Investments focused on major market indexes and that are more equities-based seem to not be favored within the investment community at the moment, but exchange traded funds (ETFs) could be the exception to the rule.
Susan B. Weiner for Financial Planning says that two major trends are fueling the market now:
- Strategies that move to their own beat, away from the broad market and strategies that are available to “accredited” (with investable assets of $1 million or more) investors are becoming more common
- The recent unveiling of the Bernie Madoff scandal and the hedge fund messes are making ETFs more popular than ever because of their transparency and ease of use
The typical allocation of stocks and bonds has not helped investors stem any bleeding within portfolios, so a more dynamic approach is being implemented. Segments of the market such as commodities, and currency are easily accessible with ETFs, and offer investors “havens” and places to put their money, if they prefer to stay away from equities.
At this time in the market if you are nearing retirement, a goal many investors should be striving for is to preserve their money, rather than focusing on a boost in returns. ETFs help to diversify well, and do so with less risk.
Meanwhile, for all investors trying to shore up what’s left within their portfolios while the economy is in a downturn, try this simple plan:
- Sell one-third of your invested equity positions now
- If the remaining two-thirds decline 5%, sell another third
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.