Ch.10 · Benchmarks and Performance Evaluation · medium
What is 'sector rotation' as an investment strategy and what are its risks?
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EXPLANATION
Sector rotation involves shifting portfolio weights between sectors based on where we are in the economic cycle — e.g., overweighting cyclicals in recovery and defensives in contraction. While theoretically sound, timing sector rotations correctly is extremely difficult. Mistimed rotations can lead to significant underperformance versus staying broadly diversified.
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