There’s no doubt that the markets are a touch shaky this year. One minute analysts are saying that it’s best to short the market, the next week, it’s not such a good idea. Here’s how you can charge through the confusion with exchange traded funds (ETFs) and a sound strategy.
The major lesson concerning the market volatility is that there is opportunity knocking for both sides of the market. Whether you are bullish or bearish, there is a fund and a time that is right for you. It is up to you to decide how to do that. [How to Decide Which ETF is for You.]
Even though a number of investors have already profited handsomely from the oscillations in the market, many others sat idle, and had negligible returns, says Thomas Kee for MarketWatch. One answer to this problem is trend following. [Why Use a Trend Following Strategy?]
When you employ an investment strategy with ETFs, whether it’s trend following or something else, use it and stick to it. Why? Think about that treadmill you bought for your living room. It doesn’t really get you much when you’re using it as a clothes hanger. If you’re treating your strategy like that treadmill, neither will ever do you any good.
Advisors and investors need simple, specific rules in order to follow an investment discipline over an extended period of time. We use the 200-day moving average strategy to determine when we’re in and when we’re out. When a position is above its 200-day, it’s a buy signal. When it drops below or 8% off the recent high, it’s a sell signal. [How to Stop Predicting with ETFs.]
To learn more about the benefits of trend following, grab a copy of The ETF Trend Following Playbook.
For more stories about trend following, visit our trend following category.
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.