New year, fresh start. It’s a time-honored tradition – we set resolutions, and by Jan. 31, they’re out the door. But if we’re lucky, one or two stick around for the long-haul. Why not make your exchange traded fund (ETF) investing resolutions one of them?
As 2010 begins, ETF investors have a unique opportunity to re-examine their strategies, evaluate their holdings and appraise the expanding universe of ETFs, says Don Dion for The Street. [Other investing strategies.]
Here are some resolutions to make 2010 a better year for your portfolio, some from Dion, some from us:
- Know your goals/objectives: What’s the strategy and scope of your portfolio? Why? Remember to look for ETFs that encompass a broad, balanced selection of firms. Investors looking to add long-term exposure to any sector or asset class should look for a fund that is well diversified and doesn’t overlap with any other funds they are holding.
- Check out your options: Things such as track record, liquidity and assets under management are all valid and important. They can tell you a lot about the health of the ETF. Expense ratios are also an important factor, as they cut into principal. Many of the newer providers are offering lower fees or fee-free investing, so be sure to take advantage where you can. [Fee-free is the new competition.]
- Liquidity: Investing in illiquid products can be a dangerous endeavor for a variety of reasons. There are two sides to every trade, and when an ETF fails to attract both buyers and sellers, investors often must buy the fund at a premium, only to sell it later at a discount.The closing of illiquid ETFs can also result in panic selling and high-opportunity cost.
- Discipline yourself. It’s hard not to get emotional, both when the markets are doing poorly and when they’re doing well. No one can predict the future, and we don’t know what 2010 will ultimately bring. The best you can do is be prepared with a strategy. We use the 200-day moving average as a buy and sell indicator. [How to follow trends.]
- The news matters. Keep an eye on world happenings. Political upheaval, major weather events and leadership changes are among the things that can indirectly affect your holdings. Don’t just isolate yourself to the business section.
- Milestones. Are you coming up on a major life change, such as having children or entering the homestretch before retirement? Look at your portfolio and make sure it’s still working for you and ensure that you’re on track for success.
- Keep track of us. ETF Trends is all over the place. We can be followed on Seeking Alpha, Twitter and Facebook. And at the top right of any page on ETF Trends, you can enter your email address to subscribe to our free daily newsletter. Now you don’t have to miss a thing.
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.