Rotating sectors

This approach is based on economic forecasting. If it is predicted that interest rates will rise, you should choose stocks that will increase in value in such an environment.

For example, stocks from the oil sector fluctuated wildly between 1997 and 2000 because the world price for a barrel more than doubled during this period. As the price of a barrel was at an all-time low toward the end of 1997, an investor choosing this approach would have overweighted his portfolio with stocks from this sector. Anyone who invested in Petro-Canada during this period would have made over 50% in profit.