Warren Buffett’s first rule of investing is "Never lose money". Gosector investment strategy gives great emphasize on risk management, we combine diversification with more active risk management methods.
In the last two decades the strategy had a max worst draw down of ~17% vs. -55% of s&p500. So what are our ingredients of risk control?
1. Diversity - we invest in 3 different sector ETF's/Funds.
2. Market timing - we reduce market risk through a model called "Bear market protection”, this model takes the portfolio to cash or treasuries safety during major bear market
3. Negative volatility is one of the factor taken into account in the sectors ranking process, sector with high negative volatility are ranked lower.
4. Trend strength - sector with strong persistent trend has shown to be more prone to draw-downs.
5. Overbought conditions - is also one of the factors that lower the sector rank so the system avoids buying peaking sectors.