Buy/sell playbook for 4 fund types: sector / active / bond / index

Doing DCA or building an allocation means dealing with four fund types: sector funds, active funds, bond funds, index funds. They all look like “funds”, but what they track, how much they swing, and where the returns come from are completely different — so the buy/sell methods must differ too. This article clarifies the differences, then gives each a buy/sell discipline with concrete numbers.

This is Section 24 (free) of the Fund Strategy series — an expansion and summary of Section 4 (“sector-fund strategy in a choppy market”).

1. How the four fund types differ

Type	Tracks / earns	Volatility	Best for	Example
Sector fund (thematic ETF)	A single industry/theme index (semis, new-energy, healthcare); earns industry cycle + valuation	High (most exciting)	“Follow the trend, fade the wobble” on strong sectors	Semiconductor ETF, Robotics ETF, Biotech ETF
Index fund (broad ETF)	A broad index (CSI 300, STAR 50, Nasdaq 100); earns market β + valuation	Medium	Long-term DCA, valuation grid	CSI 300 ETF, STAR 50 ETF, S&P 500 ETF
Active fund (active equity)	Manager’s stock-picking; earns excess return α	Medium–High (manager-dependent)	Trust the manager; DCA + add on drawdown	Active equity fund
Bond fund (pure-bond / treasury ETF)	Bonds; earns coupon + rate-driven gains	Low (the anchor)	Portfolio defense; negatively correlated with equities	Pure-bond fund, Treasury ETF

One-line memory: sector = cycle, index = valuation, active = manager, bond = rates.

2. Buy/sell discipline per type (with numbers)

1. Sector fund — three MA tranches in, three deviation tranches out (see Section 4)

Buy (3 conditions + 3 tranches): NAV no new low for 3 months, and last-3-month volume > 115% of prior 3 months; 20/30/60-day lines bullish, 60-day flattening up; gain in prior 2 months < 20%.
- Pulls back below 20-day, above 60-day → add 1×;
- below 30-day → add 1.5×;
- below 60-day, above 120-day → add 2×.
Sell (deviation rule): deviation from 20-day line >5% trim 1/3; >8% trim another 1/3; >10% close.

2. Index fund — valuation percentile + grid + DCA

Buy: when PE/PB historical percentile <30%, double the DCA; every 5% drop adds 1 unit (grid); pullback to the 250-day line adds 1×.
Sell: valuation percentile >70% trim 1/3; holding annualized return reaches +15% take profit 1/3; break below the year-line with deteriorating fundamentals → close.
Cadence: DCA base 1 unit/week; grid step 5%.

3. Bond fund — rate cycle + drawdown adds

Buy: 10Y treasury yield >2.6% (rates high) add; NAV drawdown >1.5% add 1 unit; widen credit spreads → allocate.
Sell: 10Y yield <2.0% (rates bottom) trim; pure-bond annualized >4.5% take profit; new NAV high trim 1/3.
Discipline: pure-bond annualized target 3%–4%; only add after drawdown >2% (avoid catching credit risk falling knives).

4. Active fund — manager + drawdown + DCA

Buy: manager α stable (information ratio >0.5), max drawdown below peers, weekly DCA; NAV drawdown >15% add 1 unit.
Sell: new NAV high trim 10%; manager change / style drift trim 1/3; Sharpe <0.5 move to watch.
Cadence: DCA 1 unit/week; drawdown-add threshold 15%.

3. One-table cheat sheet

Type	Buy / add	Sell / trim	Key numbers
Sector	Strong sector, wait for dip: below 20d → +1×; below 30d → +1.5×; below 60d → +2×	Deviation from 20d: 5%/8%/10% → trim 1/3 / 1/3 / close	3mo no new low + vol >115% + prior-2mo gain <20%
Index	Valuation <30% double DCA; every −5% add 1 unit; year-line add 1×	Valuation >70% trim 1/3; +15% annualized take 1/3; break year-line close	DCA 1 unit/week; grid step 5%
Bond	10Y >2.6% add; drawdown >1.5% add 1 unit	10Y <2.0% trim; annualized >4.5% take profit; new high trim 1/3	Pure-bond 3%–4%/yr; add only after >2% drawdown
Active	Stable α + DCA; drawdown >15% add 1 unit	New high trim 10%; manager change trim 1/3; Sharpe <0.5 watch	DCA 1 unit/week; drawdown threshold 15%

4. How to combine them

Anchor: bond funds (low vol, negatively correlated with stocks) form the base so the portfolio never panics.
Core β: index funds for long-term DCA — capture the market’s long-term rise.
Satellite α: sector + active funds for punch, using the discipline above to sell-high/buy-low. Never go all-in.
Sizing reference: the 5-3-2 rule from How to Invest ¥100k (50% defense / 30% arbitrage / 20% DCA) — turn “dare to sell when up, dare to buy when down” into a routine.

⚠️ This article is a framework illustration only and is not investment or trading advice. Markets are risky; decide with care.