If you’re still sitting on the sidelines, you might be starting to get a little lonely. More and more investors are wading back into the markets to snap up stocks and exchange traded funds (ETFs) and ride the rally.
According to Pragmatic Capitalism on The Daily Crux, individual investors now have the highest equity allocations since 2004. Stocks and stock funds now have about 63.5% of the total amount invested in individual investor portfolios, according to an Asset Allocation Survey. [The Basics of Trading With ETFs.]
That’s great news, because investors who have sat out until this point have missed a large part of the rally. It’s not too late, however; many ETFs are still well off their 2007 highs.
If you’re on the fence, still nursing the wounds of the financial crisis, there’s an easy way to get comfortable in the markets again. Follow these steps to implement a strategy:
- Evaluate the goal of your investment and figure out what your strategy is going to be. A strategy needs to not only be effective, but simple. Studies have repeatedly shown that the more complex a strategy is, the less likely it will be used.
- Your strategy should be two-fold, containing an entry and exit point for your position. You should always know exactly when you’ll buy and when you’ll sell.
- Our strategy is trend following, using the 200-day moving average as a determinant of when we’re in and when we’re out. For more information on trend following, check out The ETF Trend Following Playbook for tips and advice. [6 Mistakes ETF Investors Should Avoid.]
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.