You are viewing an older ETF Trends article from 2009. You may be interested in reading our more current articles on Long-Short ETFs and Trend Following.
Emotions can be our own worst enemy when it comes to exchange traded fund (ETF) investing, and bear markets can heighten them. But there are ways to avoid the traps that have sunk many a portfolio.
Suzanne McGee for The Wall Street Journal says that falling into traps in bear markets is easy. Our fears and emotions are heightened. Big losses tend to be seen, especially in the current bear market, leading to “desperation” moves. Some investors get so scared, they don’t do anything.
How can you avoid these pitfalls?
1. The Value Trap. Investors convince themselves that a stock or ETF makes sense because it’s cheap, making it a great value. But sometimes “cheap” can mean “trouble.” Examine the fundamentals of a sector instead before deciding that something is a bargain.