During the recent market volatility, it is more important than ever for exchange traded fund (ETF) investors to remain unemotional and level-headed about the events of this year.
Investors who have been disciplined about their portfolios and placed a long-term asset allocation plan into action could find plenty of great buying opportunities soon, says Kenneth Smith in an interview with Index Universe.
When the markets rebound, investors with cash on the sidelines can employ the 50-day moving average strategy for getting back in incrementally. Using the 50-day will allow investors to take advantage of low valuations and capitalize on a recovery early.
Those areas that have been the most beat-up in this downturn could be positioned to perform the best.
By having a strategy for getting back into the market, there is lowered risk as well. When the 50-day has been crossed for some of these areas, such as small-caps and financials, put 25% of your portfolio value in. When the fund goes up another 5%, put in another 25%. Around this time the 200-day moving average should be in sight.
To see which ETFs are approaching their 50-day and 200-day moving averages, visit our ETF Analyzer. By clicking on “EMA 50” and “EMA 200,” you can sort funds by percentage above or below the averages.
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.