Joe Bel Bruno for the Associated Press reports that persistent fears of a recession, weak retail sales figures and disappointing results from Citigroup sent the markets plunging.
What’s an investor to do? Where most well-known market index ETFs such as the Dow, S&P and Nasdaq have dropped more than 10% off of their recent highs, some international and sector-specific ETFs have corrected more than 20%.
This could be a normal correction and the market could catch up to where it left off a few months ago. But what if it doesn’t? What if the doom and gloom pasted all over CNBC is correct? Here are three rules that we continue to remind investors about that should keep most of us out of trouble:
- Maintain an 8% stop-loss on your ETFs.
- Keep an eye on the trend. If your ETF declines below its 50-day average, that’s not a good sign. If the same ETF declines below its 200-day average, sell.
- Don’t chase markets that are too hot. The last time many world markets and industry groups collectively hit news highs was in 2000. You know what happened then. Keep your emotions in check.
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.