There Are Questions To Be Asked, But ETFs Aren’t Really a Riddle

August 14, 2008 at 2:00 pm by Tom Lydon

Keeping your exchange traded fund (ETF) portfolio on the right track is a matter of asking some simple questions.

Gary Gordon of ETF Expert has the queries investors should think about:

Does a bad economy equal bad stocks? Nope. There will always be areas that will move in different directions than the general market. For something that may not work in a bad economy, there is something else that does.

How do we know when the economy has hit bottom? Unfortunately, there’s no way to tell. We can guess and guess as much as we like, but the only reliable way to capitalize on trends is to wait for a fund to move above its 200-day moving average.

Should we wait for signs to improve before we invest? There is no surefire sign or number of signs that signal a recovery. Instead of focusing on what you can not control, focus on things you can control. Again - wait for the trend to reveal itself. Be patient.

What is in our control? The investments that we make are in our control, and the time to get out is within your control, too. Set a stop loss. When a fund drops 8% off the high or below its 200-day moving average, get out.

Will things ever get better? Things always get better! You don’t even have to be an optimist to see that. The market has always, and will always, move along in cycles.

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