Is this a good investment strategy?

I'm a big fan of index funds, particularly Vanguard's 500 Index and any EAFE (international) index.

I feel, however, that indexes like the S&P 500 could be "tweaked a bit" by excluding those sectors or industries of the economy that have traditionally not done well in a long time.

For example, I'd be interested in an S&P 500 index fund MINUS industries like food production (which have posted negative returns in profits AND shareholder value for the past 10 years!) and several others. Is this a sound strategy? Isn't it easier to spot the losers in a market rather than the winners?

On a similiar note, is there any website that shows a COMPLETE history of economic sectors of the stock market? I'm interested in finding if any one sector has consistently beaten other sectors of the market over 20 or even 30 years of time (not interested in YTD, 3 or 5 year charts, though).

Thanks for your help.

I like you're thinking, but I don't think that it is necessarily a good strategy now.

Why?

At the peak of markets, you tend to get consolidation waves. When it happened in 2000/2001 you saw companies like Best Foods and Frito Lay get snapped up. This time around, you have Dean Foods and some other food manufacturers being bought up. That is, there is consolidation in the food production market - and for that matter - in lots of moribund industries by private equity for turn-around.

Also note that "losers" tend to have lower betas than "winners". So when a market goes down, you tend to underperform the market.

Furthermore, "losers" tend to be cheap - so if/when there is a turn-around - you miss out on lots of profits. Since it takes a very good eye, lots of experience and sturdy brass juevos to pick the ugly ducklings - it's usually best to just keep the diversified S&P 500.

This isn't to say that it can't be done. Fund managers do this every day. I've got a better idea. Go long SSO (double long S&P 500) for half your money and deposit the other half in money market. It is guaranteed to outperform the S&P 500 by half the money market rate (i.e. 2.5%) before fees. Net of fees, you should do about 2.0% better than the S&P 500 which is better than about 2/3rds of fund managers.

Sector histories are available on Bloomberg, if you have a spare US$17k/year. There are similar functions on trading platforms (e.g. ScottTrade, E*trade), but you'll find them vaguely disappointing because they don't have enough flexibility, functionality and transparency to do your research.