Three Sector Funds for December

December has historically been a bullish month for the stock market. In fact, over the past 24 years, buying and holding an S&P 500 Index fund during the month of December would have netted a gain 20 times, or 83.3% of the time, with an average gain of almost +2% (+1.93% actually).  A lot of investors might be tempted to say “That’s good enough for me”, and who could blame them?
But there might be a way to do even better.

Certain sectors show historical tendencies to perform well during certain times of the year.  So let’s look at a simple 3 fund portfolio that has performed quite a bit better than the S&P 500 over the past 24 years.

The “December Three”
The three sectors are Biotech, Software and Home Construction.  Figure 1 displays some potential trading vehicles.

Sector Fidelity ETF
Software FSCSX VGT
Home Construction FSHOX XHB

Figure 1 – Fidelity and ETFs

For testing purposes we will use the Fidelity funds listed in Figure 1 as they have historical data going back much further than the ETFs listed.

Figure 2 displays the annual result of a portfolio split evenly between the three funds versus the S&P 500 Index.

Fid 3

Figure 2 – Annual Results: 3 Fidelity Sector Funds vs. SPX

Figure 3 displays the growth of $1,000 invested only during the month of December in the “Fidelity 3” versus the S&P 500 Index.

 Fid 3 chart

Figure 3 – Growth of $1,000 invested in Fidelity 3 versus SPX (1990-2013)

Figure 4 displays the relevant comparative figures.

 fid 3 results

Figure 4 – Comparative Results

A few things to note:

*The Fidelity 3 has gained an average of +4.21% versus +1.93% for SPX.
*The Fidelity 3 median gain was +2.52% versus +1.25% for SPX.
*The Fidelity 3 has showed a higher standard deviation, but also a *higher Average/Standard Deviation.
*The worst December for the Fidelity 3 was -4.99% versus -6.03% for SPX.
*Interestingly, the Fidelity 3 has been up 19 times and down 5, versus up 20 and down 4 for SPX. 

However – and most importantly – the Fidelity 3 has outperformed SPX in 18 of the past 24 years.

So are biotech, software and home construction guaranteed to show a gain and outperform the S&P 500 this December.  Not at all. But for an investor looking to “beat the market”, it certainly is “food for thought.”

Jay Kaeppel  
Chief Market Analyst at and AIQ TradingExpert Pro ( client

Jay has published four books on futures, option and stock trading. He was Head Trader for a CTA from 1995 through 2003. As a computer programmer, he co-developed trading software that was voted “Best Option Trading System” six consecutive years by readers of Technical Analysis of Stocks and Commodities magazine. A featured speaker and instructor at live and on-line trading seminars, he has authored over 30 articles in Technical Analysis of Stocks and Commodities magazine, Active Trader magazine, Futures & Options magazine and on-line at

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