Instead of feeling left behind in an ever-changing market environment, investors can turn to an equity trend-following investment strategy that can adapt to the shifts as they come.
In the upcoming webcast, How Trend-Following Can Help Your Investment Participate in Positive Trends and Minimize Losses, Sean O’Hara, president of Pacer ETFs Distributors, will outline a dynamic trend-based investment strategy that allows financial advisors to follow the price movement of an investment over time using an unbiased approach.
Specifically, Pacer ETFs offers a suite of so-called Pacer Trendpilot ETFs, including the Pacer Trendpilot US Large Cap ETF (BATS: PTLC), Pacer Trendpilot US Mid Cap ETF (BATS: PTMC), and Pacer Trendpilot 100 ETF (BATS: PTNQ).
A trend-following strategy could diminish drawdowns during bearish market conditions to help improve overall, long-term investment returns. The Pacer Trendpilot strategy tries to participate in the market when it is trending up, pare back market exposure during short-term market downtrends, and prevent extended declines by moving to T-bills during long-term market downtrends.
“In today’s uncertain and volatile economy, investors can be apprehensive about the market and how to navigate it. Most people are familiar with the technology bubble in the early 2000s and the recession from 2007-2009, but there have been 26 bear markets since the Great Depression of 1929. Following a trend allows investors to be more confident in their decision-making,” according to Pacer ETFs.
The strategy follows strict guidelines with three indicators, including an equity indicator, a 50/50 indicator, and a T-bill indicator.
The Equity Indicator refers to when the Benchmark Total Return Index closes above its 200-day SMA for five consecutive business days, the exposure will be 100% to the Benchmark Index. From the equity position, the Index will change to the 50/50 position or the T-Bill position depending on the 50/50 Indicator and the T-Bill Indicator.
The Price Signal 50/50 Indicator refers to when the Benchmark Total Return Index closes below its 200-day SMA for five consecutive business days, the exposure will be 50% to the Benchmark Index and 50% to 3-Month US Treasury bills. From the 50/50 position, the Trendpilot Index will return to the equity position or change to the T-Bill position depending on the Equity Indicator or T-Bill Indicator.
In its latest update, Pacer added an Extreme Valuation Trigger where if at close of business the Index is either 20% above or 20% below its 200-Day SMA, the exposure will automatically go to the 50/50 position. The Index will not move to the 100% Equity position or the 100% T-Bill position unless triggered by one of those indicators.
Lastly, the Trend Signal T-Bill Indicator refers to when the Benchmark Total Return Index’s 200-day SMA closes lower than its value from five business days earlier, the exposure will be 100% to 3-Month US Treasury bills. From the T-Bill position, the Trendpilot Index will change to the equity position when the Equity Indicator is triggered. It will not return to its 50/50 position unless the Equity Indicator is first triggered.
“Many investors fall victim to emotional investing causing them to buy high and sell low. Trend-following strategies remove emotions and speculation from the investment decision-making process. The goal is to use an indicator to participate in positive trends and avoid negative trends. The indicator may not be right every time, but the goal is to be right enough times to prevent devastating losses,” according to Pacer ETFs.
Financial advisors who are interested in learning more about the trend-following strategy can register for the Wednesday, December 14 webcast here.