Is there a lot of money flowing to small sectors of the markets now that exchange traded funds (ETFs) cover so many market sectors? Take the latest tulip and truffle mania for example.
Beware of Tulip and Truffle ETFs in 2011? Well, not quite, but the hype can definitely translate. The so-called tulip-mania stems from 1593, when tulips were brought from Turkey and introduced to the Dutch. The novelty of the new flower made it widely sought after and therefore fairly pricey. Thus, tulips, began to mutate and different colors and patterns appeared, giving different values to the flowers. Everyone began to deal in bulbs, essentially speculating on the tulip market, which was believed to have no limits, reports Andrew Beattie for Investopedia. [U.S. ETF Investing: Getting Back To Basics.]
More recently, a French farmer farmer fatally shot a trespasser he suspected of trying to steal highly coveted truffles from his land on the edge of France’s southern Provence region. Greg Keller for Associated press reports that demand for truffles peaks at Christmas time, when the French traditionally splurge on delicacies such as truffles, champagne, foie gras, prawns and oysters. Last year black truffle prices reached $600 a pound due to the shortage, Chabert said. The current price is just under $500 a pound. As prices mount, the trend is clear that there is a killing to be made in truffles. [4 Tips On Picking The Right ETF.]
The moral? It’s ok to jump on trends with concentrated markets but important to have sell a strategy.For instance, if you own silver, copper, sugar ETF…what’s your strategy?
At ETF Trends, we use the 200 day-moving-average, and sell when a fund falls below that trend line. By watching market trends and approaching the market with a strategy, trend following can be a way to navigate the markets and manage risk.[Buy and Hold Or Trend Following?]
Tisha Guerrero 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.