First, investors should have an asset alloccation strategy based on their time horizon and risk tolerance – hold more fixed-income and less equities for a conservative portfolio or lean toward equities in a risk tolerant portfolio.
Moreover, an ETF investor may also follow an investment’s trend lines to help guide when one is in or out of a position. For example, we utilize the 200-day exponential moving average. If an ETF moves above its trend line, it is a buy signal, and if it drops below, it is time to let go. [An ETF Trend-Following Plan for All Seasons]
For more information on market trends, visit our trend following category.
Max Chen contributed to this article.