Market Pulse: What will perform best in 2015?
Special to the Bonanza
This year the S&P 500 Index, a measure of large-company stocks, is up about 13 percent. That’s better than the S&P Mid-Cap Index, which is up 9 percent.
Small-company indexes are lagging, rising 4 percent. In 2014, large-cap stocks performed far better than small-cap stocks.
Large-company stocks aren’t always the leaders. Small-cap stocks, with their 37 percent return, were last year’s leaders. So should investors own large-cap, mid-cap, or small-cap stocks in 2015?
Instead of being locked into one market segment, it is best to employ a strategy that allows the investor to rotate to the best-performing area.
When large-cap stocks are leading, then hold an S&P 500 index fund. Once small-cap or mid-cap stocks lead, however, switch to a mid-cap or small-cap Exchange-Trade Funds (ETFs).
Rotating to the leading market segments is what my style index rotation model is all about. I’ve published the details of this model in Stocks & Commodities magazine, which is available in the lobby at 889 Alder Ave.
How do you know what segments are leading? Each weekend I post a style index ranking free-of-charge on the Analysis page of http://www.ETFtradingstrategies.com.
The ranking uses ETFs from the iShares family because they cover all the style index choices, ranging from large-cap growth to small-cap value. I buy and sell through Schwab so I often use Schwab ETFs because they trade commission free.
Trading style index ETFs allows investors to gain well-diversified exposure to a specific area of the market and gives investors the flexibility to quickly move from value stocks to growth stocks, or from small-cap stocks to large-cap stocks.
By owning the better performing ETFs (top half of the relative strength ranking) an investor can outperform.
David Vomund is an Incline Village-based fee-only money manager. Information is found at http://www.ETFportfolios.net or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.