Last year after Europe seemed to have been hammered pretty well, I decided to put my 2011 Roth IRA contribution in Vanguard’s Total International Index. This turned out not be so great because Europe continued to have problems and a tsunami clobbered Japan. US stocks (where the rest of my money is) stayed about the same, but it was a roller coaster ride.This year I thought it would be good to pick some sector that didn’t do well last year that is due to do better this year. In my brokerage account where I usually play around with tech stocks, this past year I was doing more with banks and financial stocks. Goldman Sachs, Bank of America, and SunTrust have all had rocky years with their stocks going way down and sometimes recovering. The tech stocks held pretty steady for the most part. Right now the financials are down again, so I looked at Fidelity’s list of sector funds and noticed that the financials pretty much did the worst, losing 20% or more last year, while the S&P 500 broader index was about even.
It seems like banks are due for a recovery and, if so, maybe they will bounce back stronger than the rest of the market. They also have a sector fund that is just banks, but it did a little less badly last year, so I think this year I will throw my IRA contribution into Fidelity’s Select Financial Services fund, whose top two holdings, Citigroup and Bank of America, were down by 50% this past year. Certainly those are companies that are too big to fail and due for something better. But I was wrong last year. The rest of the money stays where it is, spread out among small cap, large cap, and international funds. My plan is to use the sector fund only for a year or less and then move that money into those other funds.