Digesting Good News, Bad News And ETFs

Exchange traded funds (ETFs) and stocks go hand-in-hand with the latest news, whether it’s a solid earnings report or a political event. An investor usually wants to hold onto a company if it’s positive news, however, Glenn Curtis for Investopedia says there are things to consider when taking in the news.

• Look for something offsetting. Companies often know that a piece of bad news will signal a sell-off, so in an effort to limit the potential damage, they will combine it with something positive to help shareholders and Wall Street overlook it.
• How will the news affect the future? A spate of good news is great for now, but potential growth going forward isn’t a guarantee. Take in the news and try to come up with potential repercussions this might entail for the company.
• Be aware of expectations. Stellar earnings or numbers far exceeding anticipated ones are wonderful, but if a company fails to meet "whisper earnings," the stock may be finished.
• Establishing a trend=caution. Keep in mind even if a company has an exceptional quarter, or has a relatively consistent pattern, it may may not be able to top itself time and again.
• Has a company milked the sell side for all it’s worth? After research coverage has been picked up and reported, a company usually takes off, but after the initial "pop," make sure there is substance.

We advocate developing a discipline and sticking to it. Avoid getting caught up emotionally with your holdings and reacting too quickly to either good or bad news. Our strategy is to follow a 200-day moving average. If a fund drops below the average or 8% off its high, we sell.