DWM Aim High Ultra Sector
Maximum Equity Exposure = 150%
Model Investment Strategy:
This model applies a tactical strategy to the domestic sector markets. This model utilizes Sectors, Leveraged Sectors, Money Markets, each at the optimum time. At times this model can be 100% invested for the maximum pre-determined equity exposure in the S&P 500 Index Fund. It also as the ability to utilize leverage. The time is determined by integrating the Market Environment Indicator (MEI) Individual Fund Signals (IFS) (see below for further explanation). At certain times the model will be invested in the following proportions:
• 100-150% Sectors
• 75-112.5% Sectors, 25% Money Markets
• 50-75% Sectors, 50% Money Markets
• 25-37.5% Sectors, 75% Money Markets
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• 100% Money Markets
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* At times the model can be 100% invested for the maximum pre-determined equity exposure in the S&P 500 Index Fund. It also has the ability to utilize leverage.
This is Disciplined Wealth Management’s Aim High Ultra Sector Model.
Research studies have found that certain sectors excel more than others at different times in the domestic market cycle. When the market has terrific momentum, as it had in 1998-99, drilling down and using sector funds has the greatest portfolio punch. However, every bull market is interrupted by the inevitable bear; research has shown that building a Money Market position has the potential to protect positive returns experienced during the last bull market advance.
Overview
The Aim High Ultra Sector Model quantitatively focuses on owning the leading sectors in uptrends based on over two decades of experience in sector analysis. The model combines relative strength analysis to determine the leading sectors with individual sector signals developed for that specific sector/industry group.
How it Works
Relative Strength Analysis (RSA): Monthly 13 growth orientated sector/industry are ranked from leaders to laggards based on momentum. The four leaders, with preset exposure limits, equally make up the program for the coming month.
Individual Fund Signal (IFS): For risk management, each of the 13 growth sector/industries has their own buy/sell signal which is monitored daily. Looking only at the IFS signals of the four leading sectors, on a buy signal the individual sector/industry fund is purchased, or on a sell signal that sector/industry fund is sold, with that 25% allocation going into a defensive money market position.
Market Environment Indicator (MEI): a quantitative measurement of the direction and momentum of the overall market. When this is in an uptrend and confirmed with an Individual Fund Signal, the Model will take a 1.5X position within that sector.
Conclusion:
The primary goal of the DWM Aim High Ultra Sector Model is to out-perform the benchmark index with less risk relative to the increased return. The principles of relative strength are applied to the DWM Aim High Ultra Sector Model, and returns compared to the returns of the S&P 500. Relative strength adds value, along with the MEI and IFS. This is a disciplined process to improve the risks and returns for Sector/Industry groups with an aggressive tactical model. While the common wisdom is for investments to be diversified across all sectors at all times, history has shown that major market rotation exists: this presents investment opportunities. By employing relative strength, one can add value by identifying the leader in an uptrend and avoiding the laggards in Sector/Industry Groups in certain market environments. When the IFS is bearish on a particular Sector/Industry it is simply best to build a position in the safety of the Money Markets. When the MEI is bearish remove leverage.
The program is available on the following platforms:
www.tdameritrade.com