New Year, New ETF Strategy

January 1st at 1:00am by Tom Lydon

celebration_champagne_cheers_240063_tn New Years is  a new beginning for most of us on a symbolic level. Why not use this as an opportunity to clean out your exchange traded fund (ETF) portfolio and brush up on your trend following points and your investment strategy?

Even if you already have a strategy when it comes to ETF investing, it is always a good idea to update it and see what has been happening within your portfolio. Do you employ a strategy using the 200-day moving average? If so, so you have a stop loss in place? And what about an entrance and an exit plan? By solidifying your investment goals now, you can put yourself into position for success.

To best reach set goals, Cleo Roberts of Molalla Pioneer makes a list and puts it plain sight. This may be a good idea for your trend following plan:

  • Keep emotions out of your investment strategy: Media, articles and opinions of friends or relatives can get in the way of your investment strategy. Be ready to turn your ear away from this criticism, whether it comes from them or your own inner voice. Emotions tend to supersede logic as markets worsen, leading many to cling to losing positions. [How to keep emotions at bay.]
  • Have a strategy, and implement it: Even if you have the best strategy ever, it makes no difference if you do not use it. There are many steps and strategies to employ, so do your research. The ETF Trend Following Playbook can help get you started. [Read more in trend following here.]
  • Setting a stop-loss: At ETF Trends, we maintain an 8% stop-loss. So, if a fund dips 8% below its high, get out before it goes any further. This is a good way to keep losses to a minimum.
  • Learn about investment bubbles to avoid them: Bubbles tend to follow a pattern: As a base begins to form, shares in the sector start to move up a bit compared to the rest of the market and then there’s some institutional buying. This all happens before the general public becomes aware. Once the idea spreads to everyone, the bull market begins within that sector. From there, bubbles become a self-fulfilling prophecy until they can no longer sustain themselves.

Even if you only glance at your portfolio “once in a blue moon,”  you have no excuses now. This is a special New Year’s Eve, as we are going to have a blue moon event this day. Technically,  a “blue moon” occurs when a second full moon appears during a single month. This month, the moon was full on Dec. 2, and will be again on Dec. 31, so that identifies the New Year’s Eve moon as a blue one, explains David Brown on The Examiner.

Whatever you decide, have a special and Happy New Year and best wishes from ETF Trends for a healthy 2010!

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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