The recent markets have many advisors questioning their faith in long-standing investment principles, such as controlling risk by building diversified portfolios. Instead, they’re turning to exotic investments and products that offer downside protection. Others are trading more actively.
It should be noted that this is a small group of advisors – there are still many who are staying the course, arguing that frequent trading erodes returns and that alternative investments come with some big downsides.
We’ve been pretty vociferous when it comes to how we feel about buy-and-hold. Our strategy is to follow trends to get in potential market upswings; we also have a stop-loss to stop the bleeding when an uptrend draws to a close. While there is more risk in some products than others, ETFs are an affordable easy way to both research and ultimately implement a trend-following strategy.
What’s your strategy? Talk about it in our forums.