Market rotation

Market rotation involves purposely overweighting or underweighting certain market segments or industry sectors based on your assessment of market or economic cycles.

Market-capitalization-weighted ETFs offer an efficient way to target the desired tilt.

For example, if you believe that after a protracted period of outperformance by value stocks the pendulum is likely to swing the other way, you might invest in a growth-oriented ETF.

Source: Vanguard. This hypothetical investment or portfolio strategy is shown for illustrative purposes only and shall not be construed as a recommendation to buy or sell any security or financial instrument, or an offer or recommendation to participate in any particular trading or investment strategy.

Point to consider

  • You could end up doing worse than if you'd made no changes at all.
  • Whether buying or selling, you would have to be right about the direction of the market/economic cycle, the sectors that might profit from it and the timing of the investments.

ETF fundamentals