SRM Tutorial

The Sector Rotation Model (SRM) helps you determine which sector is most likely to outperform each month. Focusing your
investments in the top performing sectors will allow you to earn higher returns while taking on less risk.

This tutorial will guide you through applying the SRM’s recommendations to your own personal portfolio.

Getting Started

The Sector Rotation Model is updated monthly. Updated recommendations are accessible with a premium subscription and are available on the
first trading
day of each month. They represent proper positioning for the duration of that month.

Updated recommendations can be accessed through the Current Recommendations
page, available
at the top of our home page once you log in. An email is sent out each month to alert you
when updated recommendations have been posted.

To get the most out of the SRM, you will want to update your holdings immediately upon receiving the latest
recommendations.

Note: If you invest primarily through you employer sponsored 401(k) plan, or the
Federal
Government’s Thrift
Savings Plan
(TSP), please see those specific models. The recommendations provided by those models utilize similar logic
to the SRM, and are customized to provide more tailored guidance.

How to Use

The most straightforward way to leverage the SRM is to follow it exactly, as it rotates between the 11 sector
exchange-traded funds (ETFs).

• Each month when you receive the latest SRM recommendation, sell any previously established positions and move
  those funds into the new selection. The ticker symbols for each of the sector funds are clearly identified on
  the recommendations
  page.
• If the model selects Cash, sell any positions you have in any of the 11 sectors and keep the funds in your money
  market account. It is rare when the SRM moves to cash, but it does happen. When the SRM recommends Cash, it’s a
  signal that the stock market is in a downward trend and the best place to be is on the sidelines.

Note: The SRM works in sync with the Asset Rotation Model (ARM). When the SRM goes to cash, you
can check the ARM to see if bonds are an appropriate alternative to stocks. If so, you can follow the ARM until the
SRM reenters the market.

You will need to monitor both the SRM and your positions monthly.

Additional Considerations

The historical backtested performance of the SRM is based on following the model exactly, maintaining exposure to only
one sector at a time, and moving the entire portfolio according to each month’s recommendations. While the results speak
for themselves, we understand that you may be hesitant to invest so heavily in just one sector.

If that’s the case, we suggest two possible alternatives:

• Use only a small portion of your overall portfolio to follow the SRM’s recommendations. As you see the results
  over time and become more comfortable with the model’s performance, then consider increasing your exposure.
• Consider splitting your investments between the top two or three recommended sectors each month. This will allow
  for greater diversification and will reduce overall risk. The trade-off comes in the form of marginally lower
  expected returns, as well as slightly higher trading costs. Again, once you develop more comfort with the model,
  you can adjust accordingly.

Color Coding

On the Current
Recommendations page you will find the latest SRM recommendation and you will also find a table that
ranks all the funds included in the SRM from best to worst. We have included this information for those who may wish
to deviate slightly from the model’s recommendations, either for diversification purposes or other reasons. In the
Complete Ranking Table, you will notice a color coding schema designed to alert you to the status of each option.
The color coding is as follows:

We recommend that you stay away from any sectors in red and concentrate your investments in the highest ranked sectors.

As a final reminder, not following the SRM’s exact strategy and recommendations will result in returns that differ from
the model’s historical and future performance.
This wraps up the SRM Tutorial.

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The information provided here is for informational purposes only. Model
returns do not reflect
any management fees,
transaction costs or expenses. Investing involves a great deal of risk, including the loss of
all or a portion of your investment.
Nothing contained herein should be construed as a warranty of investment results. Past
performance is not an indication of
future results. All risks, losses and costs associated with investing, including total loss of
principal, are your responsibility.
Model Investing maintains positions in the funds discussed within this site according to model
recommendations.