Exercise your Inner Guru - 2013 has been good for that!

by Wayne Ferbert on October 21st, 2013

Our favorite sector ETFs have always been the SPDR Select Sector ETFs offered by State Street bank. They cover the 9 largest S&P500 large cap sectors. And they have very robust options markets.
In 2013, we have been over-weight Energy, Financials, & Technology. Energy has performed in-line with the S&P 500. Meanwhile, Financials have out-performed by around +5% and Technology has under-performed by around -6.5%.  
The distribution in performance between the different sectors has been significant. Check out the chart below. The S&P500 is up 22%. The top performing sector is up 9% over that at 31%. And if you exclude Utilities (which we do because they trade like Fixed income), then the bottom sector is 7% lower than the S&P500. 
It is a wide distribution from +15% at the lowest sector to +31% at the best performing sector. This further supports what we have written on this site a couple of times this year: 2013 has been the kind of year where you could invest in a specific idea if you had one.
In our book, we call these ideas you ‘Inner Guru’ ideas. If you had good ideas in 2013, we have definitely seen examples of out-performance in sectors and specific stocks that are obviously driving these sectors.
If you are not making a handful of your own picks to generate some extra return for around 10% of your portfolio, think about starting. The trend of finding outliers will likely continue.

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