A Sector Rotation ETF Strategy Targeting Attractive Opportunities

When implementing a sector rotation strategy, different people may use varying guidelines to achieve their goals. Investors, though, may also utilize an exchange traded fund that does the work for them.

For instance, the the actively managed SPDR SSGA Global Allocation ETF (NYSEArca: GAL) invests in other ETFs to build a global diversified portfolio comprised of equities, bonds, REITs, TIPs and commodities. When allocating toward sector positions, GAL utilizes quantitative and fundamental components to partition a chunk of its U.S. large-cap exposure for just market sectors.

“Sector rotation strategies can potentially help investors better align their investment strategy to their market outlook and position a portfolio to get more from their core,” David Mazza, Head of ETF and Mutual Fund Research at State Street Global Advisors, said in a note.

Among the investment community, advisors largely implement four main strategies when selecting sector exposure, including tactical over/underweighting based on opportunities, core and satellite positioning based on current markets, rotation based on economic factors and diversification to diminish overconcentration to single stocks.