With the bull market rally starting to lose some of its momentum, one of the best ways to protect your money is to invest in solid sector leaders.
A well diversified portfolio has always been a key to successful long-term investing, and by spreading your money out over multiple sectors you can easily build a diversified portfolio that is able to prosper even if weakness were to hit one or two sectors. Since stocks within the same sector tend to trade in sympathy to one another, you can not achieve the level of diversity you need by simply buying multiple stocks in the same sector. Instead, you should focus on just the leaders of various sectors, which will result in fewer stocks to track, while achieving the diversity you need to safeguard your portfolio.
One thing investors need to accept when looking at sector leaders is that often these stocks trade at high valuations. This is to somewhat expected since the market is willing to buy into these stocks at a higher valuation in expectation of future strength.
Typically I tend to search for stocks that trade a low valuations , but when it comes to investing in sector leaders it is OK to overlook value, and focus more on which companies are not only current leaders of their sector, but have the potential to remain leaders.
In this article, we are going to focus on sectors that have been strong, and are likely to remain strong moving forward. Using these strong sectors, and finding companies that are leaders within these sectors, we can build a basket of stocks that are attractive for long-term investors to buy and hold.