Mutual Funds  |  JUL 1999

A System For Trading Fidelity Select Funds by Jay Kaeppel

A System For Trading Fidelity Select Funds by Jay Kaeppel The key techniques for trading stocks, options, and futures can also be applied successfully to mutual funds. Here’s a systematic approach to mutual fund trading. Several keys to investment and trading success are universal; these keys apply to stock, futures, and options trading, and they also apply to trading mutual funds. The first key is to identify opportunities with above-average profit potential. The second is to determine how best to take advantage of those opportunities without taking on too much risk. Achieving the proper balance is of paramount importance; if you never take enough risk, you never allow yourself the opportunity to achieve above-average gains. Conversely, if you take on more risk than you can handle, eventually you will find yourself bailing out at the wrong time. The mutual fund trading system I will examine is designed to achieve such a balance. The Fidelity family of funds offers a unique set of opportunities via their Select group of funds. Each Select fund concentrates its portfolio in a specific industry group or sector — for example, brokerage, defense, health care, regional banks, and airlines, to mention only a few. These funds offer investors unique opportunities as well as unique risks.

by Jay Kaeppel