Have you been playing defense with your exchange traded fund (ETF) portfolio lately?
If so, good. The time to dribble to the other side of the court has not occurred, as the domestic market has not yet fully rebounded. There will come a day that some beleaguered areas such as financials will inch back over their long-term trend lines, but until then, there are ways to protect yourself.
Eric Bolling for The Street has a few ideas of defensive type ETFs to help keep yourself protected in the meantime.
- Consumer Staples Select Sector SPDR (XLP), down 2.1% year-to-date
- PowerShares International Dividend Achievers (PID), down 2.8% year-to-date
While both funds are down year-to-date, they’re currently sitting above their trend lines (200-day moving average).
PID gives an international play on companies that pay dividends. By default, this ETF actually plays the weak side of the U.S. dollar and strengthens by other currencies upswings such as the yen, euro and yuan. XLP focuses on daily necessities such as toothpaste and toilet paper, items you aren’t going to go without no matter how dire your straits. Well, we hope.
We say that if an ETF is below the 200 day-moving-average, it is recommended not to go in. Of course, if you’re interested in more of a short-term play, you can use the 50-day moving average as your sell point instead.
But always make sure the trend is right before you invest, and remember that just because one area isn’t performing, it doesn’t mean that all areas are depressed.
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.