Long-term investors who’ve adopted the buy-and-hold methodology don’t seem too pleased with the way the markets have rewarded their patience. Maybe it’s time to look into a more active trend-following strategy for your exchange traded fund (ETF) portfolio?
Even successful big-shot investors like Warren Buffett, Peter Lynch and David Swensen all recommend that the average investor is better off with index funds, remarks Neil Weinberg for Forbes. That is, they espouse the idea that beating the market consistently is nearly impossible. [ETF Investing and the Art of Patience.]
Still, there are many little-known investors who have done quite well in the investment game without relying on buy-and-hold for achieving portfolio gains.
Investors who are actively trading need to employ technical indicators to help identify when it is best to enter or exit a market, according to Forbes. Sectors and areas of the market come in and out of favor so it is crucial to follow the trends.
Some have contend that being an active trader would incur high trading costs. However, some online brokerage firms are advertising zero commissions on many ETF trades, making this point increasingly moot.
The buy-and-hold mantra is coming into question. In today’s climate, hanging on for dear life can result not only in lost money, but lost time. There are lots of uptrends out there and it’s just a matter of learning to spot them and, most importantly, acting on them. We use the 200-day moving average to determine when we’re in and when we’re out.
If you’re ready to start taking a more active role in your portfolio, here’s a special report on trend following to get you started. Trend following is the strategy we use for our clients; it eliminates emotional decision-making that can be detrimental to your portfolio. If you have a strategy and use it, you should be rewarded for your diligence. To learn even more about trend following, consider The ETF Trend Following Playbook.
For more information on trading ETFs, visit our ETF 101 category.
Max Chen contributed to this article.
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.