Investment Strategy: Index Rotation

I asked NDR to further test and adapt two models it had developed, one focused on each of my themes. Each model was multifactor, combining at least 10 indicators that individually had a good track record of predicting relative performance. The factors considered a cross section of approaches by looking at economic, bond market and stock market indicators.

I began to use these models back in 2000 and did so with increasing frequency for more clients through 2004, when I decided to start my own firm with my new strategy combining thematic index rotation with narrowly focused individual stock selection in media and telecom.

Part three of this series will appear Wednesday and explain the market cap and style models in detail. In part four, set to publish Friday, I'll explain my approach to investing in media and telecom.

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Know What You Own: The most active stocks on Friday included the S&P 500 Depository Receipts (SPY), the PowerShares QQQ (QQQQ), the iShares MSCI Emreging Markets Index (EEM), the Financial Select Sector SPDRs (XLF), Citigroup (C), Palm (PALM) and the Ultra S&P 500 ProShares (SSO). For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.

This was originally published on RealMoney on Jan. 9, 2009. For more information about subscribing to RealMoney, please click here.

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