What a pleasant surprise it was to see someone else touting the importance of discipline when investing in exchange traded funds (ETFs). As we’ve rigorously outlined our ETF investing philosophies in various posts, I’ll say again that the best defense against the market roller-coaster is a strong discipline to stick with your selling points. And Alan R. Elliott of Investor’s Business Daily agrees. Here’s a sample of how great minds think alike when it comes to ETF strategies:
Elliott says to sell a stock once it drops 7% to 8% below your purchase price. We couldn’t agree more. That’s why we closely follow the 200-day moving average of all our ETFs. If an ETF falls below it, or if it drops 8% off its high without going below its 200-day average, it’s sold. Below is a chart of SPY for the past year. As you can see, last summer it fell below its long-term trend line. Thus if we had owned it, we would have sold it.
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.