There is an index that has beat oil, gold and China, but there isn’t an exchange traded fund (ETF) to invest in it. The CBOE Volatility Index (VIX) has gained 130% over the past year, making investors swoon over the idea of an ETF tracking volatility. Although investment can’t be made directly into this action, there is a lot to be learned, and Gary Gordon for ETFExpert has some ideas.
When the VIX is climbing and there is greater volatility, then the stock market tends to be skittish, causing fear and panic. However, lower volatility with a falling VIX shows more certainty. High points (around 30) mean the end of fear and low points (around 15) indicate complacency. The VIX appears to be trending down, which is a good sign for stocks. Yet lookout for erratic price swings, with the VIX higher at 23.
While keeping an eye on volatility can be helpful, it is just one tool investors can use to watch the markets. Keep your financial goals in mind, watch the long-term trend lines and know that diversification is also important.
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.