From the desk of Jerry Robinson...
A few years ago, I stumbled across an interesting white paper entitled Relative Strength Strategies for Investing written by Meb Faber of Cambria Investment Management. The paper demonstrated a powerful (but simple) investment strategy that outperformed the typical “buy-and-hold” strategy nearly 70% of the time.
Faber’s research, which was based upon 80+ years of stock market data, revealed an astoundingly simple way to beat the market. Put simply, the strategy involves buying sector-based ETFs that have recently outperformed their peers.
Instead of simply buying a plain vanilla S&P 500 index fund (like SPY), this strategy seeks to beat the return of the benchmark index by investing in the underlying S&P 500 sectors displaying the most relative strength.