Many exchange traded fund (ETF) investors are putting their money back into markets that have seen a bit of volatility. When the going gets tough, the tough whip out their coping strategies.
There are two basic truths to acknowledge right now: Trying to outsmart the market is difficult at best, and the market doesn’t always act in a logical way. [The “new normal.”]
Rather than packing up your toys and going home, though, there are ways to deal with the market when the going gets tough. Pat Regnier for Fortune has three strategies to help investors cope with the most volatile of markets:
- Learn from a burst bubble: Many market watchers contend that warning signals are often given well in advance. The real lesson is that the markets can deliver steep losses at any time, so have your stop-loss ready to go. [How to spot an investment bubble.]
- Rebalance: Rebalancing and analyzing your portfolio periodically is important. That keeps your risk where you want it, but it also means you’re making small bets against market sentiment. [Learn about trading ETFS here.]
- Use your strategy: Look for opportunities for investments by watching the 200-day moving average (or your preferred indicator). Practice using your strategy and quieting your emotions. The more you do it, the better you’ll become at it. As noted in the first point, also have a stop loss to protect yourself on the downside. [How to follow trends.]
For more stories about ETFs, visit our ETF 101 category.
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.