When choosing a house in a neighborhood you may not want to buy the best looking one as an investment. Choosing one that is looking poorly might be better; however, the one thing any real estate buyer must become aware of is whether that particular area is rising in value, staying even or declining.

If the real estate in a particular area is rising in value it will not make much difference what property is bought as the values in the entire area will rise – even of the most run down home or shopping center.

Few investors stop to think that this basic principle of real estate applies to stocks, mutual funds and exchange traded funds.

The stock market has thousands of stocks broken down into sectors just as the real estate market has hundreds of homes divided into neighborhoods. As real estate areas are increasing and decreasing in value equity sectors are increasing and decreasing in value, but usually at a much faster pace.

These are sectors that can be found in both mutual funds and exchange traded funds: oil, housing, biotechnology, pharmaceuticals, consumer, financial, various countries such as Japan, Germany or Australia and countless others.

The wise investor will make a list of various popular sectors. It might be wise to limit it to about 20 or it may be too difficult to keep up with all of them. These should be viewed on a regular basis such as weekly or monthly. Sectors do not change direction quickly.

Astute investors do not want to own any equities that are in a sector that is declining. As long as a sector is rising that is one to buy or hold any stock or index in that group.

There are exchange traded funds today that follow special sectors. There are about 200 now and more being added all the time. Pick one that trades with a large daily volume.

In 1998 and 1999 almost every market sector was advancing, but those who watched sectors carefully first saw the Asian markets start to turn down. Time to move on, sell out and find another sector that is increasing in value. There are many no load (no commission) mutual funds and exchange traded funds with very small commissions of $10.00 and no hidden internal expense ratios or redemption fees like the mutual funds.

Fund managers always tell you not to sell and stay “for the long haul” and don’t tell you they are trading around within the fund. Sell the weak funds. Rotate. Get out of the loser and rotate into a winner. Many times it is better to be in cash then to stay with a declining fund.

Take a tip from the real estate market for the stock market: rotate.

Al Thomas' best selling book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profitswith his simple 2-step method. Read the first chapter and receive his market letter at http://www.mutualfundmagic.com anddiscover why he's the man that Wall Street does not want you to know. Copyright 2007 All rights reserved