What Sector Rotation Is, and How Investors Use It

Sector, rotation, is, an, investing, strategy, based, on, a, real, pattern:, different, sectors, lead, and, lag, at, various, points, in, the, economic, cycle., "Cyclical", sectors,, such, as, Industrials, or, Consumer, Discretionary,, usually, perform, well, during, economic, expansions., Their, revenue, and, profits, are, sensitive, to, overall, growth., On, the, other, hand,, "defensive", sectors, like, Consumer, Staples, or, Utilities, tend, to, hold, up, better, during, downturns., People, still, need, basic, groceries, and, electricity,, so, demand, stays, stable, even, when, the, economy, weakens.

Using, sector, rotation, means, shifting, your, portfolio, weight, between, sectors, based, on, the, current, or, expected, stage, of, the, economic, cycle., You, bet, on, which, sectors, are, likely, to, outperform, next., Sector-specific, ETFs, are, a, practical, tool, for, this, strategy., They, let, you, gain, or, reduce, exposure, to, an, entire, sector, with, a, single, trade,, instead, of, picking, individual, companies.