Even with a minimum five-week hold, though, this system (see previous item) generates a fair amount of trading, as sectors move in and out of favor. You’ll have some winners and some losers: hopefully, you’ll have more winners and you’ll be able to ride them to larger gains.
Most of your gains will be short-term, subject to high tax rates. Therefore, the ideal place to follow this strategy is inside a tax-deferred account such as a rollover IRA.
You shouldn’t trade your entire IRA this way but you might want to start with a few thousand dollars to see how you do by following this strategy. Generally, Fidelity sector funds require a $2,500 minimum investment but only $500 for IRAs. (Call 800-544-6666.) There may be a 3% initial sales charge for these Fidelity funds while subsequent purchases made with the original investments are no- load.
The key to making this strategy work is discipline. Stick to the plan of buying the leaders and avoiding the laggards.