It follows that the best risk-reward scenario today is to embrace investments that gain when the bull stampedes, but also hold up better when sellers knock riders out of the saddle. I often talk about the virtues of owning non-cyclicals like SPDR Select Health Care (XLV), low volatility ETFs like iShares USA Minimum Volatility (USMV) and lower risk country ETFs like iShares MSCI United Kingdom (EWU). Even as the S&P 500 battles to get back to a new 52-week high, these funds have already made the list.
It is true that scores of high-fliers are logging new 52-week highs as well. I might break the 52-week winners down into two categories:
| Sampling of Prominent ETFs On The 52-Week High List | ||||||
| Higher Risk Participants | ||||||
| YTD % | ||||||
| First Trust DJ Internet (FDN) | 6.3% | |||||
| SPDR S&P Semiconductor (XSD) | 6.6% | |||||
| iShares NASDAQ Biotechnology (IBB) | 16.9% | |||||
| Market Vectors Egypt (EGPT) | 20.3% | |||||
| Lower Risk Participants | ||||||
| iSharres MSCI USA Minimum Volatility (USMV) | 0.5% | |||||
| iShares MSCI United Kingdom (EWU) | 1.7% | |||||
| First Trust Technology AlphaDEX (FXL) | 5.5% | |||||
| SPDR Sector Select Health Care (XLV) | 6.3% | |||||
While it is my preference to sample from the lower risk grouping where “risk” (e.g., drawdown, daily range, beta, Sharpe ratio, etc.) is in the eye of the beholder, you may prefer to go for the biggest price appreciators. That would be your prerogative. By the same token, I strongly advocate the use of unemotional stop-limit orders on all stock ETFs to minimize the possibility that any selection might turn into a huge loss.