The best way to keep the emotional-investing habit in check when it comes to exchange traded funds (ETFs) is to have a strategy.
Our strategy hinges on the long-term trend line (200-day moving average), which represents the average closing price over a set time period. In less dire market conditions, investors would use an ETF’s 200-day moving average to pinpoint the best time to buy or sell.
But since most ETFs are currently trading far below that bar, we say, those looking to jump into the market might want to instead use a 50-day average. Recently, Katy Marquardt for U.S. News & World report asked us to explain this strategy and highlight any ETFs that currently pass the test.
First off, if you got into commodities or emerging markets or energy over the past three years there has been lots of volatility, so determine if this is a long-term position or short-term strategy and then protect the downside.