Some believe we’re in a full-blown recession, but no matter what they believe, exchange traded fund (ETF) investors shouldn’t panic.

Chris Fichera for Consumer Reports suggests staying put and weathering the storm, while making some tweaks to your portfolio:

  • While he does suggest that large-caps are attractive and relatively expensive, it’s actually the small- and mid-caps that have been outperforming in the last two weeks. Large-caps are up about 1.7%, mid-caps are up about 2.9% and small-caps are up about 5%. There are a variety of small- and mid-cap funds out there, among them:
    • iShares Russell 2000 Growth Index (IWO)
    • iShares Russell 2000 Value Index (IWN)
    • Vanguard Small Cap Value (VBR)
    • iShares S&P MidCap 400 Value Index (IJJ)
    • PowerShares DWA Technical Leaders (PDP)
  • International is still attractive. Europe and Japan are slowing down, but there are still emerging markets out there that are growing rapidly, with still more room to grow. Emerging markets can be volatile, so having an exit strategy here is paramount.
    • iShares MSCI Spain (EWP), up 10.3% since March 10
    • iShares MSCI Malaysia (EWM), up 10.5% since March 10
    • iShares MSCI Mexico (EWW), up 8.3% since March 10
  • Go with short- or intermediate-term bonds, as long-term bonds don’t have the most attractive yields right now. They would also feel the effects if the Federal Reserve were to cut interest rates further.
    • SPDR Lehman Short Term Municipal Bond (SHM)
    • iShares Lehman MBS Bond (MBB)
    • SPDR Lehman Aggregate Bond (LAG)
    • iShares Lehman Intermediate Credit Bond (CIU)
    • iShares Lehman Government/Credit Bond (GBF)
    • Market Vectors-Lehman Brothers AMT-Free Short Municipal Index ETF (SMB)
    • PowerShares Insured National Muni Bond (PZA)

Whatever you do, whether you decide to tweak your portfolio or just sit and wait, stick to your investment plan. Once investors are guided by their emotions is when the real trouble begins.

For disclosure, some of Tom Lydon’s clients own shares of EWP.

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.