?

How often have you come across an advertisement or e-mail... Read More

The Value of Stocks of a Company

The debate rages all over Eastern and Central Europe, in... Read More

Which Way The Market

I am hearing predictions by brokers, financial planners, talk show... Read More

Stock Chart Reading

As an investor you will want to check out any... Read More

Trading Baskets II: The Crapolio, A Roll of the Dice in the Stock Market

In a previously written article, we expanded the use of... Read More

Can?t Stand The Heat

It seems that every day I turn on the TV... Read More

Making a Stock Watch List

I am taking the time to help others learn the... Read More

How Covered Calls Turned a Trader Around

Sidney felt sick as she looked at her latest OptionsXpress... Read More

Gurgle Gurgle

Caught in a whirlpool and being sucked under. No life... Read More

types of street lights induction street lighting Pete's produce ..
types of street lights induction street lighting Pete's produce ..