Being an active investor is essential to becoming a winning trader. From time to time it is important to rotate money from stock to stock or stock sector to stock sector. The pros do this all the time, especially when the facts have changed.

Let me give you an example of a rotation that our fund recently performed. We had been heavily invested in oil stocks over the last 6 months. Nearly every oil stock we own has made large gains in this period of time. We have also been invested in financial stocks over the same period at a loss. Recently we started to see a reversal to this trend, our oil stocks have been flat to down over the last 30 days. While financials have started to gain traction. It is time for a rotation, we started selling some of our oil stocks and reinvesting the gains into the beaten down financials.

We are by no means selling our entire stake in oil stocks, simply reducing positions, taking profits and rotating capital. It is important for the average investor to rotate stocks at least once per year, we prefer to rotate positions in 6 month increments.