However, that doesn’t mean they are infallible to the natural ebb and flow of market cycles.
With every new sequence in the market we will see pockets of strength emerge that will push fresh themes into the spotlight. Then money will follow, the trade will get crowded, the fundamentals behind the original thesis will deteriorate, and it will lead to relative weakness. Then the cycle starts again just when you least expect it.
Make sure that before you invest in any sector, fund, or strategy that is currently outperforming that you know its strengths and weaknesses. Often times, investors are chasing something that has already made a big move in hopes that it will continue indefinitely. My advice is to add these funds to your watch list, research them thoroughly, and work them into your portfolio during an opportunistic event such as a pullback. That will lead to a much greater likelihood of success over the long run.
This article is brought to you courtesy of David Fabian.