“Simply put, relative strength measures a stock’s performance in relation to its peers,” according to DWA. “Relative strength improves upon the technical foundation of basic trend following because it relies on unbiased, unemotional and objective data, rather than biased forecasting and subjective research.”
For instance, the Powershares DWA Momentum Portfolio (NYSEArca: PDP) uses a factor-based relative strength methodology to target stocks that have experienced strong forward momentum and potentially outperform the broader equities market in a modest bull market. However, this type of strategy could underperform in a short-term correction. [Quite a Comeback for This Momentum ETF]
While most ETF investments passively track a benchmark index, investors can still actively utilize the ETFs to adapt to short-term market moves.
Financial advisors who are interested in learning more about tactically implementing passive ETF strategies can register for the Wednesday, December 3 webcast here.