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Brad,
You're welcome, my pleasure. We chose Fidelity Select funds because they
offer the most sector funds (35+). We do not think it is feasible to
switch between Fidelity's funds and, say, Invesco's because of the 3% load
Fidelity charges. We use the switching model to determine which fund to be
invested in (#1 ranked fund over the past "X" weeks).
You bring up a great point about the Rydex series of funds. I have tested
the Nova fund with our stock model, and the return is not exactly 150% of
the S&P, but the maximum drawdown was greater than 150% of the S&P. I was
stumped. There was an article on these type of funds either in WSJ, IBD,
or Barron's, I can't remember which, that said the same thing. More
importantly, you bring up a good point---any good switching model could be
adapted to trade Rydex funds, international funds, closed-end funds,
individual stocks, etc... My next project is to test the model on homemade
groups of stocks, and then on the stocks in the groups. For example, you
run the model on your groups (equally weighted) and find that Airlines are
the number one group. Then you look at the airline stocks that make up
that group (Delta, USAir, AMR, Alaska Air, etc...) and you run the model on
those stocks. I do not know if it will work out or not, but it is
intellectually compelling. The system would have a number of biases in its
favor: the stock market is in a favorable condition (as indicated by our
stock model), the group itself has momentum, and the stock has shown
strength. Then again, maybe there is rotation within the group, where the
hot stocks make the group number one take a breather, and the laggard
stocks outperform. We'll see.
Bill Bancroft
Brad D. wrote:
> Bill,
>
> Thanks for outlining your mutual fund system.
>
> You said in one of your posts that when in "Zone 1 & 3 -- trade the
> Fidelity Sector funds with the switching model". It would seem you now
> have another decision to make: Which Fidelity (or other brand) sector
> funds do you buy? I'd be interested in hearing how you decide on the
> type of sector fund you trade. Also, have you considered trading the
> Rydex Nova fund, which is managed to have a 1.5 beta?
>
> Thanks,
>
> Brad Dingee
>
> ______________________________________________________
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